TRƯỜNG ĐẠI HỌC KINH TẾ - ĐẠI HỌC QUỐC GIA HÀ NỘI

KHOA KINH TẾ VÀ KINH DOANH QUỐC TẾ

BLOCKCHAIN AND ITS POTENTIAL TO REDUCE TRANSACTION

COSTS IN VIETNAM'S CROSS-BORDER TRADE

Lớp: QH-2023E KTQT 1

NHÓM 9

LÊ VIỆT BẢO
LÊ ANH VĂN
TRẦN NGỌC PHƯƠNG THANH
ĐẶNG THỊ MAI PHƯƠNG
TRẦN PHAN ĐỨC MINH

HA NOI, 2024
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ABSTRACT

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 TABLE OF CONTENT

I. Introduction:........................................................................................................6
1. Context in Viet Nam’s Cross-border trade:......................................................6
1.1. Vietnam’s economic context since 1990 up to present:.............................6
1.2. Vietnam’s cross – border trade background...............................................8
1.3. Challenges and complexities in Vietnam’s cross-border trade logistics....9
II. Literature review:..............................................................................................10
1. Overview of blockchain technology:.............................................................10
1.1. What is “Blockchain” ?...........................................................................10
1.2. Blockchain structure................................................................................10
1.3. How Blockchain Works and Transactional process.................................11
1.4. Core features of blockchain.....................................................................12
2. Blockchain in International trade...................................................................12
2.1. Case of blockchain in international trade................................................12
2.2. Case that successfully applied BlockChain in international trade:
Singapore...........................................................................................................13
3. How can Blockchain reduce transactional costs?.......................................14
4. Challenges of blockchain adoption.............................................................15
4.1. Regulatory Uncertainty...............................................................................15
4.2. Lack of Awareness and Understanding.......................................................15
4.3. High Implementation Costs........................................................................16
4.4. Skilled Workforce Shortage........................................................................16
III. Viet Nam’s cross-border trade: Current Status..................................................16
1. Analysis of Vietnam’s exports and imports...................................................16
Letter of Credit (L/C)...........................................................................................17
Open Account.......................................................................................................17
Cash in Advance...................................................................................................17
Documentary Collection......................................................................................17
2. Inefficiencies in current System.....................................................................17
2.1. Banking Infrastructure................................................................................17
2.2. Foreign Exchange Risks.............................................................................18
2.3. Fraud and Lack of Transparency.................................................................18
3. Relevant Stakeholders....................................................................................18
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 Private Sector Enterprises....................................................................................18
Logistics and Shipping Providers.........................................................................19
Trade Associations and Chambers of Commerce.................................................19
International Organizations..................................................................................19
IV. Blockchain’s Potential to reduce transaction costs........................................19
1. Application of blockchain in Vietnam’s trade and Cost-benefit analysis.........19
1.1. Raw Material Sourcing...............................................................................19
1.2. Supplier Management.................................................................................20
1.3. Production and Manufacturing...................................................................20
1.4. Inventory management................................................................................20
1.5. Logistics and Transportation.......................................................................20
1.6. Customs Clearance......................................................................................21
1.7. Payments and Settlements...........................................................................21
1.8. Sustainability and Waste Reduction............................................................21
2. Expected Impact on trade Efficiency.............................................................22
V. Challenges and barriers to blockchain adoption in Vietnam.............................22
1. Technology barriers...........................................................................................22
Infrastructure limitations the need for technical expertise...................................22
2. Regulatory and legal barriers.........................................................................23
2.1. The status of blockchain regulations in Viet Nam......................................23
2.2. Regulatory challenges in integrating blockchain with existing trade laws.23
3. Cultural and industry resistance.....................................................................23
3.1. Resistance from traditional stakeholders (Banks, customs agents,..).........23
3.2. Need stakeholder education and training....................................................23
VI. Recommendations.............................................................................................24
1. Policy Recommendations..................................................................................24
2. Strategic steps for adoption............................................................................24
3. Training and capacity building.......................................................................24
3.1. Educating key stakeholders on blockchain technology...........................24
Raise awareness Among Government Agencies..................................................24
Education for Businesses and Corporations.........................................................24
Academic and Vocational Education....................................................................25
3.2. Encouraging innovation in blockchain solutions for trade......................25
VII. Conclusion.....................................................................................................25
1. Summary of findings......................................................................................25

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 Blockchain’s potential to reduce transaction costs and improve trade efficiency in
Vietnam................................................................................................................25
2. Long-term benefits.........................................................................................26
3. Future research directions..............................................................................26
3.3. Food industry..............................................................................................26
3.4. Banking & Financial...................................................................................26
VIII. References......................................................................................................26

