TRADE FACILITATION OF THAILAND AND LESSONS FOR VIETNAM

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


1

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


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TABLE OF CONTEN
DECLARATION......................................................................................................i
LIST OF FIGURES................................................................................................iv
LIST OF TABLES..................................................................................................vi
ABBREVITION LIST..........................................................................................vii
ABSTRACT............................................................................................................ix

INTRODUCTION...................................................................................................1
CHAPTER 1: OVERVIEW OF TRADE FACILITATION.................................6
1.1. Trade facilitation definition.........................................................................6
1.1.1. Definition...............................................................................................6
1.1.2. Impact of trade facilitation....................................................................9
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
2.3.2. Implementation of TFA Indicators by OECD.......................................48


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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


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LIST OF FIGURES Y
Figure 1.1. Buy-Ship-Pay Model...............................................................................8
Figure 1.2. Principle of trade facilitation...................................................................8
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


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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


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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

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ABBREVITION LIST
ADB
AEO
APEC
ASEAN
ATIGA
B2B
DG TAXUD
EC
EDI
EU
FoS
FTA
GATT
GDC
GDP
G2B
G2G
ICC
ITC
ITO
OECD
NESDB
NLC
NSW
NTFC
PDSC
RFID

RTC
TEC-II
TF
TFA
THAI-NSW
UN
UNCTAD
UNECE

Asian Development Bank
Authorized Economic Operator
Asia-Pacific Economic Cooperation
Association of Southeast Asian Nations
ASEAN Trade in Goods Agreement
Business to Business partnerships
Directorate General of Customs and Taxation
European Commission
Electric Data Interface
European Union
Factor of Safety
Free Trade Agreement
General Agreement on Tariffs and Trade
General Department of Vietnam Customs
Gross Domestic Product
Government to Business partnerships
Government to Government partnerships
International Chamber of Commerce
International Trade Centre
International Trade Organization
Organisation for Economic Co-operation and Development

National Economic and Social Development Board
National Logistic Committee
National Single Window
National Trade Facilitation Committee
Policy Support Dialogue Component
Radio Frequency Identification
Royal Thai Customs
Thailand-EU Cooperation Facility Phrase II
Trade facilitation
Trade Facilitation Agreement
Thailand National Single Windows
The United Nations
United Nations Conference on Trade and Development
United Nations Economic Commission for Europe
UN Economic and Social Commission for Asia and the

UNESCAP
UNESCO

Pacific
United

WB
WCO
WTO

Organisation
World Bank
World Customs Organization
World Trade Organization

Nations

Educational,

Scientific

and

Cultural


8


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ABSTRACT
Trade facilitation with many benefits for countries in enhancing the
effectiveness of international trade, including but not limited to cost cutting, risk
and uncertainity reduction, market expansion, has been increasingly received more
and more interest from many countries in all over the world, especially in
developing countries and least developed countries. Southeast Asia is a typical
region of the developing countries for active 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, the results of these two countries in trade facilitation through trade
facilitation indicators given by other international organizations such as World
Customs Organization, World Bank… In addition, at the same time, the paper
presents the difficulties and challenges that the two countries encounter during the

implementation process of the trade facilitation, as well as the experiences that
Thailand has drawn during the implementation of the trade facilitation, thereby
giving lessons to Vietnam. From these studies, the Thesis would like to provide
solutions for Vietnam to further promote and improve the process of trade
facilitation from time to time based on experiences of neighbouring coutry as
Thailand.


