MINISTRY OF EDUCATION AND TRAINING FOREIGN TRADE UNIVERSITY MASTER THESIS TRADE FACILITATION OF THAILAND AND LESSONS FOR VIETNAM Specialization: International Trade Policy and Law TRINH THI HUYEN Hanoi – 2019 MINISTRY OF EDUCATION AND TRAINING FOREIGN TRADE UNIVERSITY MASTER THESIS TRADE FACILITATION OF THAILAND AND LESSONS FOR VIETNAM Major: International Economics Specialization: International Trade Policy and Law Code: 8310106 Full Name: Trinh Thi Huyen Supervisor: Doctor Phan Thi Thu Hien Hanoi – 2019 i DECLARATION I hereby commit that this thesis is my own study and there is no information used with the unauthorized data source The research contents in this topic are completely honest and have not been used or published in any form The information and data of other authors and other organizations referenced in the thesis are fully cited and annotated Due to limited time period and knowledge, this thesis faces with flaws and inevitably contains errors In addition, when the author carried out the research about the trade facilitation implementation of Thailand, it still exists the shortage in figuring out the details because of a big language barrier (a huge amount of information is in Thailandese) Therefore, I look forward to receiving the contributing ideas to finish this study I would like to express my sincere and grateful thanks to Doctor Phan Thi Thu Hien, who enthusiastically guided me under the process of completing this study Student: Trinh Thi Huyen ii TABLE OF CONTENT DECLARATION I LIST OF FIGURES IV LIST OF TABLES VI ABBREVITION LIST VII ABSTRACT IX INTRODUCTION CHAPTER 1: OVERVIEW OF TRADE FACILITATION 1.1 Trade facilitation definition 1.1.1 Definition 1.1.2 Impact of trade facilitation 1.2 Trade facilitation main indicators 12 1.3 WTO’s Trade Facilitation Agreement (TFA) 18 1.3.1 Overview of TFA establishment 18 1.3.2 Main contents of TFA 18 1.3.3 Current implementation of TFA 19 CHAPTER 2: THE CURRENT IMPLEMENTATION STATUS OF TRADE FACILITATION OF THAILAND 21 2.1 Overview of Thailand 21 2.1.1 Thailand geographical location 21 2.1.2 Thailand economy 21 2.1.3 Transportation and logistics structure in Thailand 27 2.2 Current implementation of TFA of Thailand 30 2.2.1 TFA Commitment 30 2.2.2 TFA Implementation of Thailand 32 2.3 Achievements of TF in Thailand 44 2.3.1 Trade Facilitation Main Indicators 44 iii 2.3.2 Implementation of TFA Indicators by OECD 48 2.3.3 Overall assessment of TF in Thailand and lessons learned 54 CHAPTER 3: THE CURRENT IMPLEMENTATION STATUS OF TRADE FACILITATION OF VIETNAM 58 3.1 Overview of Vietnam 58 3.1.1 Vietnam geographical location 58 3.1.2 Vietnam economy 58 3.1.3 Transportation and logistics structure in Vietnam 62 3.2 Current implementation of TFA of Vietnam 66 3.2.1 TFA commitment of Vietnam 66 3.2.2 TFA Implementation of Vietnam 67 3.3 Achievements of TF of Vietnam 73 3.3.1 Trade Facilitation Main Indicators 73 3.3.2 Implementation of TFA Indicators by OECD 78 3.3.3 Overall assessment of TF in Vietnam 81 CHAPTER 4: STRENGTHENING TRADE FACILITATION OF VIETNAM FROM THAILAND’S EXPERIENCES 83 4.1 Vietnam’s view for improvement trade facilitation of vietnam 83 4.1.1 Opportunites of Vietnam 83 4.1.2 Challenges for Vietnam 85 4.2 Solutions for strengthening trade facilitation of Vietnam from lessons/experiences of Thailand 87 CONCLUSION 91 REFERENCES 93 iv LIST OF FIGURES Figure 1.1 Buy-Ship-Pay Model Figure 1.2 Principle of trade facilitation Figure 1.3 What is measured in Doing Business? 13 Figure 1.4 The Global Competitiveness Index 4.0 2018 15 Figure 1.5 The implementation commitment of WTO Members 20 Figure 2.1 GDP of Thailand (2009-2018) 22 Figure 2.2 GDP/ capita of Thailand & East Asia & Pacific (2009-2017) 22 Figure 2.3 Share of economic sectors in GDP from 2007-2017 23 Figure 2.4 Balance of Trade of Thailand from 2009 – 2019 25 Figure 2.5 Thailand’s Exports from 2009 – 2019 25 Figure 2.6 Thailand’s Imports from 2009 – 2019 26 Figure 2.7 Thailand’s Foreign Direct Investment (2013 – 2018) 27 Figure 2.8 Notification Status of Thailand 32 Figure 2.9 Thailand National Logistics strategy 34 Figure 2.10 Conceptual Model of Thailand National Single Window 36 Figure 2.11 Thailand National Single Window operation 40 Figure 2.12 AEO Organization of Thailand 42 Figure 2.13 Thailand AEO Members 44 Figure 2.14 Thailand Ease of Doing Business (2009-2018) 45 Figure 2.15 Logistics Performance Index of Thailand 46 Figure 2.16 Thailand’s Competitiveness index 2009 – 2018 47 Figure 2.17 Thailand’s Enabling Trade Index 2016 47 Figure 2.18 Thailand’s LSCI (2010-2018) 48 Figure 2.19 Trade Facilitation and Paperless Trade Implementation of Thailand in 2017 49 Figure 2.20 “Transparency” measures implementation 50 Figure 2.21 “Formalities” facilitation measures implementation 51 Figure 2.22 “Institutional arrangement and cooperation” measures implementation 52 v Figure 2.23 “Paperless trade” measures implementation 53 Figure 2.24 “Cross-border paperless trade” measures implementation 54 Figure 3.1 GDP of Thailand, Vietnam, Malaysia (2013-2018) 59 Figure 3.2 GDP/capita of Thailand, Vietnam, Malaysia (2013-2017) 59 Figure 3.3 Share of economic sectors in GDP Thailand-Vietnam, 2013-2017 59 Figure 3.4 Vietnam’s Exports from 2009 – 2019 61 Figure 3.5 Vietnam’s Imports from 2009 – 2018 61 Figure 3.6 Vietnam’s FDI (2009 – 2019) 62 Figure 3.7 Notification Status of Vietnam 67 Figure 3.8 Number of AEO in Vietnam (2014-2018) 73 Figure 3.9 Ease of Doing Business in Vietnam- Thailand (2009-2018) 74 Figure 3.10 Logistics performance index of Thailand, Vietnam and Malaysia 75 Figure 3.11 Vietnam’s GCI 2009 – 2018 76 Figure 3.12 Vietnam’s Enabling Trade Index 2016 77 Figure 3.13 Vietnam’s Performance of TFI(s) of 2017 by OECD 81 vi LIST OF TABLES Table 1.1 Benefits for governments and business communities 11 Table 1.2 OECD’s Trade Facilitation Indicators 17 Table 2.1 Development of Thailand’s international trade in January 2019 24 Table 2.2 Score for Infrastructure 28 Table 2.3 Notified items of Thailand 30 Table 2.4 Thailand NSW Participating Agencies 38 Table 2.5 Major Documents Exchanged via THAI-NSW 40 Table 3.1 Development of Vietnam’s international trade in Jan 2019 60 Table 3.2 Score for Infrastructure 63 Table 3.3 Maritime and Ports infrastructure in Vietnam-Thailand 65 Table 3.4 LSCI of Vietnam, Thailand and Malaysia 78 vii ABBREVITION LIST ADB Asian Development Bank AEO Authorized Economic Operator APEC Asia-Pacific Economic Cooperation ASEAN Association of Southeast Asian Nations ATIGA ASEAN Trade in Goods Agreement B2B Business to Business partnerships DG TAXUD Directorate General of Customs and Taxation EC European Commission EDI Electric Data Interface EU European Union FoS Factor of Safety FTA Free Trade Agreement GATT General Agreement on Tariffs and Trade GDC General Department of Vietnam Customs GDP Gross Domestic Product G2B Government to Business partnerships G2G Government to Government partnerships ICC International Chamber of Commerce ITC International Trade Centre ITO International Trade Organization OECD Organisation for Economic Co-operation and Development NESDB National Economic and Social Development Board NLC National Logistic Committee NSW National Single Window NTFC National Trade Facilitation Committee PDSC Policy Support Dialogue Component RFID Radio Frequency Identification RTC Royal Thai Customs viii TEC-II Thailand-EU Cooperation Facility Phrase II TF Trade facilitation TFA Trade Facilitation Agreement THAI-NSW Thailand National Single Windows UN The United Nations UNCTAD United Nations Conference on Trade and Development UNECE United Nations Economic Commission for Europe UNESCAP UN Economic and Social Commission for Asia and the Pacific UNESCO United Nations Educational, Organisation WB World Bank WCO World Customs Organization WTO World Trade Organization Scientific and Cultural 82 On the other hand, the regulatory framework for cross-border trade is relatively not effective These have arisen because the growing volume of trade has not been matched by a commensurate increase in resources, human or otherwise, devoted to border management The resulting long delays have made corruption worse- already widespread from other factors like lack of transparency and information about procedures This situation was exacerbated by an ICT system that was unable to cope with the processes of international standards Yet a modern and fully automated customs system will be vital for the effective implementation of the National Single Window and the ASEAN Single Window to which Vietnam is committed Business processes remain complex, inconsistent, and based on manual procedures with very little imformation technology application With trade growing rapidly, these procedures cause to export competitiveness cannot be overemphasized 83 CHAPTER 4: STRENGTHENING TRADE FACILITATION OF VIETNAM FROM THAILAND’S EXPERIENCES 4.1 Vietnam’s view for improvement trade facilitation of Vietnam Trade facilitation is not only a commitment of Vietnam as a member of WTO but also a solution to improve the competitiveness and efficiency of import and export activities of enterprises However, the process of promoting trade facilitation in the country still faces many difficulties and challenges After the renovation policy was launched, international economic integration has always been an important pillar of Vietnam's economic reform The benefits of trade facilitation are very clear According to the calculation of OECD, if full implementation of the commitments under the Trade Facilitation Agreement shall help Vietnam reduce up to 18.3% of Vietnam's trade costs If one day of trading procedures across the border is reduced, the economy will save about 1% of the total import-export turnover in a year There are the following opportunities that Vietnam can gain from the trade facilitation improvement in the