IN VIETNAM

(1)

RESULTS OF TRADE FACILITATION IN VIETNAM

• NGUYEN HOAITHU

ABSTRACT:

In recent years, the idea of trade facilitation has expanded to the modernization and automation of importprocedures in order tomake the adoption of international standards easier.

It isgenerally understood that trade facilitation involves the reduction of transaction costs for all parties in the compliance with trade regulations and policies. Trade facilitationis now recognized as a key driving factorin determining export competitiveness of a country. For countries like Vietnam which is increasingly integrating intotheglobaleconomythroughexports and imports of goods and services, it iscrucial thattradeshould be “facilitated” through appropriate measures.

This paper points out that Vietnam’s abilityto strengthen thecountry’s international economic integration depends on the country’s trade facilitation measures.

Keywords: trade facilitation, international cooperation, international trade.

l.Introduction

In recent years,the idea oftrade facilitationhas expandedto the modernization and automation of importprocedures in order to make theadoption of international standards easier. It is generally understood that trade facilitation involves the reduction of transaction costsfor all parties in the enforcement, regulation and administration of trade policies. Trade facilitation has been described as the “plumbing” of international trade (Hoekman et al., 2002) thatfocuses on theefficient implementation of trade rules and regulations. By nature, trade facilitation is very technical and detailed, withthe underlying objectiveof reducing various forms of non-tariff barriers that impose significant loss of time and costs in conducting trade, including an excessive number of documents, involvementof dozens of agencies, and complexity in data reporting and processing. It is in

this context that the simplification of customs procedures is of great importance for countries around the world and Vietnam is no exception.

2 . Data and Methodology

The literature review is a continuous process that consists of literature collection, analysis, comparison and criticism. In addition, books, reports from internet sources are used to find additional information. Besides, severaldatabases, such as Google Scholar, EBSCO Business Source Premier, Elsevier Science Direct, Emerald, Springer, SAGE and JSTOR are usedin the course ofthe literatureresearch.

Furthermore, to collect data for analysis, the author also looks for reports and database from international organizations such as the World Bank (WB), International Monetary Fund (IMF), United Nations (UN) andso on. Regardingthe information about tradedevelopment in Vietnam, reports from

So 6 - Tháng 4/2022 1 19

(2)

TẠP CHÍ CÔNG THƯƠNG

several organizations, including Vietnam Trade Promotion Agency under the Ministry of Industry and Trade andotherindependentagencies.

3 .Literaturereview

3.1. Definition ofTrade Facilitation

Various definitions of “trade facilitation” have been used by international organizations and in trade agreements. According to the Organization for Economic Co-operation and Development (OECD), trade facilitation means the simplification and harmonization of international trade procedures including the activities, practices and formalities involved in collecting, presenting, communicating and processing data and other information required for the movement of goods in international trade (OECD, 2005).

In addition, many bilateral and regional trade agreementshave a broaderunderstanding of trade facilitation, extending more generally to “any procedures, processes or policies capable of reducing transaction costsand facilitating the flow of goods in international trade”. United Nations defined trade facilitation s a policy that reduces costs, uncertainty and time expanded over international trade of goods, excluding out traditional instruments like tariffs levied over the international transactions (ESCAP, 2009).

Similarly, the World Customs Organization (WCO) pointed out that the core definition of trade facilitation is “lowering trade transaction costs and creating standard efficiencies”(WCO, 2011).

With a view to maintaining a sound balance between the operational procedures and stakeholders’ requirements, the global trading community has long been striving tomove towards the conceptof paperless trade. Thisimplies a shift towards automation and thevirtualabandonment of all paperwork. The potential benefitsof paperless trade include easier processing of more reliable information, a reduction of costs and delays all along the supply chain, and increased security in conducting international trade.

