Developing Hanoi trade toward sustainability

DEVELOPING HANOI TRADE TOWARD SUSTAINABILITY
Associate Professor Phan To Uyen,
Dr Nguyen Bich Ngoc
National Economics University
Abstract:
With the sustainable development objective of Hanoi as Vietnamese political,
cultural, trade and economic center with potential population of 8 million in 2020 and 9
million in 2030, potential rate of urbanization of 65-68% in 2030, developing trade toward
modern, advance and sustainability is necessary in order to coordinate the linkage
between production and consumption, which helps to create balanced development of
urban and rural areas, traditional and modernly trade. As a result, Hanoi will become the
trade center in the region and the world. This study focuses on analyzing the practices of
sustainable development of trade in Hanoi from 2011 to 2017, indicating the weaknesses
and suggesting solutions for future sustainable trade development of Hanoi such as
interventions for enterprises, implications for industrial associations, and measures for the
local government.
Key words: Hanoi trade, sustainable development.
1. Introduction
Hanoi Municipal Party Committee (2012), in the Decision No. 2757/ QD-UBND
dated 20 June 2012 of the Committee, has approved the Hanoi Trade Development Plan until
2020, toward 2030, with the determination “To build Hanoi as a major trading center, a
center of trade and economy of the country and the Southeast Asia. To establish, enhance
and develop goods distribution channels in the direction of civilization, modernity, elegance
and sustainable development". Thus, the city has organized many promotion programs and
activities to support and promote trade. However, researches show that the level of trade
development in Hanoi has been so far lower than its potentiality.
Globalization trend is reflected through regional trade integrations, which is created
all over the world. This trend will eliminate restrictions on the movement of goods,
services, knowledge, and technology to each region and spread across the globe. Hanoi‘s
development orientation toward trade and services of Hanoi in the coming years poses new
development requirements on the quantity and quality of services as well as on the

structure, scale, mode of business and level to lead the city to the center of trade, the
market space and the commercial infrastructure, from which Hanoi truly becomes the trade
center of the country. The paper focuses on analyzing the sustainable trade practices of
Hanoi from 2011 to 2017, identifying weak constraints and suggesting solutions for
sustainable trade in Hanoi in the future.

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2. Theories of sustainable trade development
2.1. About sustainable development
Development is a process of growth both in terms of quantity and quality. The
development objective of nations is to improve the conditions and quality of living
standards such as income raising, poverty reduction, better demand satisfation of goods
for production and consumption, less relying on natural resources, fair and equal life
among members. Economic development must, however, take social and environmental
considerations into account because of the need for society development and future
generations. All of these requirements lead to a new concept "Sustainable development".
The new concept of sustainable development is discussed in the book "Not just
economic growth. Introduction to Sustainable Development" by Soubbotina (2005), that
sustainable development can also be understandable as to develop "equality and balance,
that is, to sustain the development forever, it is necessary to balance the interests of groups
in the same generation, and to do so simultaneously on all three important inter-related
areas: economic, social and environmental development. This concept also emphasizes the
comprehensiveness of the three main goals that sustainable development must achieve,
they are economic, social and environmental goal.
In 2012, the United Nations Conference on Sustainable Development (Rio+20) took
place in Rio de Janeiro, Brazil. The objective of the Conference is to ensure that political
commitments on sustainable development are made, assessing the progress and limitations
in implementing the contents of the previous summits, particularly in Rio 1992; also

identifing and solving emerging challenges in the recent time. The two main contents of
the conference are: Green Economy in the context of sustainable development and poverty
reduction, and the institutional framework for sustainable development.
The Asian Development Bank (ADB) has introduced a more specific definition:
“Sustainable development is a new form of development that integrates a production
process with resource conservation and environmental enhancement. Sustainable development
must satisfy the needs of the present generation without compromising our ability to satisfy
the needs of future generations" [2, p12]. This definition addresses more specifically about
the binding relationship between the current demand response and the future generation
capacity, through the integration of production processes with conservation measures in
order to maintain natural resources and improve the quality of the environment.
In Vietnam, Dr. Ngo Doan Vinh has taken the concept of development: “Development
must not destroy the environment, at the same time bring economic prosperity for the
majority of people, solve social issues rationally. Although there has been no exact
concept, these scholars have warned of the unforeseen shortcomings of sustainable
development and need to be aware of the reality. Therefore, the clarification of theoretical
and practical issues on sustainable development based on specific conditions of Vietnam to
bring our economy to prosperity is extremely important.