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 I. Introduction:
1. Context in Viet Nam’s Cross-border trade:
1.1. Vietnam’s economic context since 1990 up to present:
1990 – 2000
Since 1990, After “Đổi mới” (Renovation) policy has been applied in 1986, Vietnam
transitioned from a centrally planned economy to a socialist-oriented market economy.
Since then, GDP of Viet Nam grew rapidly, averaging around 7-8% per year during
1990s.
Vietnam gradually shifted from an agrarian economy to industrialization and opened
up its markets.
Vietnam began attracting significant foreign direct investment (FDI), particularly
from Japan, South Korea, and Western nations, after normalizing diplomatic relations
with the United States in 1995.
Consequently, Per capita income increased, poverty rates decreased, and the overall
quality of life improved markedly. Thus, living standard was improved
2000 – 2010
This is the deep integration period of Vietnam’s economy. Export-oriented industries,
especially textiles, footwear, and electronics, grew rapidly.
In 2007, Viet Nam Joined the WTO – which provided Viet Nam with more
Opportunities for deeper integration in worldwide market (Cross-border trade).
GDP of Viet Nam still stably grew at 6 - 7%, despite the global financial crisis in 2008
Besides, Rapid urbanization occurred, with many cities and industrial zones being
developed, particularly in major economic hubs such as Hanoi and Ho Chi Minh City.
2010 – 2020
The period highlights Vietnam's growth and sustainable development, particularly
in high technology.
Vietnam shifted the focus to high-tech industry, service and knowledge economics
such as information technology and telecommunications. During this time, Vietnam
also signed and joined many free trade agreements (FTAs) with large partners in the
world: EVFTA (Vietnam–EU Free Trade Agreement), CPTPP (Comprehensive and
Progressive agreement for Trans-Pacific Partnership). Which brings an extremely
good opportunity for businesses doing export.
In its wake, the Vietnamese economy expanded at average rates of 6–7% per year,
while the government placed stronger focus on sustainable development and
environmental protection as well. Foreign direct investments (FDI) kept to
manufacturing, high-tech sectors and services. Giants like Samsung, LG, and Intel
sunk money into Vietnam before the economy even started its turnaround.

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 During this time, Viet Nam also concentrated in developing infrastructures:
transportations, electricities, waters, telecommunincations… and so on which
provided the country much ability of industrialization and modernization.
2020 – Present:
Since 2020, due to the Widespread of
Covid – 19 Pandemic, global economy has
hugely been affected, and so do Vietnam’s
Economy, especially in tourism and
service sector.
However, in the pandemic era, E –
commerce and logistic aspect has been
supremely grown and has changed the consumer’s buying behaviour since then.
This led to the rise in Vietnam’s Cross-border trade as consumer’s demand rise day
by day.
At the same time, Vietnam has accelerated digital transformation across various
economic sectors, aiming to develop a digital economy and embrace Industry 4.0.
By 2045, Vietnam aims to become a developed, high-income country through
industrialization, modernization, and deeper international economic integration.
Mini – conclusion:
Since the “export boom” after the joining WTO, it can be observed that Vietnam’s
economy has strongly been advantaged by the increase in FDI Flow and Cross –
border trade.
1.2. Vietnam’s cross – border trade background
Viet Nam has been a medium export country in various industries. In 2023, Vietnam
total value of export is 453,693,565 (thousand USD), Instantly:
Electronics and Telecommunications remained Vietnam’s largest export sector with
165,208,768 (thousand USD)
Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof was
followed by with 59,092,903 (thousand USD)
Besides that, Textiles and Garments, Agriculture and Seafood, Footwear were also in
top export industries of Viet Nam.
Here is some more details about Vietnam’s export products

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 (Trademap.org, 2000)
In recent years, Viet Nam’s cross-border payment market has noticed significant
expansion. This was said to be driven by the rapid growth in cross-border e-commerce
and digital payment services. Specifically, in past 5 years, Viet Nam gradually becoming
an international e-commerce hub in Southeast Asia with remarkable statistics:
Vietnam and the broader Southeast Asia region are experiencing an annual growth
rate of 20% in cross-border e-commerce from 2021 to 2026 (Techinasia, 2024)
According to Amazon, Products sold by Vietnam on their platform have increased
over 300% in the past five years. (Techinasia, 2024)
E – Commerce will replace traditional stores in the future, and due to high demand,
Cross-border trade will also grow.

