Market Access Support for Vietnam, through the Strengthening of Capacities

Dr. Bernardo Calzadilla SarmientoUNIDO Deputy Representative - Geneva

Presentation Outline:

• UNIDO’s Trade Capacity Building Approach• UNIDO’s current and planned programmes in

the Trade Capacity Building field• FOCUS: Vietnam• Outcomes and Conclusions

Presentation Outline:

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

1980 1985 1990 1995 2000 2001 2002 2003 2004

bil

lio

n U

S$

World

Developed economies

Developing economies

Source: UNCTAD, 2005

LDCs

World exports, 1980-2004 (US$ billion)

Global Trade Growth & Marginalisation ConcernsGlobal Trade Growth & Marginalisation Concerns

Share of developing countries in global trade only 26% Every 1% growth in Trade, LEADS TO one-half % Income increase Over 75% of global trade is in manufactures (industrial goods)

Share of manufactured trade in total trade, %, 1970-2005

27.1%

74.3%72.1% 70.9%78.8% 80.5% 78.1%

33.7%

64.1%68.3% 68.8%

6.9%16.3%

21.8%

44.4% 44.2%

63.2%57.3%

74.7% 76.1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

1970 1980 1990 2000 2005

Developed Developing LDC World

Source: UN Comtrade

Global Trade Participation ChallengesGlobal Trade Participation Challenges

WORLD TRADE: MANUFACTURED GOOD

Global Trade Participation ChallengesGlobal Trade Participation Challenges

NO TRADE GAINS WITHOUT PRODUCTIVE CAPACITY

CHALLENGES IN ACCESSING MARKETSCHALLENGES IN ACCESSING MARKETS - Food Safety Requirements- Food Safety RequirementsFDA IMPORT REFUSALS for the African Countries by Sub-region UNIDO ANALYSIS of Import Refusals, Source:US Food and Drug Administration

Fishery/Seafood 717 refusals

0

20

40

60

80

100

120

140

160

ECOWAS(NON

UEMOA)

UEMOAEACECCASSADCUMA COMESA

# o

f re

fusa

ls

Labeling Registration Char. of Product Method of Production/Packing

Global Trade Participation ChallengesGlobal Trade Participation Challenges

FROM TARIFF TO NON-TARIFF BARRIERS TO TRADE

January 2005 – December 2006

T h e m a t i cP r i o r i t i e s

E n e r g y a n d e n v i r o n m e n t

T r a d e c a p a c i t y - b u i l d i n g

P o v e r t y r e d u c t i o n t h r o u g h p r o d u c t i v e a c t i v i t i e s

L o n g - t e r mG o a l

T o c o n t r i b u t e t o t h e a c h i e v e m e n t o f t h e M i l l e n n i u m D e v e l o p m e n t G o a l s ( M D G s ) , i n p a r t i c u l a r t o p o v e r t y e r a d i c a t i o n t h r o u g h s u s t a i n a b l e i n d u s t r i a l d e v e l o p m e n t .

P r o g r a m m eC o m p o n e n t s

I n d u s t r i a l P o l i c y , B u s i n e s s E n v i r o n m e n t a n d

I n s t i t u t i o n a l S u p p o r t

E n t e r p r i s e U p g r a d i n g f o r T r a d e E n h a n c e m e n t R e n e w a b l e E n e r g y

R u r a l a n d W o m e n ’ s E n t r e p r e n e u r s h i p D e v e l o p m e n t

P r o m o t i o n o f D o m e s t i c I n v e s t m e n t , F D I a n d A l l i a n c e s

S M E C l u s t e r D e v e l o p m e n t

A g r o - p r o c e s s i n g a n d V a l u e C h a i n D e v e l o p m e n t

R u r a l E n e r g y f o r P r o d u c t i v e U s e

S u s t a i n a b l e P r o d u c t i o n i nP o o r C o m m u n i t i e s

T e c h n o l o g y D i f f u s i o n

I n n o v a t i o n S y s t e m s , T e c h n o l o g y M a n a g e m e n t a n d F o r e s i g h t

M o d e r n i z a t i o n o f E x p o r t -o r i e n t e d A g r o - i n d u s t r i e s

S M E E x p o r t C o n s o r t i a

S t a n d a r d s , M e t r o l o g y , T e s t i n g a n d C o n f o r m i t y

C l i m a t e C h a n g e a n d I n d u s t r i a l E n e r g y E f f i c i e n c y