1

INTRODUCTION
1. The research rationale
Nowadays, the increase of trade in both value and volume sets out with the
question for countries that is to create a favorable business environment to promote
the movement of goods across national borders for the purpose of optimizing
transaction costs and time. In a globalized world characterized by globalization and
integrated supply chains, the need for global regulations and rules to facilitate trade
are more and more pressing. As a consequese, many international organizations such
as WTO, WCO, UNCTAD, OECD, APEC, focused on the trend of trade facilitation.
Derived from that, trade facilitation has become the target and tool to improve
national competitiveness of many countries in the world such as Thailand and
Vietnam.
Trade Facilitation Agreement (TFA), the first multilateral trade agreement of
WTO with its fundamental role for reforming of trade all over the world, is the
source of international law for countries to build and enforce national trade
facilitation. The TFA regulates the expedition of the movement, release, clearance of
goods and sets out measures for effective cooperation between customs and other
governmental authorities on trade facilitation and customs compliance issues. As of
22 February 2017, the TFA came into force following its ratification by two-thirds of
the WTO membership. Thailand and Vietnam are two countries of the south-east asia

(ASEAN) who actively participated and ratified the TFA.
With a high level of human development and the second largest economy in
ASEAN and the 20th largest in the world by purchasing power parity, Thailand is
classified as an emerging industrial economy in which production, agriculture and
tourism are key sectors of the economy and it is an export-dependent market
economy with exports. Thailand became the 20th WTO Member to formally accept
the WTO’s Trade Facilitation Agreement (TFA) when it submitted its instrument of
acceptance on 5 October 2015. About two months later, Vietnam also did ratify the
TFA in 15 December 2015 with its orientation to quickly adapt and figure out how to
keep up with other members.


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Vietnam and Thailand are the two countries in Southeast Asia, located in the
center of the world's most vibrant economy, having a favorable geographical position
and natural conditions to develop all types of freight transport. They have similar
characteristics in terms of tropical climate and traditional agriculture. Also, the both
countries have the borders on the sea, with seaports and favorable natural conditions
for tourism development and import export activities. Despite of above-mentioned
similar characteristics, the economic starting point of the two countries is quite
different. In the 1970s, Thai implemented the "export-oriented" policy, of which
ASEAN, America, Japan and EC were the main export markets. Industry and
services and tourism have gradually played an important role in the economy and the
role of agriculture has been declining. Thailand is now a new industrialized country
(formerly a traditional agricultural country). Meanwhile, Vietnam is also a traditional
agricultural country. Thanks to economic and political reforms under ”Đổi Mới” in
1986, Vietnam have achieved rapid economic growth and transformed Vietnam from
one of the world’s poorest to a lower middle-income country. According to the World
Bank's Doing Business 2019 report, Thailand ranks 27th among 190 economies in

the Ease of Doing Business (EODB) ranking (taking the third place after Singapore
and Malaysia within ASEAN area), and ranks 32th in the logistic performance index
(LPI) ranking in 2018. These results demonstrate that Thailand has achieved certain
accomplishments in trade facilitation.
As the two typical economies of the Mekong region, Vietnam and Thailand
are on the momentum of economic development and effort to apply trade facilitation
measures to strengthen economic cooperation with countries in the region and the
world. The 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 and lessons for Vietnam" is
chosen to be the topic of this master thesis.
2. Literature review
As a category to promote international trade, trade facilitation quite received
much attention and research from many organizations and researchers, including the


3

research on trade facilitation in general, on trade facilitation in Asia inluding the
ASEAN countries.
Regarding studies of trade facilitation in general, it would be impossibe not to
mention on the work “Indicators for Trade Facilitation”. This digital Handbook was
developed as a follow-up to the Workshop on Trade Facilitation Performance and
Monitoring, co-organized by the United Nations Economic and Social Commission
for Asia and the Pacific (UNESCAP), the Organization for Economic Cooperation
and Development (OECD) and the Asian Development Bank (ADB), in collaboration
with World Bank (WB), International Trade Centre (ITC), World Customs
Organization (WCO), United Nations Conference on Trade and Development
(UNCTAD), with the support of the United Nations Network of Experts for Paperless
Trade and Transport in Asia and the Pacific (UNNExT), the China International

