Facilitating Trade Through Competitive, Low-Carbon Transport

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.