C l e a n e r a n d S u s t a i n a b l e P r o d u c t i o n

W a t e r M a n a g e m e n t

M o n t r e a l P r o t o c o l

S t o c k h o l m C o n v e n t i o n

C o m p e t i t i v e n e s s A n a l y s i s a n d T r a d e - r e l a t e d P o l i c i e s

C o r p o r a t e S o c i a l R e s p o n s i b i l i t yf o r M a r k e t I n t e g r a t i o n

Three thematic areas:Three thematic areas:

M A R K E T S

P R OD U C T S

Products to Market

….by upgrading supply capacities and standards infrastructures

Connect to the Market

DevelopCompetitive

ManufacturingCapability

Prove Conformity with

Market Requirements

Compete Conform Connect

Connect to the Market

DevelopCompetitive

ManufacturingCapability

Prove Conformity with

Market Requirements

Compete Conform Connect

“Products must conform to requirements of clients and markets”

CONFORMITY with standards

“Rules for trade must be equitable and customs procedures harmonized”

CONNECTIVITY to markets

“Countries must have marketable products for exportation”

COMPETITIVITY of productive capacities

Challenges for trade participation: UNIDO 3Cs

Global Trade Participation ChallengesGlobal Trade Participation Challenges

Integrating into Global TradeIntegrating into Global Trade

Supply side development (UNIDO)• Industrial policy and supportive institutional structure• Investment and technology transfer • SME development and access to finance• Cluster and export consortia development• Productivity and quality• Industrial Upgrading, sectoral technology support• Cleaner Production, energy efficiency

Standards & Conformity Assessment/Compliance (UNIDO)• Development and harmonization of standards• Development of testing services , PT Schemes• Certification (products and enterprise systems)• Metrology/Calibration chain• Accreditation schemes

Integration in to the MTS (WTO, UNCTAD, ITC, WB…)• WTO rules, negotiations• Trade facilitation (customs, documentation)• Infrastructure (transport, ports)

Compete

Conform

Connect

UNIDO TCB UNIDO TCB - Key Focus Areas- Key Focus Areas

UNIDO’s TCB Projects: A FEW EXAMPLESUNIDO’s TCB Projects: A FEW EXAMPLES

NATIONAL PROGRAMS: Aid-for-TradeAid-for-Trade type type Programmes Programmes (Supply-side & Conformity)(Supply-side & Conformity)

• Specific TRTASpecific TRTA: EGYPT- - Traceability of agro-industrial products for the European Market

• Product Specific TRTAProduct Specific TRTA: Regional Cotton Programme- a key issue in Cancún

• Supply and Conformity: Supply and Conformity: INTEGRATED INDUSTRIAL DEVELOPMENT SUPPORT PROGRAMME FOR SRI LANKA

Regional Programmes: Aid-for-TradeAid-for-Trade type Programmes type Programmes (Supply-side & Conformity)(Supply-side & Conformity)

- - Regional TradeRegional Trade:: UNIDO/EU - UEMOA Programme- Productive Capacities and Quality Promotion- Standards and Conformity Assessment- Regional accreditation scheme

- Regional TradeRegional Trade:: EAC (Burundi, Kenya, Rwanda, Tanzania, Uganda)

- Trade capacity building in agro-products for the establishment and proof of compliance with international market requirements…with special focus on regional cooperation.

- Regional TradeRegional Trade:: MEKONG (Cambodia, Lao PDR, Vietnam)

Cambodia and Lao PDR

Formulation and publication national standards, for domestic and export products Development of ISO 9001, ISO 14001 and HACCP certification services, reinforcing corresponding institutions Accredited Product Certification scheme established TBT enquiry point, standards library and documentation centre with facilities for acquisition and dissemination of information established Vietnam Product certification scheme for CE marking and other IEEE requirements Compliance capacity for EU traceability, EUREPGAP, GVP and GTP Upgraded Vietnam Metrology Center National proficiency scheme launched and BOA staff trained in specialised areas

Within this regional context, one area in which UNIDO has focussed has been on the issue of Vietnam's market access issues.