Electronic Commerce Center (CIECC) and the New Zealand Ministry of Foreign
Affairs and Trade. For the “Trade facilitation: ITC publications”: The International
Trade Centre (ITC) has many publications to help businesses and policymakers make
the most of important agreements to break down trade barriers. Among them are
insights on the Africa Continental Free Trade Area, the WTO TFA and the WTO
Information Technology Agreement.
For the studies of trade facilitation in the Asia, the publication on trade
facilitation: “designing and implementing trade facilitation in asia and the pacific
2013 update” is the outcome of a collaborative effort between the Asian
Development Bank (ADB) and UNESCAP. It provides the operational guidance on
how to assess the status of trade facilitation, what measures are necessary, how to
design trade facilitation objectives and how to implement it at national and regional
levels, which shall help to bridge the gaps among policy makers, practitioners, and
economists. The book also provides lots of experiences of countries within region,
consisting of Thailand and Vietnam - for training on regional trade policy and help to
shape trade facilitation measures in Asia and the Pacific. Next relevant publication is
“Trade

Facilitation

and

Paperless

Trade

Implementation

in

ASEAN”

(ST/ESCAP/2805) – results of the UN Global Survey 2017 on Trade Facilitation and


4

Paperless Trade Implementation for ASEAN countries. The Survey provides
information on the implementation of selected measures under the WTO TFA, as well
as on the implementation of innovative, technology-driven measures aimed at
enabling trade using electronic rather than paper based data and documentation otherwise referred to as “paperless trade”. The report also includes the analysis of the
impact on the trade cost of increasing the implementation rates in ASEAN coutries.
In Vietnam, there are also some studies on the trade facilitation such as: Article
“Facilitating trade and harmonizing Logistics policy in ASEAN countries” published

in External Economic Review No. 63/2014, Foreign Trade University of three
authors Nguyen Thu Thuy, Hoang Truong Giang and Nguyen Trung Kien. This paper
outlined general trade facilitation, explores trade facilitation in ASEAN members,
provides the analysis on logistics policy comparisons among ASEAN members, then
proposes some solutions to harmonize logistics policies of ASEAN countries
including Vietnam. Thus, the paper only focuses on facilitating trade in general in
terms of harmonizing logistics policies of ASEAN countries, including Vietnam.
Article “WTO Trade Facilitation Agreement: Opportunities and Challenges for
Vietnam” published in External Economic Review No. 71, Foreign Trade University
of two authors Trinh Thi Thu Huong and Phan Thi Thu Hien. The Article goes
through the overview of the TFA, goes deeper into studying the opportunities and
challenges posed to Vietnam, thereby proposing solutions to Vietnam on ratification
and enforcement of TFA. The Article has a broad scope, a joint study for relevant
subjects in the Vietnamese territory in the implementation of the Agreement.
However, the time for writing the article is February 2015 so the information has not

been updated, especially after the TFA officially took effect on February 22, 2017.
However, there is very few research analysing trade facilitation of Vietnam in
comparison with Thailand. This comparison is very important because the
neighbouring country has had great success in facilitating trade so far. There are
absolutely some precious lessons that are suitable for Vietnam situation. Therefore, it
is suggested that there should exist a depth and comprehensive research on the
current status of Vietnam's trade facilitation and Thailand’s experiences in this issue.


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3. The research purpose
The general objective of the paper is to provide recommendations on enhancing
the Vietnam’s trade facilitation implementation from the lessons of Thailand. To
achieve this overall aim, there are specific tasks that the thesis needs to solve:
 Summarizing the basic theories of trade facilitation, the impact of trade
facilitation in improving trade efficiency worldwide, encouraging economic
growth.
 Studying the current status of Thailand’s trade facilitation implementation, then
identifying the core experiences behind the country’s practices.
 Analyzing the overall situation of trade facilitation in Vietnam, its challenges and
difficulties, analyzing the trade facilitation gaps between Vietnam and Thailand.
 Providing the great experiences from Thailand and avoid the negative situations
that the country may suffer, then propose recommendations for Vietnam.
4. The research scope
-

Research time:

The thesis will focus the research on trade facilitation of

Thailand and Vietnam in the recent 10 years, from 2009 to 2019.
-

Reseach scope: The thesis shall be studied in two aspects: (i) The legal frame 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 practical analysis in both countries.
5.

