Dynamics of Viet Nam’s comparative advantage structure: RSCA Clustering at the HS2 Level, 2000- 2023

Abstract

This paper examines the dynamics of Viet Nam’s comparative advantage structure at the two-digit HS (HS2) level over 2000-2023. Applying K-means clustering on a feature vector that summarizes each HS2 industry’s dynamics (advantage strength, volatility, persistence, instability, and trend), the HS2 structure are classified into four clusters with relatively homogeneous patterns. Building on this classification, the paper characterizes each cluster’s role in the export structure and its contribution to export growth over time, and it further measures within-cluster concentration. A Markov transition framework is then employed to quantify the probabilities of maintaining, gaining, and losing comparative advantage across sub-periods. The results indicate that the drivers of export growth have shifted across clusters over time and that within-cluster concentration differs markedly, implying a risk-growth portfolio-management approach to policy design, in which policy packages are tailored to clustered-specific characteristics so as to harness growth drivers while reducing concentration and dependency risks.