Budget: US$ 2.5 million Donor: Norway

Regional TradeRegional Trade:: MEKONG (Cambodia, Lao PDR, Vietnam)

Trade Capacity Building in the Mekong Delta Countries of Cambodia, Lao PDR and Vietnam, through Strengthening Institutional and National Capacities Related to Standards, Metrology, Testing and Quality (SMTQ)

UNIDO UNIDO Aid-for-TradeAid-for-Trade type Programmes type Programmes (Supply-side & Conformity)(Supply-side & Conformity)

Market Access Support for Vietnam,

through the Strengthening of Capacities Related to

Metrology, Testing and Conformity

US/VIE03/083

Asia’s Second-fastest-growing economySource: FORTUNE (European ed.), Nov. 2006, No.9, Vol.154

GDP average during the past 5 years: 7.4%

GDP growth in 2005 second highest in the Asian region: 8.4%

Increasing Exports (textiles, seafood & furniture): US$32 billion

FDI as a percent of GDP: 3.8%

Literacy rate: 90%

Growing interest from Global Manufacturers (looking for alternatives for China) such as: Intel, Victoria’s Secret, etc.

Vietnam reduced its poverty rate from 51% to 8% in only 15 years

Remarkable achievement - Exports the Key

LessonsLessons from high growth countries: from high growth countries: VietnamVietnam

VIETNAM – Surging Ahead

                                                              

                                                         

VIETNAM: Significant Trade PotentialRapid Economic Growth

VIETNAM (1990 - 2004)GDP, Import and Export

0

10

2 0

3 0

4 0

5 0

GDP Import Export

- GDP growth 8.4% in 2005, fastest growth in Southeast Asia, from US$ 31 bn. To US$ 52 bn. over the last 5 years

- Population of 82 mn., ranking 14th largest in the world

- Growing Imports, Exports and Investment

- Becoming a competitive regional manufacturing base

Source: WDI

Output 1

Upgraded metrology testing facility having internationally accredited mass and temperature laboratories, leading to the provision of precise and recognized calibration to the industry.

OBJECTIVE

Upgrade the required technical infrastructure for metrology, textile/apparel, microbiology and chemical testing and calibration needs in industry, system certification capacity and strengthen SMTQ institutional service caability.

US/VIE/03/083

PHASE I

Quality Assurance and Testing Centre 3 (QUATEST 3), Ho Chi Minh City

Mass measurement laboratory Temperature Measurement laboratory

Vietnam Metrology Institute(VMI), Hanoi

Mass measurement laboratory Temperature Measurement laboratory

Output 2 Upgraded textile/apparel, microbiology and chemical testing facilities. The facilities will provide testing services to exporters in the fisheries, food-processing and garments sectors and also undertake complex testing for trace elements and environmental process compliance.

Quality Assurance and Testing Centre 1

(QUATEST 1), Hanoi

Textile testing laboratory:

Quality Assurance and Testing Centre 3

(QUATEST 3), Ho Chi Minh City

Food testing laboratory:Microbiology testing laboratory:

National Fisheries Quality Assurance and Veterinary Directorate Branch 1 (NAFIQAVED 1), Hai Phong City

Microbiology testing laboratory:

Carries out physical and compositional testing of textiles and garments.

Carries out a wide range of testing of products, food and animal feedstuffs.Carries out tests on fruits & vegetable products, fish & fish products, milk & milk products, and water.

Carries out tests on fish & fish products, and potable water.

Output 3

Strengthened pool of national trainers capable of providing training to ISO 9000, ISO 14000, HACCP and SA 8000, OHASS 18000 and GMP.

20 - 27 April 2005: HACCP Auditor Training Course, Hanoi.

23 participants from Vietnam, Laos, Cambodia;

28 April - 6 May 2005: HACCP Training of Trainers Course, Hanoi. 06 participants and 03 observers (only Vietnamese participants);

25 April - 5 May 2005. EMS Training of Trainers Course, Hanoi.

05 participants from Vietnam;

29 April 2005. EMS Seminar, Hanoi. 45 participants from different agencies and companies;

04 - 12 May 2005. QMS Training of Trainers Course, Hanoi.

06 participants from Vietnam;

06 May 2005. HACCP/GMP Seminar, Hanoi. 55 participants;

12 May 2005, QMS Seminar, Hanoi.

40 participants;

18 July - 05 August 2005, Training on Temperature Measurement (02 trainees) and on Mass Measurement (02 trainees) at PTB, Germany;

27 Nov - 18 Dec 2005, Training in Textile Laboratory, Sri Lanka.

2 trainees;

11 - 14 April 2006, SA 8000 Lead Auditor Training Course, Hanoi. 14 participants;

OSHAS 18000 training will be carried out in December 2006.