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Thus, sustainable development is a way of social-economic development in order to
better solve the relationship between stable, rational and sustainable development in terms
of scale, quality, structure and level of environmental friendliness, which aims to better meet
the needs of the present generation without obstructing the needs of future generations.
2.2. About sustainable trade development
Sustainable trade development must be ensured not only about commercial scale,
but also quality in the development process. However, the environment is increasingly
polluted, resources are gradually exhausted, trade fraud increases... Therefore, the new

approach of sustainable trade development should pay attention to both quanty and quality
aspects in the development process. People are starting to focus more on how to exploit
and use resources in a higher economical way with lower negative effects and higher
effectiveness. Commodity production focused only on product and profitability now
considers more on waste and environmental pollution issues. Commodity trading focused
on sales and profits now concerns more about quality of goods and food safety,
environment-friendly products, the labor right protection, improved income and working
environment. Trade development plans must be considered more comprehensively. From
the new perspectives, in the process of development, harmonized combination of
economic, social and environmental factors may ensure greater growth, less polluting
emissions, and contribute more to solve social issues. Thus, trade development needs to
follow the new sustainable ways.
According to Nick Robins and Sarch Roberts (2000) in "The Reality of Sustainable
Trade", sustainable trade is the close linkage between environment, trade and development.
The research highlights practical issues, challenges for the sustainable trade development,
creating great economic value, reducing poverty and inequality.
Bill Vorley, Dilys Roe and Stevebass (2000) refer to the standards of sustainable
trade in the report ―Standards and Sustainable Trade." This report identifies opportunities
for trade development linked to poverty reduction for sustainable development and
addresses the issues surrounding sustainable trade standards. Sustainable trade occurs
when exchanges of goods and services create positive social, economic and environmental
benefits, reflecting the four core indicators of the sustainable trade development:
(1) Create economic value
(2) Reduce Poverty and inequality
(3) Restore environmental resources
(4)To be implemented in an open governance system and be responsible for state
management.
To measure these four criteria requires specific standards such as the technical
specifications, terms, definitions and principles that the authors have provided, including:
(1) Quality: taste, clean…

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(2) Safety: healthy, safety of employees
(3) Practical: reliability of goods
(4) Friendly-environment: waste, environmental affects
Therefore, “sustainable trade development is a stable, rational, long-term development
of the scale, quality, structure and level of environmental friendliness of trade"
In order to find solutions for sustainable trade development not only for Hanoi,
many organizations and trade management agencies have researched and outlined policies
such as: a study on natural resources and environment at the University of Hanoi (1995).
This study shows that the concept of sustainable trade development has been adopted in
the Brundtland Report as a process that simultaneously requires sustainable development
in four areas: economics, humanities, environment and technology. The study of the
Ministry of Industry and Trade of Vietnam (2012) has clarified the scientific basis to
develop and improve the policy of export and import development to meet the
requirements of rapid and sustainable economic development in our country in 2011-2020
period and many works of Nguyen Duc Thanh (2010), Le Danh Vinh (2013), Dang Dinh
Dao and their partners. (2015).
In addition, there are many related articles published in journals such as articles by
Chu Van Thuan and Nguyen Duc Ha (2013), Hoang Tho Xuan (2016). These studies
mainly analyzed the strategy, providing the scientific foundation, policies to create
sustainable export conditions, promoting the trade sector to develop sustainably in the
context of integration. To be more specific, Hanoi government has developed the
commercial development plan for the city such as Decision No. 5058/QD-UBND dated
5/11/2012 of the Hanoi Municipal Party Committee for approval of the wholesale and
retail network planning in Hanoi up to 2020, with the orientation toward 2030.
However, these documents are only in the planning and defining the legal framework
for sustainable development for Hanoi's socio-economic development policies but have not

focused on studing contents and essential solutions for sustainable trade development in the
city. Therefore, the article will analyze and evaluate the current status of Hanoi's trade
according to the criteria of sustainable development, point out the causes and propose
measures to develop Hanoi's trade towards sustainable development in the coming years.
2.3 Research methodology and data sources
To analyze Hanoi's trade in a sustainable development aspect in the period 20112017, the method use disdescriptive statistics to compare the dynamics and changes of
Hanoi trade over the years in terms of commercial scale, the number of Hanoi commercial
enterprises, the total retail sales of goods and services, the turnover of import and export,
the structure of high quality products friendly environment...
The source of data is from the General Statistics Office, Hanoi Statistical Office,
General Department of Customs, Ministry of Planning and Investment, Vietnam Socio-