Mini conclusion:
Throughout Vietnam’s economic development in each specific periods, it can be
predicted that Cross – border trade, (especially in E – Commerce sector) will continue to
grow and play an important role in Vietnam’s future economic growth. So how to
improve cross – border trade will be an head – scratching issue for Vietnam’s economy.
Along with the rise of Cross – border trade, Cross-border payment will also be
considered to be in higher demand in Vietnam’s Future cross-border Trade market.
1.3. Challenges and complexities in Vietnam’s cross-border trade logistics.
Although Vietnam’s trade Logistic services has remarkable development in the past
few years up to now, there are also some notable disadvantages:
Firstly, limitations in infrastructures. Although undergone rapid growth recently,
Vietnam's transport infrastructure, particularly in remote and border areas, remains
underdeveloped. Moreover, Border checkpoints can experience long wait times due to
limited capacity or outdated facilities, hindering the smooth flow of goods.
Secondly, the complexity in customs and regulatory barriers. Vietnam’s customs
procedures, although improved in recent years, can still be time-consuming and complex,
involving extensive paperwork and inconsistent regulatory enforcement. Differences in
regulations between Vietnam and neighboring countries can complicate cross-border
trade, leading to delays and increased compliance costs.
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 Thirdly, logistics costs in Viet Nam are relatively high. Vietnam has one of the highest
logistics costs in the region, accounting for a significant percentage of GDP. These costs
stem from inefficiencies in the supply chain, including delays at ports, underdeveloped
transport infrastructure, and the reliance on manual processes. Partially, high logistics
costs reduce the competitiveness of Vietnamese goods in the international market.
Finally, Cross – Border payment and Financial barriers. Traditionally, cross-border
payments are costly due to intermediaries, currency conversion and transaction fees.
Therefore, handling cross-border payments remains a challenge for many Vietnamese
businesses, especially smaller exporters, due to the complexities of currency exchange,
fluctuating exchange rates, and financial regulations.
Since cross – border payment and financial barrier remain huge challenges for many
Vietnamese exporters, our team propose utilize the functions of Blockchain Technology
to support the financial sector of cross – border trade.
2. Purpose of study
In this report, we will go through the advantages of Blockchain and how it addresses
transaction inefficiencies in Vietnam’s trade and assess the potential impact of blockchain
on reducing cross – border transaction costs.
3. Research objective
Highlight how blockchain technology functions in international trade.
Evaluate how blockchain could be applied to optimize cross-border trade in Vietnam.
Investigate the potential cost savings through blockchain adoption in Vietnam’s trade
sector.
4. Research questions
What are the key factors contributing to high transaction costs in Vietnam’s cross-
border trade?
How can blockchain be integrated into Vietnam’s trade infrastructure?
What are the expected outcomes in terms of cost reduction and process efficiency?

II. Literature review:

1. Overview of blockchain technology:
1.1. What is “Blockchain” ?
Blockchain is an technology that create distributed database and shared across the
computer network’s nodes. It is best known for their crucial role in cryptocurrency
systems, maintaining a secure and decentralized record of transactions. But they are not
limited to cryptocurrency uses. (A. Hayes, 2024)
1.2. Blockchain structure.
Blockchain consist of a programs called
scripts that conduct the tasks you usually
would in a database: entering and accessing
information, and saving and storing it
somewhere. When a blockchain is
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distributed, it means that your data has been copied and saved in various devices and they
must all matched to be valid.
(A. Hayes, 2024)
1.3. How Blockchain Works and Transactional process
Blockchain is somehow similar to spreadsheets and database, which has been
widely known before. What different is how the data was structured and
accessed. Take international trade transaction as an example, after the transaction
has been recorded, it will be stored in a file called Block (the size of the block can
be flexible). Once the block is full, it will run through a process that create
hexadecimal number called “Hash”. “Hash” is created after one block was full and
then encrypted with the next block header’s data, also known as the “chain” that is
connect the two block. Hence, this Technology called Blockchain.
Transactional process
First, the transaction entered the memory pools. Next, the transaction will be
transmitted to peer-to-peer computer network, which scattered all across the
world. Then, this network of computer will solve the equation to guaranteed if this
transaction is valid or not.Once the transaction was legitimate, it will be transferred
into a block. These blocks will be chain together by the Hexadecimal number called
“Hash” Code. After that, the transaction will be completed.