3.2. Changes inthe trade facilitation regulatory and policy framework

International cooperation on trade facilitation pre-dates the World Trade Organization (WTO) but has been given more attention since the

inclusion of trade facilitation as a topic under the WTO in 1992. Two multilateral agreements, the

wco

Revised Kyoto Convention (RKC) and the WTO Trade Facilitation Agreement (TFA), have been negotiated in the past years and now constitutea multilateral framework for a core setof trade facilitation measures and disciplines to be implemented and respected globally. They complement older legal instruments such as the UNECE Convention of Harmonization ofFrontier Controls (1982), and the International Customs convention TIR (1975), the FAL Convention (1962) as well as other regional or transport mode specificagreements.

By creating theseinstruments, namely the

wco

RKC and the WTO TFA, governments have deepened and strengthened their commitment to implement trade facilitation. The wco RKC

provides standards and recommendations to harmonize and simplify Customs procedures and practices. The WTO TF is a more horizontal Agreement thatcovers a wide range of government activities. Implementation of the Agreement will require WTO Members to take legislative and non legislative, i.e. organizational or practical measures.

Over the past 30 years, the number ofexisting trade agreementshasincreasedrapidly on a global scale. In 2010, more than 300 preferential trade agreements werenotified to theWTO and were in effect. The proliferation of these agreements and customs unions increases the complexity of overlapping trade rules and raise specific trade facilitation concerns with regards to the rules of origin. Irregularities, including deliberate fraud, with Certificates of Origin (CoO) arecommon.

CoOare stillcommonly paper-based, physically accompany the goods, need to be presented as original copy for customs processing. The direct exchange of CoOamongstissuingadministration is anemerging trend adopted for pilot projects, such as the Senegal-CI exchange project. Another approach to secure authenticity and integrity of CoO is the self-certification. Exporter based risk management and information exchange with the issuing authorities in the foreign country are other means to limit CoO fraud.

120 So 6-Tháng 4/2022

(3)

Afterthe September11attacks in theU.S, many governments adopted security measures that significantly affect port, transport and border proceduresworldwide. Global transport of goodsis now subject to additional requirements as regulators worldwide push for the advance submission of cargo information to identify security risks easierand earlier.

Numerous countries have introduced Advance Cargo Declaration requirements for maritime container goods and / or airfreight includingthe EU, the U.S, Japan, Australia and New Zealand, Mexico, Turkey, China and the Philippines. Under these requirementstransportoperators are obliged to provide a defined set of data prior to arrival (exact time requirements differ across regulations) to Customs authorities and/or port and aviation authorities.

3.3. Key trends in implementing trade facilitation measures

3.3.1. Agency cooperation

Many trade facilitation instruments and concepts, including the WTO TFA, RKCand TIR, focus on the Customs administrations and the simplification of their procedures and processing.

This perspective, however,isincreasingly replaced bya more integrated vision of trade facilitationthat brings in other government agencies, such as food control agencies, veterinaryservices, and transport bodies. Mandates, responsibilities and interventions on goods and means of transport overlap, in particular with regards to control measures applied to goods crossing the borders.

Simplification for trade facilitation therefore requires integration both from the organizational and the IT perspective and stretches to risk management, border management, as wellas pre clearance formalities.

Information integration has been the driving force behind so-calledSingleWindows for trade. In conceptual, Single Window scenarios, external users-traders and other intermediaries-submit structured information to a single platform where internal users-government entities or other service providers-access the information, process it, communicate between each other, and communicatethedecision backto theexternal user.

3.3.2. Cross-border cooperation

The simplification of proceduresrests to alarge extent on the cooperation of neighbouring countries and trading partners. Process, procedures and document alignment and harmonization across borders, cuts costs to traders who are shipping goods across several borders. Sharing data and information through point-to-point communication amongst administtations across borders provides additional security relevantinformation, allows for a better control of transit movement, and secures licenses and certificates that are common sources of fraud, such as the CoO or the Sanitary and Phytosanitary certificates. Cross-border exchange of data is currently pursued in many regions on different levels; for transit movements, for sharing of licenses and certificates from government to government (G2G), and for sharing of customs data (WCGOGCNetc.).