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Economic Development Strategy, Planning Hanoi trade to 2020 toward 2030 and other sources.

3. The practice of sustainable trade development in Hanoi in the period 2011-2017
3.1. Contribution of trade and services to GDP growth and economic restructuring
in Hanoi
In 2017, the total output in Hanoi reached 519,568 trillion dongs, equaling 0.13
times the national GDP and 0.58 times the GDP of Ho Chi Minh City. The growth rate of
GRDP Hanoi is 7.32% per annum for the period of 2011 - 2015 and 8.5% for 2017, the
highest level in the last 6 years. Particularly, the growth rate of trade and service sector
always achieves high growth rate over the years, reaching an average of 7.47% in the 2011
- 2017 period, standing only after industry and construction reached 8.58%. This shows the
great role of the trade-service sector in contributing to Hanoi's GDP growth, employment
and quality of life.
The development of the trade sector will help improve the level of economic
development, offset the shortage of production and goods of the city, contribute to the

socio-economic stability. However, due to the impact of the general economy status, the
contribution of trade is unstable over the years and has not reached the target of
sustainability, creating insecurity in the roadmap for economic development in general and
trade in particular.
Table 1: GRDP growth rate in Hanoi 2011 – 2017
Unit: %
Year

GRDP

Agriculture, forestry
and fisheries

Industry and
construction

Service

2011

7,0

6,9

8,9

7,5

2012

6,9

3,0

12,8

6,0

2013

7,3

4,1

6,2

6,7

2014

7,5

2,0

7,2

7,5

2015

7,9

2,3

7,4

8,0

2016

8,2

2,2

9

8,3

2017

8,5

2,5

7

10,3

7,47

3,42

8,58

7,33

Average
2011-2017

Source: Statistical Year Book of Hanoi 2017
3.2. Total retail sales of goods in Hanoi
* In terms of value and growth

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According to General Statistics Office and Hanoi Statistical Office, in the period of
2011 - 2017, the total retail sales of goods in Hanoi has increased from 161,626 trillion
dongs to 561 trillion dongs with average growth during the period reached 12.1% per year.
In the past two years, the growth rate of total retail sales in Hanoi has been stable at nearly
7% thanks to the government's policies to support and create favorable conditions for
enterprises to boost production, focusing on attracting investment capital, raising the
quality of goods, designs and beautiful packaging to meet consumer demands.
The growth of total retail sales in Hanoi over the past few years shows that
commercial activities in the city have developed well, ensuring the circulation of goods to
meet the production and consumption demand, production and consumption towards
modern ways. It can be seen, however, that the capital city, the economic, political and
cultural center of the country with many potentials can be exploited for commercial
development such as: favorable geographic economy, the density of production
establishments and agencies, large schools, high living standard of population, visitors,

large tourists, early developed commercial activities, developed material and technical
facility system, the growth of the trade sector over the past years is not matched. The city's
commercial GRDP growth rate is not as fast as the increase rate of the flow of goods.
Trade is largely based on the benifits from price difference with traditional trading
methods. New modern business forms and modes have not yet developed strongly so the
added value created in commercial activities is not high.
* About trade structure
According to the economic model, the largest contribution to the total retail sales in
Hanoi in the past years is the non-state sector with the proportion of 85-90% which has been
increasing over the years, particularly from 83% in 2011 to 86.5% in 2017. This proves that
the non-state sector with dynamic and high competitiveness is always maintaining a
dominant position in the field of retailing in Hanoi, contributing greatly in promoting the
economic development of the city. In addition, attracting the participation of large foreign
retailers with great financial strength, prestige and brand needs to be considered seriously to
change the appearance of the trade sector in the city toward modern direction.
Table 4: Total retail sales of goods in Hanoi in the period 2011-2017
Indicators

