Supply chain organisation is one of the three pillars of trade, the Work Bank said in a report it presented at the 2013 Vietnam Supply Chain Congress that opened in Ho Chi Minh City on October 2.

The three-volume report, titled "Trade Facilitation, Value Creation, and Competitiveness: Policy Implications for Vietnam's Economic Growth", explores the role of trade facilitation and logistics in driving exports and national competitiveness.

It posits trade as consisting of three pillars – transport infrastructure and logistics services, regulatory procedures for exports and imports, and supply chain organisation.

Pham Minh Duc, senior economist at the bank, pointed to the weaknesses in Vietnam's manufacturing and agricultural supply chains that prevent the country from lowering export costs and capturing much needed value addition.

He listed major constraints in manufacturing supply chains as being a reliance on primary supply chain structures from which very low value addition is captured, heavy dependence on feedstock, weak sourcing capacity, weak cluster arrangement, lack of working capital, and dependence on intermediaries for both sourcing and marketing.

The predominance of government-to-government rice exports discourages high quality and positive response to market signals, which is one of the major constraints in the agricultural supply chain, he said.

The report also blames Vietnam's small scale of farming, saying more than 70 percent of rural households farm less than 0.5ha and use backward farming methods.

Price and seasonal fluctuations, ineffective enforcement of health and sanitary conditions at all stages from the fish farm to the market, and lack of working capital are other constraints, it says.

The report recommends several policy changes to restructure supply chains to capture value and participate proactively in global chains.

In the manufacturing sector, the government should have a priority list to reflect Vietnam's comparative advantages, consult with MNCs and the private sector to develop an action plan to facilitate strong supporting industries to increase local value and availability, attract FDI, support PSD, and reduce the trade deficit, it says, adding IPs should be changed into industrial clusters with specialised production and logistics and greater use of domestic suppliers.

To improve the supply chain for agriculture, the government should introduce agro-industrial production towards improving quality, scale up successful contract farming for large scale agro-industry development, and reduce G2G sales and the role of smaller enterprises, it says.

It calls for more effective health and sanitary regulations conditions in the aquaculture industry.

The three-day Vietnam Supply Chain Congress 2013 "Source. Make. Deliver", which is being organised by the Vietnam Supply Chain Community, has attracted more than 600 professionals and 40 speakers from renowned companies.-VNA