(Source:Investopedia.com)

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 1.4. Core features of blockchain
First and foremost, BlockChain can provide decentralization. While most of other
types of transaction will store their original data in one server and try their best to protect
it. Blockchain allow the transaction/contract to be stored in many servers and connect
with each other with the “Hash” number, create a sustainable and strong network that
protect the data from being stolen or changed. If someone trying to steal the data from
one node in the network, other nodes will prevent it by comparing the block hashes. So
consequently, no single nodes can be altered within the chain and the data remain
irreversible in blockchain.
Secondly, improve the transparency. Due to the decentralization of blockchain, the
data could be viewed by everyone (Everyone can see the live transaction). As a result, if
new Blocks are created, everyone will get updated and informed, which prevent the data
from being altered in the dark.
Thirdly, guarantees the security. Due to transparency and decentralization, even
though hackers may be anonymous, but their wallet address will be stored on blockchain,
thus, will provide the police with more data and allow them to track the lost currency
easier. Additionally, although blockchain can guarantee the transparency, however, users
can remain anonymous when making transactions (Only us can reveal our identity).
2. Blockchain in International trade
Not only being used in Cryptocurrencies and financial sectors, Blockchain can also be
used in international trade. According to World Bank’s recent report (2023): “to create
momentum for the growth of marginal or developing countries like Vietnam, from now
on to 2030, it is necessary to focus on international trade and Blockchain technology is
considered to be the "key" to promoting this commercial activity...”
2.1. Case of blockchain in international trade
On the one hand, we all know that the time and cost of clearing goods for import or
export add a significant financial burden on trade due to the copious layers of
authorizations to import or export goods, for instance like permits, licenses, phytosanitary
certificates, and others. The final arbiter in a border transaction is Customs, whose role is
to ensure that all such permits have been obtained and that they are valid and that the
goods have been lawfully declared and all regulatory requirements have been met.
The Holy Grail for Customs and other border agencies would be a set of trustworthy
documents (invoices, bills of lading, packing lists, etc.) that accurately describe the nature
of the goods, their conformity to the required standards, the inspections and
authorizations that they have undergone, any transformations through processing, and any
changes of hands along the entire supply chain for the purpose of conveyancing or re-
packaging. (“Can Blockchain Revolutionize Int. Trade?,” 2018)
In fact, not all the above information is available to authorize. Thus, goods are often
subjected to a high level of scrutinize. Consequently, his results in high costs for the
traders, delays in clearing the goods, and a high degree of resourcing for the government
authorities.