2011

2012

2013

2014

2015

2016

2017

Value (Billion dongs)
I. Economic type

161.626 168.885 199.881 225.319 240.237 256.510 286.885

State

18.563

Non-state

134.203 153.523 176.723 187.683 201.731 221.194 249.064

Collective

449

480

73

71

80

Private

60.865

69.983

85.164

95.673

101.054 110.876 124.846

Individual

72.889

83.060

91.486

91.939

100.597 110.249 124.141

FDI

8.860

9.200

13.906

10.137

8.977

II. Commodity class

161.626 168.885 198.881 225.319 240.237 256.510 286.885

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6.162

9.252

27.499

29.529

26.990
69

8.326

28.987
77

8.834


Indicators

2011

2012

2013

2014

2015

2016

Foods

30.775

31.423

53.778

60.615

53.172

57.555

Textiles

13.437

11.968

14.462

16.407

18.058

16.573

Home appliance

21.132

20.141

27.332

31.987

38.199

42.994

Item, culture, education

3.071

2.795

2.873

3.222

5.844

6.070

Wood and building materials

5.379

4.409

5.402

6.076

7.049

7.346

Automobiles with 12 seats
or less and vehicles
20.956

19.791

24.552

30.084

35.787

38.529

Petrol and other fuels

43.502

41.215

39.353

40.467

43.122

Repair of cars, motorbikes
and other motor vehicles
2.482

5.156

6.707

6.819

5.427

5.538

Other goods

25.526

29.700

22.560

30.756

36.234

38.783

I. Economic type

100,0

100,0

100,0

100,0

100,0

100,0

100,0

State

11,5

3,6

4,6

12,2

12,3

10,5

13,4

Non-state

83,0

90,9

88,4

83,3

84,0

86,2

76,5

Collective

0,3

0,3

0,0

0,0

0,0

0,0

0,0

Private

37,7

41,4

42,6

42,5

42,1

43,2

38,5

Individual

45,1

49,2

45,8

40,8

41,9

43,0

38,0

FDI

5,5

5,4

7,0

4,5

3,7

3,2

10,1

38.868

2017
64.26

Percentage (%)

Source: Hanoi Statistical Year Book 2014, 2017
3.3. Export - import status in Hanoi
3.3.1. Export
* Turnover and growth
In the period 2011- 2017, Hanoi export situation has strongly fluctuated. Between
2011 and 2017, exports have increased steadily from $9.782 million to $11.779 million. In
general, the export growth rate is only 5.04% per year, a modest growth rate, lower than
the national growth rate and not corresponding with the potential and strength of the
capital city.
* Export structure
Regarding to export structure by economic sectors, it can be seen that export
activities in Hanoi in recent years have attracted many economic sectors. At present, the
foreign-invested sector is leading the share of the city's total export turnover by nearly
50%, followed by the non-state sector, then the state economic sector. In the period of
2011 - 2017, the share of the foreign invested sector increased from 40.1% to 51.2%, the

share of the non-state sector increased from 19.8% to 30.66%, and the proportion of the
state sector decreased from 40.1% to 18.1%. In general, the foreign-invested sector and the
non-state economic sector, especially the foreign invested sector, are playing a key role in

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export activities in Hanoi.

Table 5: Export turnover in Hanoi from 2011-2017 by economic sector and industry
Criteria

2011

2012

2013

2014

2015

2016

2017

I. Economic type

100,0 100,0 100,0 100,0 100,0 100,0 100,0

State

40,1

34,5

31,8

31,4

25,5

19,6

18,1

Non-state

19,8

17,1

18,7

20,2

24,7

31,5

30,66

FDI

40,1

48,3

49,5

48,4

49,8

48,9

51,2

II. Product groups

100,0 100,0 100,0 100,0 100,0 100,0 100,0

Agricultural products

9,5

10,4

9,8

9,6

10,1

9,0

8,4

Forest products

0,9

0,9

1,5

1,6

1,8

1,9

Seafood

0,1

0,1

0,1

0,1

0,1

0,1

Garment, textile

11,1

10,7

13,2

13,3

15,6

14,4

13,56

Footwear and leather products

2,0

1,9

1,8

2,2

2,3

2,2

1,8

Electronics

3,1

3,6

2,9

5,9

5,5

4,0

5,4

Computer accessories and peripherals

15,9

18,9

18,5

14,2

13,7

13,3

13,86

Handicrafts

1,2

1,5

1,7

1,7

1,7

1,6

1,5

Petroleum (Temporary import, re-export)