The research methodology and data source:
In the dissertation, this paper is made with the qualitative research methodology

and secondary information to reach the research objective. The author has used the
method of collecting materials, documents and analyzing the data, statistics and
information at the table, combining the methods of comparing, referring and
synthesizing to perform the above tasks.
6.

The structure of the paper:
Beside Introduction, Conclusion, Reference, the paper consists of four chapters:

Chapter 1: Overview of trade facilitation
Chapter 2: The current implementation status of trade facilitation of Thailand


6

Chapter 3: The current implementation status of trade facilitation of Vietnam

Chapter 4: Strengthening trade facilitation of Vietnam from Thailand’s experiences


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CHAPTER 1: OVERVIEW OF TRADE FACILITATION
1.1. Trade facilitation definition
1.1.1. Definition
Trade facilitation is a very popular issue in international trade. This issue is
frequently mentioned in cross-country conferences among the countries and
international organizations. Many international organizations in all over the world
express their particular interests in trade facilitation such as the WTO, ITO, WCO,
UNECE, World Bank. Understanding the term “trade facilitation” varies in the
literature and amongst practitioners. Trade facilitation is mainly and widely used by
institutions which seek to improve the regulatory interface between government
bodies and traders at national borders.
In order to answer the question “what is trade facilitation?”, there are a few
international organizations who expressed their ideas as follows: With regard to
WTO, it defined that trade facilitation refers to “the simplification and harmonization
of international trade procedures, where trade procedures are the activities, practices,
and formalities involved in collecting, presenting, communicating, and processing
data and other information required for the movement of goods in international
trade”. Meanwhile, regarding the United Nations Centre for Trade Facilitation and
Electronic Business (UN/CEFACT), trade facilitation means “the simplification,
standardization and harmonization of procedures and associated information flows
required to move goods from seller to buyer and to make payment”. Such definition
implies that both the physical movement of goods and the associated information
flows are important in a supply chain. It also comprises of the governmental agencies
that intervene in the goods transit, and the various commercial entities that conduct
business and move the goods. Similar to WTO, APEC also mentioned that trade

facilitation refers to “the the simplication and rationalization of customs and other
administrative procedures that hinder, delay or increase the cost of mong goods
across international borders”.
So, why does trade facilitation matter? There are great potential gains from
trade facilitation for both governments and the business community. Governmental


8

authorities shall profit in terms of enhanced trade tax collection, better use of
resources and increased trader compliance. A more efficient and transparent public
services will allow the administration to maintain high security levels and effective
government control. Meanwhile, traders will gain higher predictability and speed of
operations and lower transaction costs, resulting in more competitive exports on
global markets. For countries, reducing unnecessary delays and costs attracts
investments, and supports growth and job creation. Trade facilitation measures can
particularly benefit developing countries, where it frequently takes three times as
many days to export goods as it does in developed ones. Exports from developing
countries require nearly twice as many documents and six times as many signatures
(World Bank: Doing Business 2012).
To utilize the benefits that trade facilitation can bring for trade, according to
OECD, trade facilitation refers to “policies and measures aimed at easing trade costs
by improving efficiency at each stage of the international trade chain”. The WCO
had another approach when indicating about the goals to avoid of unnecessary trade
restrictiveness: Trade facilitation “can be achieved by applying modern techniques
and technologies, while improving the quality of controls in an internationally
harmonized manner”. Meanwhile, the definition of OECD and UN/CEFACT give the
broader approach to trade facilitation by mentioning about the behind-the-border
measures such as conformity assessment measures, business facilitation and logistics
services at the international trade level. The model Buy-Ship-Pay (Figure 1) lays

down the three main processes of internation trade transactions, consisting of (1)
Buy: referring to contract establishment, order making, (2) Ship (the most
complicated): referring to five main activities: preparing for export, export,
transportation, preparing for import, import; and (3) Pay: referring the payment made
by buyer to the seller. This model suggests the application of total traspaction
approach in regulatory procedures, government control and improve business
processes.