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 What if all of these steps of a supply chain, from the start to destinations,
are being captured in blockchain?
First, it could provide higher degree of assurance that the information is correct as the
information of everything in the supply chain are being saved in the Blockchain and
cannot be manipulated or altered all along the chain. Furthermore, Blockchain can cut
down on the process in verification due to its transparency – which can be viewed by
everyone, guarantee that Customs and all Agencies are met and Valid. Consequently, the
goods will be clear without further intervention from human.
2.2. Case that successfully applied BlockChain in international trade:
Singapore.
Singapore has corporated and developed “TradeTrust” – a platform that based on
Blockchain technology. TradeTrust is used to digitalize and standardize cross – border
trade process. It not only help cut down on the transaction cost, but also improve the
transparency and and trust, at the same time, boost the transaction speed.
Additionally, Singapore Port, which has been known to be one of the busiest port in
the world. Due to Singapore’s geographical location advantage, Singapore Port has
become one of the world’s biggest freight transfer station and the main entrance for
West’s exporter to enter South-East Asia market. With the assistance from Blockchain,
port’s manage and tracking process become more and more effective, from storing the
data to control the transport process.
Singapore also incorporate with other countries such as: Japan and Korea to apply and
develop blockchain in cross – border trade, put up the foundation for transparent and
save trades between each parties who take part in the trade.
(Benefits et al., 2024)
3. How can Blockchain reduce transactional costs?
Traditionally, cross – border payments are often done via the traditional SWIFT
network (the World Wire network was able to strip out intermediary fees and dramatically
reduce the time a wire transfer might take, which result cost are relatively high due to the
advent of intermediaries in the trade – who appear to be the middlemen to operate various
stages, mainly is currencies conversion. Because of this appearance, Parties who take part
in cross – border trade usually have to pay an additional fee, known as “transaction fees”.
Beside manage the operation of currencies conversion process, every parties that take
part in cross – border trade also concern about the intransparency risk, for instance, alter
the trade data, contracts to deprive benefits. Consequently, finding an legit intermediaries
will be the most suitable and safe choice for every Firms to slash the risk when operating
cross – border trade. Thus, this will cost them more.
However, with Blockchain, these fees are minimized as transactions occur directly
between parties on a decentralized ledger by
creating “Smart Contract”. Additionally,
Blockchain can still guarantee the supply
chain transparency as it can be viewed and
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tracked clearly by everyone who take part in the trade (transparency). Therefore,
BlockChain can also enhance the trust of a party’s portfolios by ensure traceability of
origin of goods from origin to destination, which traditionally, will take them a colossal
amount of cash and time to examine.
Moreover, by applying BlockChain, the transaction time can be reduced as the
BlockChain’s transaction processing speed (Usually measured in minutes) is much faster
than third-parties (usually measured in days).
In other words, Blockchain can eliminate intermediaries without making the trade
process’s efficiencies reduced.
Mr. Quyết Vũ, CEO of LocaMOS, said that: “Blockchain technology plays an
increasingly important role in cross-border e-commerce activities, creating trust
expectations for customers. Because before, to have faith in commercial activities
International trade often requires the help of a third party, the government or public sector
related legal entity. However, since Blockchain, operations International trade, especially
cross-border, has gained confidence customer place". (Diệu, 2023)
According to SheHar Yar, CEO of Software House, blockchain can eliminate the need
for multiple intermediaries, reduce transaction times to minutes, and lower costs by up to
40%. (Mcdermott, 2024)
4. Challenges of blockchain adoption
Notwithstanding this widespread interest and the opportunities for digital
transformation that blockchain technology presents, the actual implementation of
blockchain technology in the public sector has remained limited.
Previous studies have highlighted several adoption barriers such as lack of regulation,
security, and privacy concerns, insufficient and lack of interoperable infrastructure, lack
of information about operational costs, inefficient and energy-costly transactions, the
need for value-driven transitions in administrative processes, and the absence of effective
governance models.
A key challenge for blockchain and distributed ledger systems adoption in public
sector digital transformation projects is think about the application and adoption of
blockchain and DLT holistically to avoid misalignment among the social, information and
technical aspects of blockchains and DLTs. (worldbank.org)
Particularly, in Viet Nam, “BlockChain” has not been widely applied
due to several reasons
4.1. Regulatory Uncertainty
Vietnam's legal and regulatory framework for blockchain technology is still
underdeveloped. There is no comprehensive legal framework specifically governing
blockchain applications, making it difficult for businesses to adopt the technology
without clear guidelines.
Regulatory uncertainty also discourages investment in blockchain-related projects, as
businesses are unsure about potential legal implications.

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 4.2. Lack of Awareness and Understanding
Blockchain is still a relatively new and complex technology, and many businesses,
particularly small and medium-sized enterprises (SMEs), lack sufficient understanding of
its benefits and applications.
Limited awareness leads to hesitancy in adoption, as many businesses are unsure how
blockchain can be applied to their operations or how it can reduce costs in trade logistics.
4.3. High Implementation Costs
Implementing blockchain solutions can be expensive, particularly for smaller
businesses. Initial setup costs, infrastructure upgrades, and the need for skilled personnel
can be prohibitive.
The high cost of adoption, coupled with the uncertain return on investment in the
short term, makes businesses hesitant to transition from traditional systems to blockchain-
based solutions.
4.4. Skilled Workforce Shortage
Blockchain development and maintenance require a workforce with specialized skills,
including expertise in cryptography, software development, and cybersecurity. However,
Vietnam currently faces a shortage of trained professionals in these areas. The lack of
blockchain talent forces companies to either outsource to foreign experts, increasing
costs, or delay blockchain projects.
Some others could be mentioned such as: Data Privacy and Security Concerns,
Interoperability Issues, Cultural Resistance to Change, etc.

III. Viet Nam’s cross-border trade: Current Status

1. Analysis of Vietnam’s exports and imports
From the aforementioned details in Vietnam’s cross – border trade background sector,
we can see the trade indicators of Viet Nam:
- Vietnam total value of export is 453,693,565 (thousand USD)
- Vietnam total value of import is 335,129,154 (thousand USD)

