SOURCE: World Bank
Speeches & Transcripts
December 15, 2017
Ousmane Dione, World Bank Country Director in Vietnam
Vietnam Logistics Forum 2017
As Prepared for Delivery
Your Excellency, Deputy Prime Minister Vuong Dinh Hue,
Minister of Industry and Trade Tran Tuan Anh,
Vice Minister of Transport Nguyen Nhat,
Distinguished participants from the Government, the private sector, and the development community,
Ladies and Gentlemen,
Good morning, Xin chào!
Let me begin by expressing my appreciation for the strong partnership between the Ministry of Industry and Trade and Ministry of Transport, Vietnam Economic Times, and the World Bank in co-organizing this important annual event which provides a venue to discuss key challenges and opportunities for the logistics sector in Vietnam.
As you know, effective and efficient logistics and connectivity are key to Vietnam’s regional and global competitiveness. Logistics performance is particularly important for an economy like Vietnam that is highly dependent on participation in global value chains and exports. Ultimately, this will translate into productivity gain which Vietnam needs to achieve its ambitious development objectives.
The country’s consistent policy of openness and export-led growth has paid off. The economic reforms undertaken since the 1990s helped spur growth and reduced poverty. Over the past 20 years, Vietnam has signed more FTAs than any other country in the region, making it one of the most integrated economies in the world, with trade-to-GDP ratio of over 170 %. The country’s merchandise export growth averaged 15 % in the past five years, almost five times the global trade growth. As such, Vietnam has emerged as a global manufacturing hub and one of the world’s leading FDI destinations, attracting about $35B registered capital in 2017 alone.
But quantity does not always translate into quality. Although export revenue growth has been robust, Vietnam often carries out the lowest value-added segment of production in global value chains. Export performance remains largely driven by the FDI sector, which accounts for 70 % of total export, showing weak linkages between domestic firms and global value chains. Moreover, Vietnam’s trade costs are higher than the ASEAN average. As a proportion of GDP, logistics costs in Vietnam stand at about 18% of GDP, almost double that of advanced economies and higher than the global average of 14%. While significant progress has been made in improving logistics infrastructure and services, there is still ample room for further improvement: Vietnam’s ranking in the Logistics Performance Index dropped from 48 in 2014 to 64 in 2016. During the same period, other economies improved their performance much faster than Vietnam, meaning it is losing competitiveness.
A strategy to enhance trade competitiveness in complementarity to trade liberalization is needed to support Vietnam’s vision of becoming an upper middle -income country by 2035 with a more sophisticated economy and exports that sustain accelerated growth.
There is a need for the Government and the private sector to define a clear agenda for reform if the quality of logistics services is to be raised, to meet the demand of an increasingly sophisticated economy. Interventions will be required across the many dimensions of logistics, complemented with significant investments in infrastructure. Allow me to highlight several key aspects of this strategy:
First, enhancing connectivity is necessary. With more efficient connectivity, linkages between domestic production and international markets could be strengthened. This, in turn will reduce trade costs and increase the reliability of domestic firms in delivery of orders. Despite significant public investment, trade-related infrastructure has not kept pace with the export growth and the rapid rise in freight volumes. Vietnam’s growth potential is being constrained by weak connectivity of major growth poles to main international gateways, high transport cost, and poor quality of transport and logistics services. Investment remains unbalanced, focusing more on roads than other modes of transport. Master planning will need to reflect expanding demand of main economic activities and trade as well as to optimize investment in appropriate multimodal transport and logistics centers. The over-reliance on public investment, which is clearly unaffordable and therefore unsustainable, should be revisited. Shifting to private sector financing and establishing clear priority for essential investments are all key for better connectivity.
Second, promoting trade facilitation could be a game changer. Global trends show that gains from improving trade facilitation can easily outweigh gains from tariff reduction, especially since tariffs are already quite low in most sectors. Promoting trade facilitation by simplifying customs and specialized management regulations – we estimate that 76% of the time to import into Vietnam is due to border and documentary requirements – and there is a high number of rules to comply with. The goal of trade facilitation is to make supply chains more efficient and to reduce costs, red tape and bottlenecks faced by traders. The recent progress in customs reform is encouraging, but reform of specialized management agencies remains slow. But customs reform alone will not produce significantly improved trade facilitation. The current regulatory framework for trade facilitation, which covers licensing processes and administrative procedures applied before, and at borders, involves a complex set of laws and legislative documents. The World Bank recently supported GDVC in the development of the Vietnam Trade Information Portal to enhance access to such trade laws and regulations, which is beginning to have an impact. However, the guidelines are not always consistent, with possible duplication, unclear application and the involvement of different government agencies. Adopting a more holistic and integrated approach, focusing on policy actions to review and rationalize measures and procedures, apply automation, in particular for National Single Window, eliminate multiple inspections, use risk-based management in specialized inspection agencies, and improve transparency are required.
Third, inter-agency coordination and collaboration with the private sector is imperative. Successful implementation of this Multi-Sectoral Action Plan clearly requires commitment from all agencies, an inter-agency collaboration mechanism with a strong Government leadership. I would like to congratulate Deputy PM Hue for the recent decision to establish the National Trade Facilitation Committee (NTFC) that is critical to lead inter-agency efforts and to comply with WTO’s Trade Facilitation Agreement. Moving forward, we recommend that the NTFC should extend to cover logistics development area, and oversee the implementation of National Logistics Action Plan. Partnership with the private sector is vital, and we highly recommend a representative of the private sector to participate as a NTFC member.
Last but not least, measurement of the reform progress is important. As is often said, what cannot be measured cannot be improved. We see the collection and maintenance of sound data on logistics and trade facilitation performance as being critical to formulating appropriate reforms and interventions. Having the right transport and logistics statistics would make policy development more targeted and precise with the first challenge being the initial baseline of transport and logistics performance in Vietnam, which we do not have yet. In that regard the World Bank is supporting the Ministry of Transport in developing a comprehensive database and indicators on logistics in Vietnam, called the Vietnam Logistics Statistical System.
Ladies and gentlemen,
Leadership at the highest levels of Government will be important to any reform agenda in this space. We also know that proper involvement of the private sector is key – after all, the majority of logistics services are provided by private enterprises.
I take comfort that together you all can rise to the challenge. I am very pleased to note the diversity of stakeholders represented here. This reflects a fundamental feature of all logistics platforms, that improvement is a collaborative effort involving several key agencies within government as well as the private sector.
Your presence, Deputy Prime Minister Hue, also reflects the importance that the Government attaches to the sector and the need to implement robust approaches that meet international standards, and best practices.
The WBG stands ready to support Vietnam in making trade facilitation, logistics and trade competitiveness a centerpiece of its development and growth strategy. We are ready to provide comprehensive analytical and technical assistance combined with multi-year financial assistance, where needed.
With these few remarks, I wish you all ladies and gentlemen, fruitful discussions and deliberations.
Thank you. Xin cảm ơn!
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