16,4

12,6

7,8

6,9

5,1

4,7

5,17

Coal

2,9

1,9

1,0

0,9

0,3

0,2

Others

36,9

37,5

41,7

43,5

43,8

48,6

31,78

Source: Hanoi Statistical Year Book 2014, 2017
The export structure of Hanoi has shifted in a more diversified way, boosting
exports of new goods such as electronics, metal, software. In addition, exports are not
different from neighboring countries, the competitiveness of goods is low, this is also the
main cause of the trade deficit of Hanoi in the past years. Export structure of Hanoi has
been improved thanks to the economic restructuring and the process of industrialization
and modernization. The proportion of processed products and groups has gradually
increased, and the quality of export goods has been raised considerably.
* Export markets:
Beside traditional export markets such as ASEAN, China, the EU, the United States
and Japan, many exporters in Hanoi over the past few years have actively sought and
penetrated new markets. Along with support programs from the government in
understanding market information, laws, business policies of importing countries, trade
promotion, many enterprises have actively invested in technology, quality, product design
to increase the competitiveness of goods, to create advantage to enter the market.
However, penetration of new markets is also difficult because most of them are difficult to
access due to far geographic location, new business policies of the country, and the
requirements for adjusting products to suit consumer tastes.

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3.3.2. Import
* Turnover and growth: In the period of 2011-2017, Hanoi's import turnover has
increased from $25,345 million to $29,829 million. In general, the import turnover growth
rate over the years has been unstable, the highest reached 18.2% in 2011 and the lowest is
-4.7% in 2012, average growth rate of imports in the period of 2011 - 2017 is 3.2%. It can
be seen that the growth rate of Hanoi's import turnover is lower than that of the export
turnover and also lower than the growth rate of import turnover of the whole country in the
same period.
Table 6: Import turnover in Hanoi in 2011 - 2017
Criteria

Đơn vị tính 2011

2012

2013

2014

2015

2016

2017

Import turnover

Million USD 25.345 24.144 23.441 24.399 25.713 25.238 29.829

Development
indicator

%

118,2

- Domestic import

Million
USD

10.259 10.140 9.962 10.492 11.057 11.188 13.383

- Proportion

%

40,48 42,00 42,50 43,00 43,00 44,33 44,86

In detail:

95,3

97,1

104,1 105,4

98,2

118,2

Source: Hanoi Statistical Year Book 2014, 2017
* Import structure: In the structure of imported goods of Hanoi, the leading group
was consumption goods with the proportion of nearly 50%, the second was the group of
raw materials and finally the group of machines, equipment, component parts. Therefore, it
can be seen that domestic consumption products are increasingly subject to competitive
pressure from imports. The bright spot in the import structure of Hanoi is that the
proportion of imported raw materials is declining, showing less dependence on exports of
imported raw materials, helping manufacturers and exporters to be active in business
strategies and export product prices. In addition, the proportion of imported machinery,
equipment and accessories is also increasing, showing that businesses are increasingly
focused on investing in production technology.
Table 7: Import turnover in Hanoi in 2011-2017 by economic sectors
and commodity groups
Criteria

