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FEATURE STORY

Trade Facilitation, Value Creation, and Competitiveness: Policy Implications for Vietnam’s Economic Growth

July 4, 2013

KEY FINDINGS:

• Since reforms associated with Doi Moi in1986, Vietnam has recorded strong trade performance: 

   o Vietnam’s exports rose 34 percent in 2011, 18 percent in 2012 and nearly 20 percent in the first quarter of 2013. 

    o Vietnam has achieved comparative advantage in low-tech manufactures and resource-based and primary exports.

    o Export of primary commodities, including crude oil, declined from around 52 percent in 2000 to 30 percent in 2010.

    o Manufactures, mostly low-and-medium tech products, have increased from around 43 percent to around 60 percent over the same period.

• Nevertheless, this robust performance belies major challenges, including: low technology embodied in exports, growing trade deficits, and modest domestic value addition. In addition, as trade liberalization advanced, the scope for increasing trade through the current avenue reaches its limits. 

• The key to future growth is enhanced export competitiveness.  Trade facilitation is an effective means for doing so but has received scant attention.  Vietnam’s trade facilitation performance leaves much room for improvement:

    o According to the World Bank’s Logistics Performance Index, Vietnam ranks among Top 10 lower-middle economies, but its overall ranking has not been improved in the last five years. Within this index, customs efficiency, logistics competence and infrastructure have deteriorated.

    o Weak corridors connecting major growth poles to main international gateways, high transport costs, poor quality of transport and logistics services have constrained Vietnam’s growth.

    o While major attention to customs reform has produced some strengthening in border management, many agencies continue to rely on outmoded procedures that are time-consuming, opaque and susceptible to corruption.  Business processes remain complex, inconsistent, and based on manual procedures with very little IT and risk-based applications.

RECOMMENDATIONS:

• Establishment of National Committee for Trade Facilitation (NCTF) to develop and implement a national action plan for trade competitiveness enhancement;

• Build a sound policy framework and institutional capacity to implement a national action plan for trade competitiveness enhancement;

• Develop infrastructure and transport services;

• Simplify regulatory procedures to reduce time and cost and improve reliability of cross border trade; and

• Restructure supply chains to capture value and to participate proactively in global value chains and develop supporting industries.