Supply chain organisation is one of the three pillars of trade, the Work
Bank said in a report it presented at the 2013 Vietnam Supply Chain
Congress that opened in Ho Chi Minh City on October 2.
The three-volume report, titled “Trade Facilitation, Value
Creation, and Competitiveness: Policy Implications for Vietnam’s
Economic Growth”, explores the role of trade facilitation and
logistics in driving exports and national competitiveness.
It posits trade as consisting of three pillars – transport
infrastructure and logistics services, regulatory procedures for exports
and imports, and supply chain organisation.
Pham
Minh Duc, senior economist at the bank, pointed to the weaknesses in
Vietnam’s manufacturing and agricultural supply chains that prevent the
country from lowering export costs and capturing much needed value
addition.
He listed major constraints in
manufacturing supply chains as being a reliance on primary supply chain
structures from which very low value addition is captured, heavy
dependence on feedstock, weak sourcing capacity, weak cluster
arrangement, lack of working capital, and dependence on intermediaries
for both sourcing and marketing.
The predominance of
government-to-government rice exports discourages high quality and
positive response to market signals, which is one of the major
constraints in the agricultural supply chain, he said.
The report also blames Vietnam’s small scale of farming, saying more
than 70 percent of rural households farm less than 0.5ha and use
backward farming methods.
Price and seasonal
fluctuations, ineffective enforcement of health and sanitary conditions
at all stages from the fish farm to the market, and lack of working
capital are other constraints, it says.
The report
recommends several policy changes to restructure supply chains to
capture value and participate proactively in global chains.
In the manufacturing sector, the government should have a priority
list to reflect Vietnam’s comparative advantages, consult with MNCs and
the private sector to develop an action plan to facilitate strong
supporting industries to increase local value and availability, attract
FDI, support PSD, and reduce the trade deficit, it says, adding IPs
should be changed into industrial clusters with specialised production
and logistics and greater use of domestic suppliers.
To improve the supply chain for agriculture, the government should
introduce agro-industrial production towards improving quality, scale up
successful contract farming for large scale agro-industry development,
and reduce G2G sales and the role of smaller enterprises, it says.
It calls for more effective health and sanitary regulations conditions in the aquaculture industry.
The three-day Vietnam Supply Chain Congress 2013 “Source. Make.
Deliver”, which is being organised by the Vietnam Supply Chain
Community, has attracted more than 600 professionals and 40 speakers
from renowned companies.-VNA