Last updated: Wednesday, May 15, 2019


Vietnam Climbs Two Places on Sustainable Trade Index Report 2018

Posted: Wednesday, December 05, 2018

According the “Sustainable Trade Index 2018” Report recently released in Hanoi by the Vietnam Chamber of Commerce and Industry (VCCI) and Hinrich Foundation, a non-profit organisation that undertakes trade-related policy research and development work in Asia, Vietnam secures a fairly good Sustainable Trade Index, surpassing both Thailand and Malaysia, to rank ninth out of 20 Asian economies and the United States.

Towards sustainable trade
International trade plays a fundamental role in economic development. Thus, joining the global trading system has long been a priority policy for nations. The Sustainable Trade Index measures the capacity of 20 economies (19 Asian economies and the United States), with 28 indicators in three key pillars: Economy, society and environment. This index aims at assessing the readiness of participating countries and serves as a key factor in attracting foreign direct investment (FDI) and in choosing suppliers.

Therefore, Vietnam's promotion in the Sustainable Trade Index, from 11th position in 2016 to 9th in 2018, is considered a good sign.

The positive improvement came from all three pillars. Economically, the report noted that Vietnam has reduced tariff barriers and non-tariff barriers and attracted foreign investment capital sources. Vietnam also scored high on market openness.

Meanwhile, in the environmental pillar, by reducing the dependence on natural resources for export, Vietnam's environmental index rose eight places to secure the eighth ranking on the Sustainable Trade Index 2018 in addition to participation and commitment to international environmental regulations.

Socially, Vietnam ranked eighth, well above middle-income countries such as China, Thailand and Malaysia. This results from Vietnam's good control of income inequality (GINI Index) and ranked fifth to be among best performers, while Western countries are seeing this index rising. Moreover, Vietnam's labour standards have also been improved in such indicators as forced labour, child labour and workers’ empowerment.
Mr Stephen Olson, Research Fellow from Hinrich Foundation, said that Vietnam is a country with a solid track record towards sustainable trade. Vietnam has obtained these economic achievements without leaving many consequences on other aspects.

Focus on environmental index
The Hinrich Foundation Sustainable Trade Index is a prestigious and quality report. Therefore, securing a high ranking in the report considerably helps Vietnam boost its future economic development. However, in order to be ranked higher, we still need more effort in the future.

Dr Can Van Luc, Chief Economist at the Bank for Investment and Development of Vietnam (BIDV), said, “In addition to good improvements, this report also reveals the areas that Vietnam needs to focus on in the coming time, particularly with regard to social and environmental pillars as well as other component sub-indices related to trade facilitation in the economic pillar.”

Specifically, in the economic pillar, Vietnam should simplify and reduce procedures and trade costs relating to infrastructure and logistics. In the environmental pillar, there is a need to reduce dependence on natural resources for export, reduce the rate of deforestation, wildlife trade and water pollution as a result of trade and production expansion. In the social pillar, Vietnam needs to cope with its aging population, improving its labour capacity and quality in order to meet integration requirements. In particular, it needs commitments in high-quality free trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Vietnam - EU Free Trade Agreement (EVFTA).

Mr Stephen Olson advised, “Vietnam needs to look at key environmental indices, especially its rate of deforestation currently amongst the highest indices. Besides, reducing trade costs is also a priority that needs to be considered. This index is built on four factors: infrastructure, logistics, corruption and legal system, to measure burdens of the economy created by the trading system.”

In addition, most businesses in the Asia - Pacific region are facing challenges of digital transformation. In order to capture future investment and business opportunities and take part in global supply chains, top two current priorities for businesses are improving customer interactions on digital platforms and raising digital skills for their workforce.

Although Vietnam obtained higher rankings on the Sustainable Trade Index, Vietnam still needs to improve many fields to have a higher position in the future.

The Hinrich Foundation Sustainable Trade Index 2018 is assigned to the Economist Intelligence Unit for development by the Hinrich Foundation. This index measures the capacity of 20 economies (19 Asian economies and the United States) to participate in the sustainable international trading system like engaging in international trade, encouraging foreign investment and seeking support from international cooperation agencies in a sustainable manner. This is the second edition of the study, with the first published in 2016.

Giang Tu

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