Like many of its Southeast Asian neighbors, Vietnam faces the twin challenges of sustaining economic growth and protecting the environment. On the one hand, the impressive poverty reduction and growth performance attained over the past 25 years is now challenged by slower global and domestic growth, more intense international competition for foreign direct investment, and the need to drive domestic productivity improvements. On the other, Vietnam s vast natural resources as represented by two major river deltas, a long coast line, and a multitude of rivers and canals and the large portion of its population leaving in proximity to bodies of water or dependent upon water- and weather-driven sectors of the economy, such as rice production and aquaculture, demand that decisive steps be taken to reduce the carbon intensity of the Vietnamese economy. This report argues that promoting the use of waterborne transport in Vietnam s freight logistics can be an effective way of both facilitating economic growth and reducing the emission of greenhouse gases and local pollutants. In particular, it shows that investments in capacity expansion and better maintenance provision at the country s main navigable waterways and coastal shipping routes can result in logistics cost savings, which promote trade and drive growth. But they would also result in meaningfully lower emissions in a sector that remains less green than it could be, on account of the use of relatively small and inefficient vessels. The report offers three main contributions. First, by profiling Vietnam s inland waterway sector it sheds light on a critical component of the economy that has nevertheless remained opaque. Second, it proposes and quantitatively assesses well-defined public- and public-private investment opportunities in waterborne transport that can improve sector performance. And third, it explicitly takes into account the value of changes in local pollutant and greenhouse gas emissions in a preliminary economic appraisal of the interventions proposed. As the need to strengthen Vietnam s trade competitiveness intensifies, the inland waterway and coastal shipping sectors, often overlooked, can be part of the reform and modernization agenda. This report intends to contribute to that important conversation."

Vietnam has attained a strong record of economic growth and poverty reduction since the adoption of market-based economic reforms and pro-poor policies starting in the mid-1980s. Much of this achievement was driven by an untapped, rapidly-growing labour force and the enablement of greater labour participation in higher-productivity sectors of the economy. Yet, as Vietnam has restructured its economic activity towards manufacturing, more mechanised primary sector production and increasingly, services, and as the labour force is projected to expand at a markedly lower rate than before, finding new sources of productivity improvements has become the key to sustaining economic growth going forward. Improvements in freight logistics can unlock productivity gains across the Vietnamese economy for years to come. The shippers and carriers that operate the supply chains that connect Vietnam to the global economy generally perceive that logistics costs in Vietnam - those incurred when moving, storing and inspecting goods - are more onerous than in peer economies like China, Malaysia and Thailand, even as they are also perceived to be more competitive than those in other developing Asian countries. While many factors may contribute to costly logistics, the main source of underperformance in Vietnam's logistics sector appears to be the inventory-carrying implications of unreliable freight itineraries, unpredictable inspection and clearance procedures and an uncertain planning, legal and regulatory framework. By making commerce more predictable, particularly for regional and inter-continental trade, more efficient logistics can lower the cost of doing business, boost competitiveness, attract investment and generate employment. In short, efficient logistics can become a driver of lasting growth. Directed at industry practitioners and policy makers alike, this report highlights five key initiatives to improve the reliability and cost-effectiveness of transportation and logistics in Vietnam's domestic and international supply chains. These include: (i) modernising the customs system more broadly to enable goods clearance in a consistently timely manner; (ii) enhancing regulatory transparency to minimise discretion in the regulation of commerce; (iii) promoting multimodal transport corridor planning; (iv) enhancing competition and professionalism in the trucking industry; and (v) deploying capacity more strategically at major gateways, particularly at Cai Map-Thi Vai.