2011

2012

2013

2014

2015

2016

2017

I. Economic type

100,0 100,0

100,0

100,0

100,0

100,0

100,0

State

64,0

63,0

62,5

61,5

62,0

61,2

61,0

Non-state

17,0

17,0

17,0

17,5

17,0

16,7

16,62

FDI

19,0

20,0

20,5

21,0

21,0

22,1

22,78

II. Product groups

100,0 100,0

100,0

100,0

100,0

100,0

100,0

Machinery, equipment,
19,3
component parts

22,7

22,6

21,0

25,4

28,8

Raw materials

34,3

34,5

35,5

26,1

24,0

32,8

23,03
33,7

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Consumption goods

47,9

42,9

42,9

43,5

48,5

47,2

43,0

Source: Hanoi Statistical Year Book 2014, 2017
This shows a high level of centralization on the import of raw materials, machinery
and equipment for business and production and export processing of the city, according to
sustainable targets with the proportion of satisfied products more than 60% of the total
import value, but the import value should be more ensured in the process of sustainable
development.
4. Conclusions and policy implications
Sustainable trade development is a stable, rational, long-term development in terms
of scale, quality, structure and level of environmental friendliness of trade. Applying the
specific assessment of trade in Hanoi in the period of 2011-2017 shows that: regarding the
scale of trade development, the number of enterprises in the area has increased, but
unstably in the period. Total retail sales have increased over the years but are mainly in
non-state economic field. Import-export turnover in the period has increased, the market
has been expanded but the increasing rate is not stable. About the quality of trade
development, on average in 2011-2017, the contribution of trade per service in Hanoi is
57%, GDP is 41,81%, which can be seen that this proportion is still modest, and do not
match with the potentials of the city, and strongly influenced by the general economic
fluctuations. The structure of high quality products tends to increase but still makes up a
small proportion. The issue of environmental protection has been addressed but the
effectiveness of management of resource exploitation for production and waste treatment

from commercial activities is not high. In general, the scale of trade growth is quite high
but the quality of trade growth is low and unsustainable.
In the context of international and regional integration, our country in general and
Hanoi in particular have had many opportunities to expand export markets, increase import
of machinery and equipment, it is important to serve the sustainable development of trade in
the area. This is a favorable opportunity for Hanoi to improve the competitiveness of many
industries and products by reducing production costs. However, Hanoi‘s economy is still
weak and small, and depends on the world economy, which brings Hanoi the challenges and
difficulties in implementing sustainable trade development. The commercial regime in Hanoi
is implementing a lack of strategic, scientific, heavy on immediate benefits, lack of longterm vision. Policy mechanism is lack of synchronism and not practical.
From the research, in order to develop sustainable trade in Hanoi, the city leaders
need to: Firstly, entirely exploit benefits from the process of globalization and international
integration, and it is necessary to have specific solutions and roadmaps to realize
development strategies for each commodity category in order to ensure that international
trade is not only for turnover or growth rates but also sustainable. Hanoi is a capital city
with many advantages to promote international economic relations, including investment
attraction and trade development. Therefore, it is necessary to constantly improve and
create a favorable environment for attracting foreign investment. At the same time, the

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markets of China, the European Union (EU), Japan, the Association of Southeast Asian
Nations (ASEAN) should be maintained and promoted, actively seeking new international
markets, integrate international and regional economics.
Secondly, to facilitate enterprises in accessing information, penetrating and expanding
the market, it is necessary to enlist the help of Vietnamese counselors and embassies
overseas in assisting enterprises to do market research and seek foreign partners. To support
human resource training activities for the trade sector to encourage the potential
development of entrepreneurs, build a team of policy makers, international trade experts,

market leaders in each industry, laws, import-export marketing. To organize training courses
to equip the necessary knowledge for businessmen, focusing first aid on business start-ups,
owners of small and medium enterprises, owners of household economy home, farms...
Thirdly, to standardize the trade regime, promulgate trade policies to encourage the
development of trade and expand the trade scale while paying attention to raising the
quality and efficiency of trade. Facilitate businesses to diversify their exports and
multilateralize their international trade, actively integrate into the regional and world
economy. Hanoi Industrial and Trade, the state management agency in charge of
commerce, is responsible for organizing and guiding the implementation of legal
documents guiding the Commercial Law and other provisions of the law on trade
development, to ensure the sustainable trade development in the context of international
economic integration, the State's regulations on market management, inspection and
combat against smuggling and trade frauds…in order to match with the local situation.
Fourthly, scientific and technological development is one of the solutions to
improve the quality and brand name of goods and meet the requirements of sustainable
development. Prioritizing to import advanced and modern technologies, new-generation
machinery and equipment. Strengthening and speeding up the transfer of technology,
especially specific technologies in manufacturing, processing, etc. To renew the approach
to statistical work according to international guidelines and standards for better
management in the process of international integration. To apply modern scientific
achievements effectively to exploit natural resources, encourage the production of
environment-friendly products, dispose of commercial waste and protect the environment.
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