near future: 4.1.1 Opportunites of Vietnam The ratification of TFA of Vietnam in December 2015 indicated that Vietnam would like to open the market and promote the international trade with the other economies in all over the world The commitment for the TF implementation also bring both the pros and cons for Vietnam economy There are many benefits in implementing the Trade Facilitation, some of them are as follows: (1) Vietnam has had the opportunity to approach to the process of implementing modernization, applying international standards and good practices, from which it has got the direction as well as guideline to apply TF contents (2) The implementation of modernization reform has created a team of staff, experts at different levels and areas to ensure that they can meet the requirements of these commitments Vietnam is also given support, technical assistance, training of foreign staffs: from international organizations such as WCO, WTO, WB, ADB, ASEAN, APEC from the Customs Japan, South Korea, France, USA 84 (3) Enterprises can reduce time and cost of customs clearance, enhance competitiveness, promote export, expand market The Government cannot act otherwise if it hopes to help Vietnamese businesses to be competitive in the global market place These improvements will greatly facilitate trade across borders, thereby reducing the costs in both time and money for Vietnamese businesses In general, it is expected to reduce the time needed to import goods by over a day and a half and to export goods by almost two days For Vietnam, the TFA could reduce trade costs by 20% and trade facilitation measures will help businesses in formal international trade According to Mr Nguyen Dinh Cung, Director of the Central Institute for Economic Management, one-day reduction in customs clearance time could result in a saving of VND1.6 billion It is a huge amount given the busy customs activities in Vietnam’s ports  The TFA regulated provisions on facilitating rapid movement of goods across borders such as advance rulings, pre-arrival processing, allowing the release of goods prior to final determination of customs duties, taxes, fees and charges, which helps to ensure the predictability of rules and procedures related to trade and customs by requiring its members to timely publish relevant documents preferably on the Internet and establishing enquiry points to respond to enquiries by interested parties  The TFA aims at creating harmonized process and standards which traders find it familiar and predictable when doing customs procedures in different countries  The TFA recognizes the importance of growth and benefits for every member state Thus, it provides for special and differential treatment for developing and least developed countries to make sure these countries receive sufficient assistance to reap the full benefits of the TFA implementation In addition, the WTO Trade Facilitation Agreement Facility will support developing and least developed countries in addressing their needs and concerns In implementing the TFA technical measures, the customs procedures in Vietnam will meet the standards of trade facilitation: standardization, harmonization, 85 simplification and transparency National single window is a supreme effort to provide merchants and companies with a unique electronic portal in each country so they can submit documents and data requests for import or export, transit goods Implementing single window mechanism by using e-customs as a tool to connect others governmental administrative agencies with customs department will help enterprises cut down on almost costs and time spent on goods clearance, promote goods circulation and competitiveness in the world market 4.1.2 Challenges for Vietnam However, trade facilitation targets of the Vietnam Government in 2018 according to "Resolution No 19/2018/NQ-CP on continuing to perform the main tasks and solutions to improve the business environment, improve the edge capacity National paintings of 2018 and the following years”, to this point of time still have many challenges Typically, with the goal by the end of 2018, the time to carry out procedures for export goods is 70 hours is difficult when the current implementation time is 105 hours, similar to the time to process goods Import goods are 132 hours, while the target by the end of 2018 is 90 hours Currently, 19.4% of imported consignments are subject to pre-clearance inspection and are difficult to fall below 10% by the end of 2018 (Vietnamnet News, 2018) Beside the fact that the macro challenges which Thailand suffered also come to Vietnam including but not limited to limitation on technical facilities, shortage of fully TFA understanding, difficulties on legal frame creation/adjustment, or lack of infrastructure and technical building, Vietnam has also faced with the internal challenges coming from itself (1) Lacking of the consistency between TF requirements