Viet Nam’s exports have become more sophisticated with an impressive diversification of exports and increases in higher-value manufacturing exports, according to a recent World Bank report.
The report found that manufacturing exports now accounted for about 85 per cent of total exports, up from 65 per cent in 2010, driven by dynamic growth in the export-oriented foreign sector.
Higher-value manufacturing exports, such as phones, computers, cameras, electronics and related components, increased from a 5 per cent share in 2010 to an estimated 35 per cent in 2018.
At the same time, the share of primary commodities fell steadily, with oil exports down from nearly 7 per cent of total exports in 2010 to about 1.3 per cent in October 2018.
However, the report noted that Viet Nam suffered from underdeveloped supply chains, heavy reliance on imports of raw materials and a lack of part-supplying industries.
These problems must be addressed to enhance value added and sustain export competitiveness amidst inevitable wage increases, the report said.
Viet Nam also maintained diversified market destinations for its exports with the US and China among the most important trade partners, per the report.
“Having diversified export markets helped Viet Nam to sustain export gains and to mitigate economic risks from external economic fluctuations,” wrote the report.
New trade agreements would give Viet Nam the opportunity to increase its market access for exports and new sources of foreign investment, the report said, adding that Viet Nam had already signed numerous free trade deals with two more major trade pacts on track to come into effect in the near future, namely the Comprehensive and Progressive Trans-Pacific Partnership and the EU-Viet Nam Free Trade Agreement.
“Lowering trade costs was critical to boosting exports, improving competitiveness and enhancing integration in the global value chains,” the report noted.
As room for continued tariff reduction was narrowing, further reductions in trade costs could only be achieved by reducing costs of non-tariff measures and logistics costs.
The report pointed out Viet Nam’s high trade costs resulted mainly from the high cost of compliance with non-tariff measures.
The report cited statistics that documentary compliance time for non-tariff measures for imports in Viet Nam was two-and-a-half times higher than the average of 28 hours of four ASEAN-4 countries of Malaysia, Singapore, Thailand and the Philippines. The time for documentary compliance for exports in Viet Nam was 50 hours, more than twice the ASEAN-4 average.
The current system of non-tariff measures in Viet Nam remained complex together with overlapping procedures and a lack of interagency co-ordination.
“Viet Nam should make every effort to establish a least-cost and transparency system of non-tariff measures with uniform and consistent definition and classification in accordance with international standards and clear policy objectives,” the report suggested.
The establishment of a national committee on trade facilitation and national single window was critical to enhancing interagency co-ordination, according to the report.
According to the Ministry of Industry and Trade, Viet Nam needed to participate deeply in the global value chain to promote high-value exports. — VNS