3.3.3. Paperless trade

Information exchange inglobal supply chains A seamlessflowof information is at the center of modern supply chain management. Supply chains that are geographically fragmented and extended rest upon information processing and exchange amongst supply chain partners.

Information visibility, Information timeliness, and Traceability are the three information requirements thatmatter most.

Supply chain partners already havea lotofdata available in electronic format: Notifications, requests and services orders are produced and exchanged amongst transport operators, e-invoices sent between partners and to clients, and certificates anddocuments exchangedwithauthorities. Logistics partners also use specificsoftware and platforms for processes from warehouse management, to route planning and order management, and to increase productivity and performance.

Progress with paperless trade with the introduction of modem equipment and technology for control and facilitation at border points, and clearance facilities. Customs administrations tap m-services, use barcode and QR codes to retrieve information, and technologies such as license plate number reading for vehicle control at border stations.

So 6-Tháng 4/2022 121

(4)

TẠP CHÍ CÔNG THƯƠNG

Data andmessaging harmonization

Many current trade facilitation initiatives call for more cooperation and integration across agencies, across borders, and between ICT systems. The UNTDED and UNCEFACT code lists are widely usedforunambiguous identification of data elements that can be integrated into data models. Two hierarchical data models, thewco data model and the UN CCL, constitute de facto standards for data harmonization for trade and transport facilitation. National and regional data harmonization efforts align their data models to both data models. The wco data model incorporates non-Customs requirements of other agencies and can accommodate a large type of data and messagesfromsupplychain partners.

In addition to the global initiatives and instruments, initiatives also emerge at industry level and for specific transportsectors, suchas for the advance cargo information (IATA cargo xml message), and standards forelectronic documents (e-CargoSecurity Document (e-CSD)). InEurope, projects, such as e-freightand the National Single Window (NSW) for transport, build a framework for information exchange based on common data and messagestandards.

3.3.4. Client orientation in public administration Public administration leverages the benefits of automation and fasterand processing through ICT.

Improved process speed and efficiency provide an answer to resource scarcity and growing trade volumes. But there are two additional elementsfor which ICT can and increasingly isleveraged: the reduction of physicaland time barriers for service delivery, and improved information provision.

In the real world, administrations physically locatedin different places havedifferent operating times, and responsibilities and mandates are fragmented over various bodies. By using ICT, this geographic, procedure and time fragmentation can be overcome. Physical presence is not necessary for obtaining information and submitting documents, and services provided by different entitiescan beaccessed in a single location at any time. There is the trend across in government affairs to set up online portals that regroup different services from different entities and that allow

citizens to interact with one access point without physicalcontact.

4. Results oftrade facilitationinVietnam Accordingto the World Bank, Vietnam exports for 2019 was $279.72 billion, a 7.79% increase from2018, while import value was $271.36billion, a7.99% increasefrom 2018. This increase is due to the trade facilitation measures that have been applied.

Indicators of the trading across borders environment are published by the Worlds Bank and measure the trade environment in terms of time, numberof proceduresandcost requiredfor import and exportof a standardized cargo.

Tomake a comparison, a number regions have been included in the Table 4.1. The regions are East Asia/Pacific and the OECD. When comparing Vietnam to the East Asia/Pacific region’s average, a positive picture emerges. Vietnam has more favourable trading environment than the East Asia/Pacific average according to all the indicators, except the number of documents necessary to import. This again indicates that importing to Vietnam is more difficultthanexporting.

Lastly, when comparing Vietnam with the OECD average, it can be seen that it takes more than twice as long to import and export from Vietnam compared to the OECD average, even though the number of documents required for trading and the associated costs is rather competitive.

By looking deeper into the data in the table below for Vietnam, one can conclude that preparing documents is the main bottleneck as half of the total time requiredin the export and import process involves document preparation.