Examples of training provided under the Project

Output 4 Improved capabilities of the accreditation services provided by STAMEQ.

Accreditation in Vietnam and Corporate Governance of STAMEQ

- need to bring the BoA into full compliance with ISO/IEC 17011

- continue training activities for BoA staff members and technical assessors

- ToR for proposed Accreditation Council drafted

-Develop new laws on standards and quality (Gov. deadline for standards legislation mid 2006 & for legislation on quality late 2006)

Output 5 Enhanced corporate governance and service capability of STAMEQ, enabling the provision of support services to the growing private sector driven industrial sector and exporters.

Board of Accreditation (BoA): In order to continue the process towards a more independent status of the BoA, the functions of Deputy Director-General of STAMEQ and Director of BoA have been separated as of May 15, 2006.

The Government published a decree (No 43/2006/NĐ-CP) in April 25, 2006 that allows “commercial entities” within the government’s administration to benefit with autonomy in personnel, finance and operations; and encourage the corporatization of organizations within the government administration.

Significant developments in Vietnam’s public administration:

TRADE CAPACITY BUILDINGtcb@unido.org

STAMEQ: SWOT Analysis

Longstanding customer relationships,

Easy access to government-owned companies;

Political connections;

Good and quick response to client requests due to availability of local experts within the country, familiarity with local context/language.

Testing: the ability to offer a range of technical fields in-house. High quality of service, experienced workforce. Specialized in areas where high volumes can be generated (other services are sourced from specialized laboratories).

BDS: “package” approach is interesting and attractive to SMEs, especially newly established ones, and donors who are funding SME support programs, including possibly programs established in neighboring countries.

HWC: Currently the only training/consulting organization specializing in the field of welding (and the only officially recognized welding institute in Vietnam).

Vertical and horizontal integration within STAMEQ (provided synergies are exploited).

STRENGHTS

TRADE CAPACITY BUILDINGtcb@unido.org

STAMEQ: SWOT Analysis

WEAKNESSES

Broad diversification rather then specialization within the entities;

Internal competition in some key areas;

Ability to cope with political constraints as a state organization. Although entities will enjoy a large degree of autonomy after implementation of Decree Nr. 115, they still might have to cope with political constraints;

Marketing capacity/budget lower then possible new, foreign-invested market entrants, sales side weak;

Lack of managerial accounting system.

TRADE CAPACITY BUILDINGtcb@unido.org

STAMEQ: SWOT Analysis

OPPORTUNITIES

Capitalize on testing needs arising from increased investment and export activities;

Capitalize on opportunities arising from integration of Vietnamese enterprises in multi-national supply chains;

Consulting and certification in ISO 9000 for government bodies (according to Decision Nr. 144/2006 issued by the Prime Minister on applying ISO 9000 in government offices). The conditions defined according to this decision leads to a de facto monopoly of STAMEQ in this field. The training center intends to develop capacities to exploit this opportunity.

TRADE CAPACITY BUILDINGtcb@unido.org

STAMEQ: SWOT Analysis

THREATS

Increased foreign competition in testing and in-country establishment of competitors in QMS consulting and certification;

Relatively mature market for ISO 9001;

The establishment of in-house testing facilities, or testing facilities in industrial zones;

Gradual decrease of donor support for SME BDS;

Could decision Nr. 115 lead to a situation where many smaller institutions need to seek new revenues and subsequently also use their laboratories more intensively for testing activities? Whether this is a threat or opportunity depends mainly on whether STAMEQ can maintain its quality (and convince clients to pay a higher price for it).

VIETNAM: WTO Accession – a Challenge

- WTO accession – a demanding process

- Success in meeting WTO obligations also depends on the technical assistance support provided in meeting the requirements of the TBT/SPS agreements

- WTO TBT/SPS agreements are to be implemented immediately

- Establishment of TBT and SPS Enquiry Points

- Promotes continued domestic reform towards perfecting a market based economy

- Promotes meaningful market access to foreign markets

- Increased export opportunities

- Attract larger flows of FDI

- Poverty reduction

WTO ACCESSION BENEFITS :

The way forward

- WTO Accession.

- TBT Issues addressed through Enq. points

- SPS Strengthen capacity to deal with Standards and Conformity Requirements related to Key Export Sectors in Vietnam

- Enhance ownership

- Improve participation and influence standard development