In 2005, flows of goods in and out of Vietnam totaled more than $58.4 billion. Of these flows, $32.2 billion in goods were exported, while $36.8 billion were imported. This output includes Economic Processing Zones (EPZs) and Industrial Parks (IPs), which account for 38 percent of the country’s production value. Together, these zones attracted just over 50 percent of FDI. Top trading partners included the United States, China, Japan, Taiwan, and Singapore, and top traded goods involved petroleum and petroleum products, agricultural products, textiles and apparel, and fishery products. In 2006, China became Vietnam’s top trade partner with $8.7 billion of two-way trade, overtaking the U.S. share of $7.6 billion. The United States, however, remained Vietnam’s largest export market.
Vietnam has made numerous changes to the laws and regulations governing trade in goods and services, creating an environment that supports the import and export of goods and services. While a sound legal framework is largely in place, the flow of goods and services among Vietnam’s trading partners is encumbered by institutions that operate less than optimally. In key industries where Vietnam is struggling to achieve or maintain competitiveness, such as apparel, trade facilitation costs help make or break the industry. Although there has been some recent progress, serious obstacles hinder the efficient and secure movement of trade across Vietnamese borders. Major challenges facing Vietnam include—
- Upgrading the relevant public agencies, in particular the Customs Agency.
- Eliminating corruption.
- Further streamlining of trade processes, including import processes handled by Customs (such as valuation).
- Greater integration of border institutions.
- Stronger cooperation between the public and private sectors.
To facilitate goods and services flows, Vietnam should continue to improve the laws, institutions, and operations of its trade-related institutions. Modern institutions must be managed, staffed, and equipped to achieve the appropriate balance between facilitation and control, and to provide reduced trade transaction costs. Vietnam’s Customs Agency Institute is making progress in developing more modern and reliable services through a major upcoming reorganization effort sponsored by the World Bank, which should result in numerous and significant changes to its regulations, organization, and operations.
This chapter analyzes the legal, institutional, and operational constraints that impede trade expansion and recommends ways to minimize those constraints. First, the analysis focuses on Vietnam’s legal framework for trade in goods and services and for the primary trade administration institution, Customs. Second, the chapter considers the institutional issues regarding Customs management, organizational capacity, and operations. Third, the chapter reviews other key public institutions involved in trade facilitation, including the MOT, Ministry of Agriculture and Rural Development, the Ministry of Health, and the police, along with their respective roles in trade facilitation. Lastly, this chapter provides recommendations for improving trade facilitation in Vietnam.