Table 4.2 shows thatthe timeto handle portof border procedure for exporting is longer than importingbut the cost for exporting islessthanthat for importing.

4.1. Tradeflows

Trade facilitation is likely to affect imports and export volumes.By removing redundant andtime

consuming procedures trade costs will fall and the export andimport volumes will rise.

In Vietnam’s case, the trade flows are in line with the effects we expectfrom trade facilitation.

122 SỐ6 -Tháng 4/2022

(5)

Table 4.1: Comparisonof DoingBusiness Indicatorsbetween Vietnam and selectedregions in 2020

Region or Economy Vietnam East Asia & Pacific OECD

Time to export: Border compliance (hours) 55 57.5 12.7

Cost to export: Border compliance (USD) 290 381.1 136.8

Time to export: Documentary compliance (hours) 50 55.6 2.3

Cost to export: Documentary compliance (USD) 139 109.4 33.4

Time to import: Border compliance (hours) 56 68.4 8.5

Cost to import: Border compliance (USD) 373 422.8 98.1

Time to import: Documentary compliance (hours) 76 53.7 3.4

Cost to import: Documentary compliance (USD) 183 108.4 23.5

(Source: World Bank, 2020)

Table4.2: Indicators ofTrading across borders in Vietnam in 2020

Export Import

Time to complete

(hours)

Cost (USD)

Time to complete

(hours)

Cost (USD)

Clearance and inspections required by customs authorities 5 60 16 85

Clearance and inspections required by agencies other than customs 8 25 8 0

Port of border handling 55 205 32 288

Trade has become more important for the economy.

In 2017, Vietnam had a total export of 215,118,607 in thousandsof USS and total import of213,215,299.14 in thousandsof us$ leading to a positive trade balance of 1,903,307.86 in thousandsofus$. The Effectively Applied Tariff Weighted Average (customs duty) for Vietnam is 2.69% and the Most Favoured Nation (MFN) Weighted Average tariffis 5.88%.The tradegrowth is 9.79% compared to a world growth of 5.68%. GDP of Vietnam is 245,213,686,370 in current us$.

Vietnam service export is 14,790,500,000 in BoP, current us$andservices import is 18,470,000,000 in Bop, current us$. Vietnam’s exports ofgoods

Figure 4.3: Vietnam’s trade balance during 2010 - 2019

andservices as percentage of GDP is 105.83% and imports of goods and services as percentage of GDP is 102.47%.

SỐ6- Tháng 4/2022 123

(6)

TẠP CHÍ CÔNG THƯƠNG

Figure 4.4: Vietnam’s trade growth rate compared to GDP growth rate

Figure 4.5: Vietnam’s trade flow as share of total

As shown in the Figure4.5, Vietnam’s tradeto GDP ratio has been increasing since 2010. The ratioin 2019 was 210.40%, a 2.09% increase from 2018. This result is contributed to the implementation of various TF measures during recent years.

4.2. Export diversification

Trade facilitation is also likely to promote product diversification. As trade costs decrease, companies are able to diversify their production and to produce timesensitive goods that previously

were not exported due to time consuming procedures. Time sensitive goods tend to have high value, which implies that faster customs clearance couldresult in more production of higher value products. Such goods are likelyto include textiles and clothing, perishable products and semi

finished products, that all rely on timely deliveries.

Conclusions about the effects of trade facilitationon trade flows from Vietnam can be drawnwhen studying the manufactures as share of total exports over time.

The share of manufactures shows an upward trend, withan increase from 64% in 2010 to 80.5% in 2019. Consequently, the country has diversified its production by producing more manufactures than previously, partly as a result of trade facilitation.

4.3. Customs revenues

Trade facilitationreduces trade costs and increases trade flows, which in turn increases the customs revenues. Customs revenueisan important source of government revenue, especially in developing countries that may lack other tax systems. Earlier experiences suggest that customs modernisation programmes have a large positive effecton customs revenues. Several countries have more than doubled their customs revenues after successful implementation customs modernisation programmes. Even relatively modest reform programmes result in increased customsrevenues.