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 Vietnam’s import statistics (2023)
(Trademap.org, 2000)
So that, Viet Nam is a Trade Surplus country.
In present trade context, Vietnam still relies on several conventional trade payment
methods, includes:
Letter of Credit (L/C)
One of the most widely used payment methods in Vietnam for international trade, the
letter of credit is issued by a bank guaranteeing that a buyer’s payment to a seller will be
received on time and for the correct amount.
It provides security to both parties, especially when trading with new partners. L/Cs
are often used in trade between Vietnam and markets such as the EU, the U.S., and Japan.
(Diệu, 2023)
Open Account
In an open account transaction, goods are shipped and delivered before payment is
due, typically within 30, 60, or 90 days. While this method increases risk for the exporter,
it is becoming more common due to competitive pressures.
Exporters in Vietnam may prefer this method with trusted trading partners, especially
within ASEAN and neighboured countries like China.
Cash in Advance
This is the least risky method for exporters, but the most risk for importers.
Vietnamese exporters request cash payment before shipping goods, ensuring they receive
payment before the trade is completed.
This method is typically used when dealing with small orders or customers from
countries with high currency risk.
Documentary Collection
In this process, banks act as intermediaries but do not guarantee payment. A
documentary collection is less secure than a letter of credit but is less costly.
It is commonly used when there is some level of trust between the importer and
exporter but not enough for an open account.
2. Inefficiencies in current System
Although Viet Nam’s Trade has been operated efficiently, there are still some
remarkable inefficiencies:
2.1. Banking Infrastructure
Although Vietnam's banking system has developed significantly, delays in cross-
border payments can occur due to limited international banking partnerships and outdated
infrastructure.
The processing times for cross-border payments through traditional banking channels
can still be slow, often resulting in delays in shipments or financial settlements.

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 2.2. Foreign Exchange Risks
Vietnamese businesses trading internationally are often exposed to foreign exchange
risk, particularly due to the volatility of the Vietnamese Dong (VND) against major
currencies like the U.S. dollar (USD) and the Euro (EUR).
Managing exchange rate fluctuations and currency conversions can lead to higher
costs or potential losses, making international trade payments more complex and risk for
Vietnamese businesses.
2.3. Fraud and Lack of Transparency
There are concerns about fraud in trade payments, including false invoicing and
document fraud, which make traditional payment systems less secure. This is especially
critical for SMEs in Vietnam that may not have robust systems for verifying trade
partners’ legitimacy.
3. Relevant Stakeholders
The most common stakeholders in financial section in Vietnam’s International trade is
Bank, sometimes are Fintech Companies.
In Viet Nam, banks such as Vietcombank, BIDV, and Techcombank play essential
roles in trade finance, offering letters of credit (L/C), payment processing, and foreign
exchange services to facilitate international trade. These banks are increasingly adopting
digital banking solutions to support faster and more secure cross-border transactions.
Additionally, with the rise of fintech in Vietnam, companies offering digital payment
solutions, trade finance platforms, and blockchain-based services are becoming important
players in the trade payment ecosystem. These entities help reduce transaction costs and
enhance payment transparency, providing alternatives to traditional banking systems.
Besides, Government bodies, include Ministry of Industry and Trade (MOIT),
General Department of Vietnam Customs, State Bank of Vietnam (SBV) are also take
part in the trade.
Apart from that, there are also some other stakeholders that can be cited:
Private Sector Enterprises
Exporters and Importers
Small and Medium-Sized Enterprises
Logistics and Shipping Providers
Freight Forwarders and Logistics Companies
Port Authorities
Trade Associations and Chambers of Commerce
Vietnam Chamber of Commerce and Industry (VCCI)
Sector-Specific Trade Associations
International Organizations
World Trade Organization (WTO)
Regional Trade Agreements (RTA) Stakeholders

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 IV. Blockchain’s Potential to reduce transaction costs.