and effective management requirements of the governements Only in 2013, Tan Son Nhat Customs Department has arrested a lot of illegal drugs imported into Vietnam by air to consume or to transit to other countries Also in that year, with the TF regime, especially for export goods, 600 Heroine packs was caught in the way to Taiwan Regardless of what the reasons are, this is still a costly counterpart to the current conflict of management of Customs 86 between TF requirements and management requirements On the one hand, Vietnam still wants to open the market, reduce trade barriers for facilitation, on the other hand, it has to protect our border from crime and illegal smuggling In the context of a developing country, the legal system is not perfect, the importexport companies have not yet operated professionally, the number of smuggling enterprises and the corruption among customs officers become a challenge for implementing effective application of Trade Facilitation measures (2) Lacking of TF knowledge and training programmes for government officials as well as the experts who shall consult to build the legal fram for the trade facilitation implementation It is sometimes the case that trade facilitation measures are provided for in national legislation but the measures are not in use because government officials not know how to explain such regulation In many countries technical assistance is needed in the development of official instructions or standard operating procedures to provide guidance to border officials on how to apply measures This will also help to ensure more consistent uniform application The capacity of Vietnam custom officers is still sometimes limited and has not yet kept pace with renovation and reform regarding the content of Trade Facilitation Agreement (3) Lacking of clarity on the procedures Excessive and inefficient bureaucratic procedures seem to be frequent, excessive and inefficient import, export and transit procedures are one of the main problems that TFA aims to address It does so not only through the technical procedures to accelerate release of goods and improve customs controls, but also through a direct requirement that members review their formalities and documentation requirements with a view to minimizing their incidence and complexity According to a number of local and foreign logistics companies interviewed, the country’s customs and regulatory practices act to increase the operational costs of many logistics companies servicing the region Although Vietnam’s customs procedures are currently being modernised– a new electronic customs clearance system (‘e Customs’) was launched in April 2014 – delays are still common These have largely been attributed to a number of inefficient, manual customs processes, including cargo inspections that have attracted criticism for lacking 87 in both transparency and consistency 4.2 Solutions for strengthening trade facilitation of Vietnam from lessons/experiences of Thailand In recent years, Vietnam's economy is considered more and more growing Economic growth in 2018 reached 7.08% compared to 2017 - the highest increase in 11 years The quality of growth and the investment and business environment have been improved, the newly established businesses increased sharply However, with a small economic scale, Vietnam's response to future fluctuations may be more difficult because of limited financial and monetary balance In order to improve its competitiveness, achieve the objectives and commitments in trade facilitation of WTO, Vietnam will learn the following solutions from Thailand’s experiences as pointed out in Chapter 2: (1) Enhancement on the understanding of Trade Facilitation Agreement and the relevant agencies and take quick action for the TFA implementation Vietnam government must recognize the importance of TF and set up the right mindset and attitude to implement the Agreement • The mindset (from “effort” to “compliance” approach) • The attitude (from passive/responsive to active/proactive one) Once these are set, the remaining tasks will become easier and more effectively carried out (2) Promulgate policies, rules, regulations (legal frame) for trade, investment and transportation For examples, policies encouraging the establishment of an industrial model using information technology and technologies with preferential tax treatments during the course of production are advised to be enacted This will be the basis to attract many foreign logistics enterprises to business with Vietnam enterprises Provision on logistics services prescribed in the Vietnam Commercial Law 2005 should be amended in order to create a legal basis for logistics Vietnam government should also take into account amending and supplementing policies and laws regulating logistics services, multimodal transport, cross-borders transportation It is also important to review international commitments on logistics