The Vietnamese government's revenue from customs duties in the first five months of 2020 was estimated atUS$5.3 billion, down 17.18%from the same period of 2019. This is partly aresult oftrade facilitation efforts and increased economic integration aswell as economic development.

124 SỐ 6- Tháng 4/2022

(7)

Figure 4.6: Manufactures as share of total exports during 2010 - 2019

Figure 4.7: Vietnam’s FDI inwards during 2010 - 2019 (in billion USD)

The amount of FDI in Vietnam shows an upward trend from 2010 and onwards, see figure below. According to the World Bank, Vietnam has been one of the largest recipients of FDI in the world, in relative terms. FDI is the result of other reforms as well, but it is likely that trade facilitation has had a positive influence on the large inflows of FDI inVietnam.

4.5. Cross-bordertradevalue Thanks to the application of trade facilitations measures, cross-border trade of Vietnam with other countries has made significant progress. In terms of trading markets, the top 20 trading partners of Vietnam account for about 80% of her total trade. China, the United States and Japan have been the three largest trade partners of Vietnam for many years. Since signing a bilateral trade agreement with the US in 2000 and joining the WTO in 2007, Vietnam’s trade relations have been more diversified. Trade with Europe accounted for 8.32%

of Vietnam’s total trade in 2011.

Trade with Australia and South Africa also accounts a considerable share. At the same

4.4. Foreign directinvestment

Trade facilitation also tendsto promoteFDI and have positive effects on theinvestment climate ina country.Highpredictability and lowtradecosts are important aspects when companies decide where to invest. Tradefacilitation that results in lower trade cost and a more predicable customsadministration attracts FDI inflows. The efficiency of customs procedures is especially important to attract investments in industries that produce time

sensitive goods.

time, trade withASEANmember and emerging economies such as Singapore, Indonesia, the Philippines and India has increased noticeably overthe past decade.

Vietnam and South Asian countries have good political relationship. A typical example of that relationship is the Vietnam-India strategic partnership established in 2007. Currently, Vietnam and many South Asian countries have built up a fairly complete legal framework as a basis for the development and strengthening of cooperationrelations.

So 6 - Tháng 4/2022 125

(8)

TẠP CHÍ CÔNG THƯƠNG

Vietnam's largest export markets in South Asia include India, Bangladesh,Pakistan,and Sri Lanka. Thetotal number of products exportedto South Asia in 2010, 2011 and 2012 has reached more than 77 commodity groups. However, it can be seen that Vietnam's exports to South Asia are still concentrated in a numberof key commodity groups: mobile phones; clinker; rubber;

computers, electronic products and components and agricultural products. The structure of imported goods focused mainly onfourgroupsof goods: corn, animal feed and raw materials;

medicine; cotton of all kinds; machinery, equipment and spare parts.

The largest import markets of Vietnam in South Asia include: India, Pakistan, Sri Lanka.

Thus, it can be seen that the trade relations between Vietnam andSouth Asiancountries over the past time have developed relatively positively. However, compared with the great potential of the two sides and the trend of expanding economic and trade relations under the influence of globalization trend, the relationship between Vietnam and South Asian countries needsto be further strengthened. This is completely consistent with the interests of all

parties and the goal of promoting economic and trade growth that Vietnam and South Asian countrieshave set.

5. Conclusion

Trade facilitation is now recognized as a key driving factor in determining export competitiveness of a country. In a case such as Vietnam, which is being increasingly integrated into the global economy through exports and imports of goods and services, itiscrucialthat trade is “facilitated” through appropriate measures.

Vietnam’s ability to ensure strengthened global integration of its economydepends on theefficacy of such measures.