1. Application of blockchain in Vietnam’s trade and Cost-benefit analysis

Base on the existed form of Vietnamese Cross – border payment methods. We assume
that BlockChain can replace and perform a more effective role than traditional one.
1.1. Raw Material Sourcing
Specifically, since Vietnam often imports raw materials from foreign nations for
domestical production, Blockchain can be used to verify the origin of raw materials
by recording every transaction in a tamper-proof ledger. Especially in some
industries like agriculture, mining, and manufacturing, blockchain ensures that raw
materials are sourced ethically and sustainably, meeting both regulatory and
consumer demands. For example, a Food & Beverage exporter and importer can
track the raw meats, fish and ingredients from farm, supplier to their warehouse, so
the exporter can guarantee the quality of products, at the same time, the importer can
verify whether the foods meet their domestical hygienic standard or not, ensuring fair
trade compliance.
This appliance of BlockChain in Vietnamese international trade supply chain not only
improve the trackability and minimized the risk of intransparency, but also can help both
Stakeholders to save more times and money when bad scenarios occurs, for instance, if a
widespread disease cause by foods occurs, suppose that the trade data were to operate by
BlockChain, Scientists can easily tracked where the disease-causing Food Originated
from. Consequently, these foods can be promptly destroyed and the diseased could be
addressed in time.
1.2. Supplier Management
According to our details about Smart Contract in How can Blockchain reduce
transactional costs?, so that payment terms, delivery schedules, and penalties for delays
can be written into self-executing contracts. This ensures that both parties meet their
obligations without relying on intermediaries, reducing administrative overhead and
mitigating the risk of disputes. In Viet Nam cross – border trade, Vietnamese textile
manufacturer enters into a smart contract with fabric suppliers in China, triggering
automatic payments once deliveries are confirmed via blockchain.
1.3. Production and Manufacturing
Similar to Raw material sourcing, BlockChain can also be used for quality control
and compliance, during manufacturing, each step of production can be recorded via
BlockChain to ensure the quality of goods that meet the standard of importers, by the
way, guarantee the manufacturing’s safety regulation. This can be applied to Vinfast –
Vietnamese biggest automobile manufacturer, BlockChain can record each components
added when producing automobiles, making it easier to identify defective parts if a recall
is needed. Thus, this can help cut down on the recall cost if the products have errors.

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 1.4. Inventory management
BlockChain can help businesses check inventory in real – time across multiple
warehouses in different locations, which can reduce the likelihood of stock shortages or
overproduction. Additionally, BlockChain system will also allows companies to predict
demand more accurately, optimizing supply chain operations and reducing excess
inventory costs.
For instance, A seafood exporter in Vietnam can monitor inventory at various cold
storage facilities and track real-time shipment status to foreign buyers by using
blockchain.
1.5. Logistics and Transportation
Logistics providers can use blockchain to track goods across borders, recording
every step from the warehouse to the final destination. Since traditional logistic service
can sometimes perform inefficiently, for example, often result in lost of Freights,
however, with the assistance of BlockChain, the lost goods can be tracked and found far
easier than traditional one. This not only increases visibility for all stakeholders,
including suppliers, buyers, and customs authorities, but also perform a cost – reduction
in trade. Additionally, Blockchain can also help eliminate fraud by ensuring that
documents, such as bills of lading and customs clearances, are securely stored and
verified.
Example: A Vietnamese rice exporter can use blockchain to track shipments from
Vietnamese ports to buyers in Europe, where every checkpoint (e.g., customs clearance)
is recorded for transparency.
1.6. Customs Clearance
Blockchain can automate customs clearance by storing shipping documents in a
tamper-proof system that customs authorities in multiple countries can access securely.
This reduces paperwork, eliminate intermediaries, speeds up the clearance process, and
helps prevent delays caused by incorrect or missing documents.
For example, a Vietnamese electronics company exporting goods to the US can
submit export documentation via a blockchain network accessible to both Vietnamese and
US customs, reducing processing time.
1.7. Payments and Settlements
From aforementioned details, there is no doubt that Blockchain enables faster,
more secure cross-border payments by eliminating the need for intermediaries such as
banks. Payments can be processed directly between buyer and seller using
cryptocurrencies or blockchain-based fiat settlements. As consequent, this reduces
transaction fees, exchange rate risks, and settlement times, which are often barriers in
cross-border trade.
Applied to Vietnam’s Cross – border payment, for example, Vietnamese exporter
of agricultural goods can receive payments from international buyers within minutes
using blockchain-based payment systems rather than waiting days for traditional bank

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transfers. Moreover, this could reduce the cost of hiring intermediaries but the efficiency,
transparency remain unchanged.
1.8. Sustainability and Waste Reduction
Last but not least, Blockchain can help companies track their carbon footprint and
waste throughout the supply chain. It records energy usage, emissions, and waste at every
stage of production and transportation, helping businesses meet sustainability goals and
comply with environmental regulations.
For example, Vietnamese seafood exporter uses blockchain to monitor its carbon
emissions and ensure sustainable fishing practices are adhered to, providing this
information to eco-conscious buyers.
2. Expected Impact on trade Efficiency
From the above analysis of How BlockChain can be applied in practical context of
Vietnam’s Cross – border trade. As an Unknown expert has said “We must take advantage
and use Blockchain as a foundation in reducing costs, because if we don't focus on import
and export, the economy will suffer and may face difficulties because Vietnam's economy
currently depends heavily on exports” (Diệu, 2023), so we expect that trade efficiency
will improved with the advent of BlockChain. With BlockChain, Vietnam’s cross –
border trade is not only become more transparent, but also has the potential in reducing
cost, transaction times and far more is reducing carbon foot print – which often appear
when international trade occurs and is considered to be one of the main factors that
damage our environment day by day.
Additionally, due to the transparency and can not be altered features of
BlockChain, Exporters and importers who take part in cross – border trade can generate
trust with their trade’s partners without intervention of intermediaries.