services at the WTO, 88 ASEAN and FTAs to find out measures to avoid conflicts between international logistic commitments and domestic laws and regulations (3) Improve of infrastructure and enhance the application of information communication technology (ICT) Transport infrastructure is more and more improved in the recent years but is still a week area of TF system, which prevents Vietnam from making opportunities from its swift international integration To create a breakthrough in transport infrastructure of Vietnam, priority should be given to develop transport infrastructure in areas with big cargo and commodity volume, high growth rate or areas which are national, regional and international economic hubs Service capacity of the three big sea ports of Hai Phong, Da Nang and Ho Chi Minh cities should be modernized Urban transport system, particularly public transport is to be rapidly developed Drastic measure should be taken to solve traffic jams and inundation in Ha Noi and Ho Chi Minh cities As for the ICT, computerized and automated administration system is absolutely vital and becoming increasingly important in TF in Vietnam It is important to stream down the heavy-duty procedures and paper requirements, more and more However, this requires long-run investments and coordination between stakeholders and government Modern and fully automated customs system will be vital for the effective implementation of the National Single Window and the ASEAN Single Window that Vietnam already committed Vietnam should put into operation more and more in compliance with ASEAN commitments In addition, the personnel resources also need to enhance their abilities to keep up with the increasing application of IT (the Revolution 4.0 of Information Technology) (4) Improve the relationship between government and private sector The relationship between the officials and enterprises is more and more important in the international trade within the country Vietnam must enhance public private relationship in information sharing, policy-making process, infrastructure improvement, human resource development and institutional capacity building There are too many strategic plans with overlapping activities but no focus on trade facilitation, while international agreements have been signed but not yet been implemented At the firm-levels, multiple agencies at different tiers of government 89 carry out trade facilitation activities with no coordination For example, customs is important, but regulating flows of goods across the border involves many other agencies, including Ministries of Agriculture, Health, Science and Technology, and Transport and port authorities Coordination among key stakeholders and their partnership with private sector is crucial to trade facilitation Thus, the important role for the government is to support activities that have positive externalities, and provide assistance that spurs the flow of trade It must simultaneously remove impediments including disengaging from areas where the private sector can play a lead role The Government of Vietnam can more in each of these areas To achieve the various initiatives and long-term efficiency, attention to restructuring supply chains has benefits that extend beyond trade facilitation The private sector not only can bring financial resource, but also can bring the know-how and expertise to support infrastructure projects led by the Government Hence, the government and relevant authority should develop a strong sponsorship of Public-Private Partnership as a critical policy in TF In addition to the efforts of the Government and State management agencies, associations, enterprises should actively take advantage of trade facilitation conditions through grasping and implementing correctly and fully with the governmental regulations, policies for process of customs clearance Also, enterprises community should promptly reflect difficulties and shortcomings in implementing administrative procedures and actively contribute ideas to build and improve the mechanisms and policies of the State The main mechanism for dialogue is an effective solution to harmonize the objectives of State management and trade facilitation for enterprises (5) Apply the provision of technical assistance and capacity building support as guided by TFA Different to Thailand, Vietnam categorized the provisions of TFA as per Category A, B and C Vietnam government already notified officially its category C provisions as defined in Article 14 of the TFA, which mean that Vietnam wished to receive the capacity support from developed countries in the world Vietnam is also given support, technical assistance, training of foreign staffs: from international organizations such as WCO, WTO, WB, ADB, ASEAN, APEC from the Customs 90 Japan, South Korea, France, USA Last but not least, learn and apply good experiences from the coutries which have been successfully and effectively