Particularly with Vietnam, we will need to continue to improve policies to promote trade relations with South Asian countries to match Vietnam's integration commitments and increase the competitiveness of Vietnamese enterprises market in South Asian countries, especially with key markets such as India, Pakistan, Bangladesh andSri Lanka. These are countrieswithrelatively high levels of development in the region, large purchasing power, with long-term development prospects anddriving forces for the whole region's development ■

REFERENCES:

1. Bagga, s. & Singh, G.N. (2012). Applications of Data Mining. International Journal for Science and Emerging Technologies with Latest Trends, 1(1), 19-23.

2. Chaparro-Peiez, J., Agudo-Peregrina, Á.F. & Pascual-Miguel, F.J. (2016). Conjoint analysis of drivers and inhibitors of e-commerce adoption. Journal of Business Research, 69(4), 1277-1282.

3. Jahanshahi, A.A., Zhang, s.x. & Brem, A. (2013). E-commerce for SMEs. Empirical insights from three countries. Journal of Small Business and Enterprise Development, 20(4), 849-865.

4. Pellan, M. I., & Wong, M. H. (2013). Trade facilitation in ASEAN and ASEAN+ 1 FT AS: An analysis of provisions and progress. Journal of World Trade, 47(2).

5. Portugal-Perez, A., & Wilson, J. s. (2012). Export performance and trade facilitation reform: Hard and soft infrastructure. World Development, 40(7), 1295-1307.

6. Sam, M. F. M., Hoshino, Y., & Tahir, M. N. H. (2012). The Adoption of Computerized Accounting System in Small Medium Enterprises in Melaka, Malaysia. International Journal of Business and Management, 7,12-25.

7. Sumanjeet, s. (2009). Emergence of Payment Systems in the Age of Electronic Commerce: The State of Art.

Asia Pacific Journal of Finance and Banking Research, 3 (3).

126 So 6-Tháng 4/2022

(9)

8. Sung, N. (2007). Information technology, efficiency and productivity: Evidence from Korean local governments. Applied Economics, 39,1691-1703.

9. United Nations/ESCAP. (2009). Designing and Implementing Trade Facilitation in the Asia and the Pacific.

Retrieved June, 14 2012, from: www.unescap.org/publications/detail.asp?id=1352.

Received date: April 2,2022 Reviewed date: April14,2022 Accepteddate: April 28,2022

Author’s information:

Master. NGUYEN HOAITHU TradeUnion University

KẾT QUẢ VỀ TẠO THUẬN LƠI thương mại TẠI VIỆT NAM

• ThS. NGUYỄNHOÀI THU Đại học Công đoàn

TÓM TẤT:

Trong những nămgầnđây, ý tưởngvề tạothuận lợi thươngmại đã được mở rộng, bao gồm việc hiệnđại hóavà tự động hóa các thủ tục nhập khẩu nhằmgiúp việcápdụng các tiêuchuẩn quốctế dễdànghơn. Tạo thuận lợi thương mạilàviệc giảm chi phí giaodịch cho tất cả các bên trongviệcthực thi các quy định và chính sách quản lýthương mại. Tạo thuận lợi thương mạihiện đượccoi là nhân tố quantrọng hàng đầu quyếtđịnhđến khả năng cạnh tranh trong xuấtkhẩu của một quốc gia. Trong trườnghợp như Việt Nam vốn đanghội nhập ngày càng sâu rộng vào nền kinh tế toàn cầu thông qua xuất nhập khẩuhàng hóa và dịch vụ, điềucốtyêu là thương mại phải được “tạo thuận lợi” thôngqua cácbiệnpháp thích hợp. Bài viếtnày nêu rõ khả năng đảm bảo tăng cường hội nhập toàn cầu của nền kinh tếViệt Nam phụ thuộcvào hiệu quả của các biện pháptạo thuận lợi thương mại.

Từ khóa: tạothuậnlợi thương mại,hợp tác quốc tế,thương mại quốc tế.

SỐ 6-Tháng 4/2022 127