Business
"Invisible tariff" in Vietnam reaches 164%: expert
Trade costs in developing countries remain high, mainly due to administrative procedures, according to expert of the Global Alliance for Trade Facilitation (GATF) in Vietnam cited by the government portal.
Obsolete trade regulations in associated with non-transparent and inefficient administrative procedures placed a burden on economic growth similar to an "invisible tariff" of 164.25%, stated Nestor Scherbey, senior advisor of the GATF in Vietnam.
Technical barrier to trade currently is the heaviest burden for imported goods to Vietnam, which is also the most challenging issue for Vietnam's small and medium enterprises (SMEs) taking part in the global value chain, stated Scherbey in a conference on September 10.
According to statistics, SMEs accounted for 97% of the total number of enterprises in Vietnam.
GATF, led by the World Economic Forum (WEF) and other international organizations, chose Vietnam as the first developing country in Asia to support the implementation of the World Trade Organization's Trade Facilitation Agreement (TFA) through custom bond system, informed Scherbey.
According to a 2015 study by WTO economist, trade costs can be equivalent to a 134% ad valorem tariff on a product in high-income countries and a 219% tariff equivalent in developing countries.
Meanwhile, trade costs in developing countries remain high, mainly due to administrative procedures, added Scherbey.
A survey conducted by the World Bank in 126 countries showed that much of time delay in exporting (about 75% on average) is due to administrative costs, while research by the WEF suggested TFA implementation could trigger a 60% to 80% increase in cross-border SME sales in some countries.
In case of Vietnam, reducing export clearance time by a day can increase annual exports by around 1%, which is around US$2.13 billion, Scherbey said.
In particular, a day's delay reduces a country's relative exports of time-sensitive to time-insensitive agricultural goods by 6%, and a reduction of five days' delay would translate into export turnover of US$10.65 billion, he continued.
Another research showed that an increase of 10% in transparency under the TFA would help Vietnam increase annual import turnover of US$8.7 billion, according to Scherbey.
Under this circumstance, the application of a modern custom bond system would solve the above issues and ensure steady source of income for state budget, he concluded.
Illustrative photo.
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According to statistics, SMEs accounted for 97% of the total number of enterprises in Vietnam.
GATF, led by the World Economic Forum (WEF) and other international organizations, chose Vietnam as the first developing country in Asia to support the implementation of the World Trade Organization's Trade Facilitation Agreement (TFA) through custom bond system, informed Scherbey.
According to a 2015 study by WTO economist, trade costs can be equivalent to a 134% ad valorem tariff on a product in high-income countries and a 219% tariff equivalent in developing countries.
Meanwhile, trade costs in developing countries remain high, mainly due to administrative procedures, added Scherbey.
A survey conducted by the World Bank in 126 countries showed that much of time delay in exporting (about 75% on average) is due to administrative costs, while research by the WEF suggested TFA implementation could trigger a 60% to 80% increase in cross-border SME sales in some countries.
In case of Vietnam, reducing export clearance time by a day can increase annual exports by around 1%, which is around US$2.13 billion, Scherbey said.
In particular, a day's delay reduces a country's relative exports of time-sensitive to time-insensitive agricultural goods by 6%, and a reduction of five days' delay would translate into export turnover of US$10.65 billion, he continued.
Another research showed that an increase of 10% in transparency under the TFA would help Vietnam increase annual import turnover of US$8.7 billion, according to Scherbey.
Under this circumstance, the application of a modern custom bond system would solve the above issues and ensure steady source of income for state budget, he concluded.