implemented to shorten time for Vietnam such as Thailand, Singapore, who are the top performers within ASEAN countries 91 CONCLUSION Vietnam has increasingly integrated more and more into global economy This requires further innovation and reform in all sections of the economy, from public to private sectors Vietnam authorities already participated in many relevant international organizations, conventions, adopted new technologies, and improved our legal frame so far in order to reach the goals of trade facilitation improvements, including but not limited to reducing trade cost, time, uncertainties, expanding market and promoting the international trade The indicators based on author’s own research show a positive result That improvement is the result of non-stopping effort in renovation of customs and many involved sectors However, Vietnam has still lacked of effective supervisor regime, harmonization, cooperation among involved authorities, between authorities and business communities in the implementation of new procedures, technology in every aspects of trade facilitation, not only just customs alone This thesis is targeted to analyse the case of Thailand from which Vietnam can learn the effective lessons from them In order to enhance the trade facilitatation implemention of Vietnam, the Vietnam government must fully be aware of the importance of the trade facilitation, from mindset to attitude as mentioned above Without such awareness, Vietnam cannot change itself to strongly and drasticly adjust the legal framework to be in accordance with the requirements of TFA, as well as to deeply concentrate on the development and upgrade of infrastructure to meet the conditions of international trading Improving the quality service of logistics is also necessary to prioritize the development of nonasset-based logistics services to increase the competitiveness of Vietnam's logistics and transport services A reliable logistics statistics system needs to be developed to assist government policy makers and businesses to develop appropriate business strategies While major attention to customs reform has produced some results in terms of border management, many agencies continue to rely on outmoded procedures that are timeconsuming, opaque and susceptible to corruption Streamlining processes and strengthening institutions are vital areas of reform, with the report detailing specific areas of focus A sound legal framework should be developed for the Customs 92 modernization program The Customs Law should be further amended to set an overall framework for business process simplification and risk management practices to meet international customs standards A risk management system should be establised Related laws are to be revised to set the foundation for applying fully and consistently the principles of risk management The goal is to successfully build the e-Government towards the Government and digital economy in Vietnam, taking the people and businesses as the focus This will be a solution to promote economic growth not only fast but also sustainable and specially to ensure a transparent and effective investment and business environment - a prerequisite for trade facilitation The Advisory Council of the Government Office has announced for the first time the Index of Administrative Compliance Cost Indicators (APCI), removing each cause, stage, area and costly cost of the enterprise In order to create favorable conditions for trade, effectively supporting enterprises, it is necessary to continue to solve specialized inspection issues in the direction of strongly transforming the state management method from pre-check to post-check, apply risk management principles and assess the law compliance of organizations and individuals At the same time, the overlap must be basically eliminated, a product subject to the management and inspection of many agencies Therefore, the ministries and branches must seriously implement the administrative procedures with the national electronic portal, not allowing the situation of both electronic procedures and businesses to submit paper documents 93 REFERENCES Andras Lakatos, Challenges For Implementing The 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https://www.tfafacility.org/ratifications, accessed on 1st March 2019 ... that Thailand and Vietnam established to promote the trade facilitation and TFA commitment of Thailand and Vietnam up to now; and (ii) measures and standards of trade facilitation indicators for. .. implementation of trade facilitation, two of them are Vietnam and Thailand This paper presents the current status of the results of the implementation of Trade Faciliation Agreement of Thailand and Vietnam, ... achievements and experiences that Thailand gained from trade facilitation are absolutely some of the best ways for Vietnam to learn and apply for itself Therefore, the topic "Trade facilitation of Thailand