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Figure 1.1. Buy-Ship-Pay Model

Prepare

Pay

Ship

Buy

for

Export

Trans-port

Prepare for import

export

Commercial
procedures
 Establish contract
 Order goods
 Delivery goods
 Request payment
 Warehousing

Transportation
procedures
 Estrablish
transportation
contract
 Collect,
delivery
gooods
 Provide
shipping
documents…

Regulatory
procedures

Import

Financial
procedures

 Obtain

import/export
license
 Provide
customs
declaration
 Provide
cargo
declaration
 Clear goods
 Payment request

 Provide credit rating
 Provide finance
 Provide insurance
 Execute payment
 Issue statements

Source: , 2019
Trade facilitation regulates the fundamental principles, consisiting of
transparency, simplification, harmonization, and standardization.
Figure 1.2. Principle of trade facilitation

Transparency

Simplification

Principles
(Pillars)

Harmonization

Standardization

Transparency is understood within government promotes openness and
accountability. Disclosure of information should be done in the way that trade can


10

access and use it. Policy decision, regulations and decisions should be disseminated
and discussed with trade prior to the enforcement to facilitate the shaping on
amended or new laws. Simplification is with the intention of eliminating all
unnecessary duplications in trade procedures and processes and enabling automation
of cargo pro-cesses. Harmonization is as the alignment of national procedures,
operations and documents with international conventions, standards and practices. It
may come from adopting and implementing the same standards as partner countries,
either as part of a regional integration process or as a result of business decisions.
Standardization of international process and practices, documents and information
agreed by various recognized international bodies. Standards are intended to be used
for adoption leading to harmonized practices and methods.
To achieve these principles, it is essential to get full cooperation between
government authorities and with the business community.
1.1.2. Impact of trade facilitation
International trade has grown rapidly in recent years, thanks partly to the
progressive reduction of tariffs barriers and quotas through successive rounds of
multilateral trade liberalization among the countries in all over the world. However,
this progress brings to light one of the remaining weak links of international trade,
which prevents countries from drawing full benefits from the advantages of open
global markets: border bottlenecks generated by inefficient, outdated and complex
trade procedures and formalities. The impact of trade facilitation in economic view is

the link between trade facilitation and trade flows, government revenue and foreign
direct investment. It was found that the improved and simplified customs procedures
would have a significant positive impact on trade flows. It further shows that a large
number of mostly developing countries have managed to boost government revenue
by implementing customs modernisation programmes that result in more efficient
collection of trade taxes. Trade facilitation aims to reduce trade costs, which includes
all costs except from the cost of production incurred in getting a good from the
producer to the final consumer. Supply chain models recognize that the components
embodied in final goods are made in many different countries. As a result of this


11

organizing global production, trade costs cumulate and are magnified along the value
chain so that inefficient border procedures have a substantial deterrent effect on trade.
Conversely, the positive effect of trade facilitation on value chain trade is magnified
and will increase specialization in those production stages in which countries have a
comparative advantage.
For the benefit: Trade facilitation have a positive influence in the international
transaction. The cost for international transaction has been remarkably reduced
thanks to the trade facilitation process amoung the countries and regions in all over
the world, such as the cost of preparing documents as recognized by the customs
authorities, the cost of moving goods from warehouse to loading port, from loading
port to the unloading port, from unloading port to the user’s warehouse, the costs
happening at the port and border, the financial cost, insurance. Besides, there are
some indirect costs including opportunity costs related to time of transport of goods
from sellers to buyers. These costs account for about 80% of the total international
transaction costs. In addition, trade facilitation can reduce transaction risks and
uncertainty in international trade. Obviously, everyone stands to gain from making
the trading process easier. Trade facilitation initiatives benefit both the business

community and governments in terms of increased economic efficiency, better
security, faster delivery of goods and reduced costs. The business community benefits
by obtaining enhanced competitiveness in national and international markets due to
reduction in delays and costs which are achieved with predictable and efficient
movement of goods across borders. While, national administrations are able to utilize
modern procedures to enhance controls, ensure proper collection of revenues due and
at the same time contribute to the economic development through increased trade and
encouragement of foreign investment. As for the consumers, they are not paying the
costs of lengthy border delays. If a truck waits at the border for a week, ultimately the
customer is paying for its being off the road and unproductive during that time.


