Vietnam reaching 'limit' of trade growth possibility, warns World Bank

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The World Bank has urged Vietnam to draft an action plan on improving logistics, regulations for cross-border trade, and supply chains since the country's scope for increasing trade is reaching its "limit."

It also called for establishing a national committee for trade facilitation.

At a conference held in Ho Chi Minh city recently to discuss Vietnam's trade facilitation and competitiveness, the bank acknowledged the country's increasing trade openness and the robust export growth since 1996. Its trade grew at 34 percent and 18 percent in 2011 and 2012, and at 20 percent in first quarter of this year.

But Pham Minh Duc, the bank's senior economist in Vietnam, doubted the pace could be sustained given concerns over logistics, regulatory procedures, and supply chains for manufacturing.

Vietnam trails behind regional countries like China, Malaysia, Singapore, and Thailand in terms of logistics performance.

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Last year its ranking was unchanged from 2007 at 53rd out of 155 countries.

"Customs" and "infrastructure," two aspects of the logistics index, dropped 10 and six places respectively to 63rd and 72nd.  

Poor logistics coupled with tortuous customs procedures results in high costs, which account for up to 25 percent of gross domestic product. The bank and independent experts at the conference said however that the number needs reviewing.

The bank said cross-border management posed "challenges" to trade.

Since 1999, when Vietnam joined the global economy, its import-export tax collection as a share of total revenues has shrunk despite the rising number of tax declarations.

This raised security concerns for the government, which has taken a "backward" control-focused approach that discourages traders.

Supply chains, especially for agricultural products in which the private domestic sector is strong, had "many weak points" which need long-term solutions.

Most rice shipments are made under the government-to-government mode which encourages production of relatively low quality.

The bank also pointed out that over 70 percent of rural farmers used outdated farming methods and operated on a very small scale.

Vu Trong Hoai, vice rector of the University of Economics Ho Chi Minh City, agreed with the bank's assessment that the three issues would hinder the country's trade.

Trade growth was skewed toward the foreign sector, he said, adding that only companies in this sector have done well in trade in the last few years.

In the first nine months this year their trade surplus topped US$9.45 billion while overall the country's imports exceeded exports by $124 million.

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