(TBTCO) – According to a report recently published by the International Finance Corporation (IFC) and the World Trade Organization (WTO), improving access to trade finance at reasonable costs can help Import-export turnover of the Mekong region (Vietnam, Cambodia and Laos) increased by more than 58 billion USD each year.
According to the report, trade growth in the Mekong region is uneven. FDI enterprises have export turnover far exceeding domestic supply chains. Research shows that domestic trade finance is not only rarely used but also high cost, fragmented and too simple.
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In 2022, banks in Vietnam only finance trade for 21% of the country’s total import-export turnover and this figure is less than 3% in Cambodia and Laos. According to importers and exporters, high collateral requirements and complicated appraisal processes are among the main reasons why they do not seek support from banks.
| IFC and WTO surveyed banks operating in three countries, as well as hundreds of import-export enterprises in Vietnam. This analysis examines the combined impact of expanding the reach of trade finance through banks by 20 percentage points and reducing funding costs to international benchmarks. |
Mr. Makhtar Diop – IFC Executive Director said: “We have witnessed firsthand the transformative power of trade finance for developing economies. But concerted action between policymakers, the private sector, financial institutions and international organizations is needed to address trade finance constraints and fully exploit them. the potential of this tool for emerging markets.
“This joint research shows that closing the gap in access to affordable trade finance will significantly boost trade flows, help create jobs, reduce poverty and support expansion supply of important goods such as food and medicine” – said WTO Director General Ngozi Okonjo-Iweala.
Accordingly, improving access to trade finance at reasonable costs can help the total trade value of goods between Vietnam, Cambodia and Laos increase by up to 9%, equivalent to more than 58 billion USD each. year.
The IFC and WTO reports recommend developing new tools such as supply chain finance and innovative digital services to reduce costs and improve access. To do this, it is necessary to improve legal frameworks to address collateral requirements, digital transactions, central bank conditions and accountability frameworks. The report also recommends raising awareness on how to access trade finance for small and medium-sized enterprises and local suppliers./.