12

Table 1.1. Benefits for governments and business communities
As for government
- Increasing the effectiveness of

As for the enterprises
- Reducing costs and delays

management measures

- Doing clearance and faster releasing of

- Exploiting resources more efficiently

goods due to policy transparency

- Increasing the revenue reasonally

- A simpler trade framework for both

- Encouraging the foreign investment

domestic and international trade

- Promoting economic development.
- Improving competitiveness.
Source: UNECE, Trade Facilitation: An Introduction to the Basic Concepts and
Benefits (ECE/TRADE/289), 2002
For the costs of trade facilitation: Regardless of the benefits of trade
facilitation, many developing countries are reticent with the cost of trade facilitation.
The enactment and enforcement of trade facilitation can lead to the establishment of
relevant departments and other organizational model and cause to the generation of
the relevant costs. Some types of costs related to trade facilitation can be listed as
follows:
(i)

Organizational costs, such as organizational restructuring costs, new
organization/agency establishment costs. The risk management team or a
central enquiry point may require additional staff. These changes may involve
in new operational mechanisms to enhance information exchange and
cooperation among related organizations and agencies. This involves cost even
if existing staff are redeployed, mainly because of training requirements.

(ii)

Legislative costs, including the costs related to the new issuance of
rules/regulations or revisions/amendment of the existing legal framework.

Additionally, the trade facilitation measures also require time and staff
specialized in regulatory work.

(iii)

Training costs, including the cost of building electronic data management
system, the cost of training human resources to understand, apply and manage
the system. Countries may choose to recruit new expert staff which is rather
costly, train existing staff or import trained staff through exchanges with other
agencies. Most countries that have undertaken reforms have chosen to train


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existing staff on the job. This will be a lengthy process as staff need to
simultaneously perform their normal duties.
(iv)

Equipment and infrastructure costs, including the costs related to tnformation
and communication technology which help improve efficiency and
effectiveness. If there is not enough equipment and infrastructure, facilitation
measures shall be more difficult to implement. Most equipment and
infrastructure should be viewed as implementation tools that should be
carefully combined and sequenced with regulatory, institutional or human
resource changes.

1.2. Trade facilitation main indicators
Different definitions of trade facilitation by international organizations gave the
broad range of trade facilitation indicators. More than a dozen of indicators of trade
facilitation had been developed, testifying to the importance of the subject as well as

its complexity. The World Bank indicated about the Doing Business and the Logistics
Performance Index (LPI), the World Economic Forum mentioned about Global
Competitiveness Index (GCI) and Enabling Trade Index (ETI); United Nations
Conference on Trade and Development (UNCTAD) mentioned about the Liner
Shipping Connectivity Index (LSCI). Among others, OECD has developed the set of
trade facilitation indicators (TFIs) included in WTO TFA which identify areas for
actions and enforce the potential reform impact to be considerd.
As for World Bank, the following indicators are given for assessment of trade
facilitation:
Doing Business: The Doing Business Report is a study by the World Bank
Group firstly published in 2003 with aim to provide objective measures of business
regulations and their enforcement across 185 economies. Doing Business Report
2019 at 16th edition focus on training for reform and compare business regulation for
domestic firms in 190 economies. Economies are ranked on their ease of doing
business, from 1–190. A high ease of doing business ranking means the regulatory
environment is more conducive to the starting and operation of a local firm. The
rankings are determined by sorting the aggregate scores on 10 topics, each consisting