Speeches & Transcripts

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

July 4, 2013

Victoria Kwakwa, Country Director, World Bank Vietnam Workshop Hanoi, Vietnam

As Prepared for Delivery

Distinguished guests and participants,
Ladies and gentlemen,

On behalf of the World Bank, I would like to welcome you all to this workshop.

The theme of this workshop, Trade Facilitation, Value Creation and Competitiveness, is particularly important for Vietnam.  As the SEDS 2011-2020 has made abundantly clear, Vietnam’s economy stands at a very critical juncture.  Traditional drivers of economic progress - factor accumulation and the state sector - have in many ways run their course.  In an increasingly globalized world, competitiveness, especially of exports, is a major determinant of Vietnam’s long-term growth. 

Vietnam has implemented a number of trade liberalization measures and signed several trade agreements in the past two decades.  To fully benefit from these policies, Vietnam needs to enhance trade competitiveness through complementary reforms that will help among other things strengthen domestic and export-related infrastructure and logistics. 

The reason we are gathered here today is to present the joint World Bank-NCIEC report on “Trade Facilitation, Value Creation and Competitiveness: Policy Implications for Vietnam’s Economic Growth”.  This report analyzes three interrelated “pillars” of national competitiveness.  These pillars are (i) transport infrastructure and logistics services; (ii) regulatory procedures for exports and imports; and (iii) supply chain organization.  These pillars are supported by government policies and institutions that need to support competitiveness. 

The report builds on the export-led growth model highlighted in the Socio Economic Development Strategy 2011–2020 and the World Bank’s Vietnam Country Partnership Strategy 2012 - 2016.  The report’s contribution to the discussion on national competitiveness lies in at least three areas.  First, it gives concrete ideas to implement the Socio Economic Development Strategy, which has called for more value-addition and enhanced and productivity.  Second, it highlights an area of trade that is vital to competitiveness.  And third, through the review of supply chains, it argues for a new development paradigm for Vietnam.

The report begins with a survey of Vietnam that reveals both impressive export performance but also looming challenges.  It argues that existing drivers of export growth are mostly depleted and new proactive efforts to boost export competitiveness must now be pursued.

The report’s analysis of Pillar 1 - transport infrastructure and logistics services – shows that Vietnam’s trade-related infrastructure is failing to keep pace with the growth of exports. The level of investment required to remedy this situation is, however, beyond what can be achieved through public investment alone. Whilst improving the efficiency of the public investment regime through prioritization is clearly needed, a shift to private sector financing will be essential.

Vietnam’s regulatory procedures under Pillar 2 also need improvement.  While major attention to customs reform has produced some results in terms of border management, many agencies continue to rely on outmoded procedures that are time-consuming, opaque and susceptible to corruption. Streamlining processes and strengthening institutions are vital areas of reform, with the report detailing specific areas of focus.

With respect to Pillar 3, weaknesses in Vietnam’s supply chains for manufactures and agricultural products have prevented the country from lowering export costs and capturing much needed value added.  The report proposes a strategy to restructure major supply chains, which would serve two purposes – to increase participation in activities that add value in Vietnam, and to in particular to enable more participation of domestic firms in the process.  Enabling the growth of supporting industries, though a longer-term endeavor, will also help.

Institutions are key to trade facilitation in general and the above endeavors in particular.  Yet the institutional environment faces challenges at various levels.  At the macro-level, there are too many strategic plans with overlapping activities but no focus on trade facilitation, while  international agreements have been signed but not yet been implemented.  At the mezzo and firm-levels, multiple agencies at different tiers of government carry out trade facilitation activities with no coordination.

There is thus an important role for the government.  In particular, it must support activities that have positive externalities, and provide assistance that spurs the flow of trade.  It must simultaneously remove impediments including disengaging from areas where the private sector can play a lead role.  The Government of Vietnam can do more in each of these areas.  Of the various initiatives, attention to restructuring supply chains has benefits that extend beyond trade facilitation.

The report ends with a set of policy recommendations.  Success will require considerable and sustained effort by all stakeholders, with the government playing a facilitative and coordination role.  Political commitment will be needed from the leadership, given the competing interests in the proposed reforms.  Unless action is taken with urgency, Vietnam’s future competitiveness will be eroded as other countries move ahead with their trade facilitation agendas.

Excellencies, Ladies and Gentlemen, I hope that at the end of this workshop, a common understanding can be reached on a set of priorities that comprehensively address trade facilitation, logistics, and supply chain organization.  We hope this report will help to galvanize Vietnam’s trade reform agenda and contribute to enhancing competitiveness.  The World Bank is happy to be part of this endeavor and ready to support internalizing and implementing the national plan of trade facilitation actions toward policy recommendations raised in the report.

I wish you every success in your deliberations and look forward to a fruitful and insightful discussion on how to make Vietnam’s economy more competitive.

Thank you.