V. Challenges and barriers to blockchain adoption in Vietnam

1. Technology barriers
Infrastructure limitations the need for technical expertise
Vietnam's digital infrastructure, while improving, is not yet fully equipped to support
widespread blockchain adoption. Inconsistent internet connectivity in rural areas, limited
access to advanced computing resources, and a lack of blockchain-specific infrastructure
can slow the technology’s uptake.
The technology requires a robust and secure infrastructure, including cybersecurity
measures, to ensure data integrity and privacy, which many businesses in Vietnam may
lack.
Blockchain development and maintenance require a workforce with specialized skills,
including expertise in cryptography, software development, and cybersecurity. However,
Vietnam currently faces a shortage of trained professionals in these areas.
The lack of blockchain talent forces companies to either outsource to foreign experts,
increasing costs, or delay blockchain projects.

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 2. Regulatory and legal barriers
2.1. The status of blockchain regulations in Viet Nam
Vietnam's legal and regulatory framework for blockchain technology is still
underdeveloped. There is no comprehensive legal framework specifically governing
blockchain applications, making it difficult for businesses to adopt the technology
without clear guidelines.
Regulatory uncertainty also discourages investment in blockchain-related projects, as
businesses are unsure about potential legal implications.
2.2. Regulatory challenges in integrating blockchain with existing trade
laws.
According to Article 17 of Vietnamese law of Cybersecurity: “Prevention of and
combatting cyberespionage; and protection of information classified as State secret, work
secrets, business secrets, personal secrets, family secrets and private life in cyberspace”,
it can be seen that Vietnamese’s Law on Cybersecurity impose strict requirements on data
protection and privacy. However, blockchain's decentralized and transparent nature may
conflict with these regulations, as the technology often involves data sharing across
multiple nodes. (Assembly, 2018)
Thus, companies adopting blockchain for cross-border trade must ensure that their use
of blockchain complies with Vietnam's data protection laws, which can be a significant
challenge given the difficulty of anonymizing data on public blockchains.
3. Cultural and industry resistance.
3.1. Resistance from traditional stakeholders (Banks, customs agents,..)
Since BlockChain is capable of replace the role traditional stakeholders, therefore, this
will directly pose a threat to their benefits. Consequently, banks, customs agents and
other traditional stakeholders definitely will resist and retaliate against BlockChain.
Thus, before BlockChain could be launched in Viet Nam, convince traditional
stakeholders will a more vital task.
3.2. Need stakeholder education and training
Being able to develop and maintain BlockChain will be extremely crucial if
BlockChain is being applied in Vietnam’s cross – border trade.
Thus, Vietnamese stakeholders, included Government Agencies, Businesses and
Corporations have to be trained intensively about BlockChain to be able to manage it.

VI. Recommendations

1. Policy Recommendations
Firstly, Vietnamese government should create comprehensive regulations for
blockchain technology, addressing legal definitions, smart contracts, and digital
signatures. This framework will provide legal certainty for businesses and investors.

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 Moreover, integrate blockchain standards with existing international trade and
Cybersecurity laws, making it easier for Vietnamese businesses to adopt blockchain for
cross-border transactions.
2. Strategic steps for adoption
Support, promote invest in pilot programs in sectors like logistics, agriculture, and
finance to test, report and refine blockchain applications before wide-scale deployment.
Additionally, government should encourage collaborations between the government
and Vietnamese private companies to develop blockchain solutions tailored for Vietnam’s
industries, especially in logistics and trade. Some large Logistic corporation in Viet Nam
that are potential to take part in BlockChain’s development project namely: Giang Huy
Logistics, Thuongdo Logistics, Gold Trans, etc.
3. Training and capacity building
3.1. Educating key stakeholders on blockchain technology.
Raise awareness Among Government Agencies
Government agencies, including the Ministry of Industry and Trade, the State
Bank of Vietnam, and customs authorities, play a crucial role in regulating and
overseeing cross-border trade. To effectively implement blockchain, it is essential that
these agencies are educated about the technology’s benefits and how it can integrate with
existing trade processes.
Training programs should focus on building a deep understanding of how
blockchain can improve transparency, security, and efficiency in trade logistics and
reduce transaction costs. Additionally, government officials must be educated on how to
adapt regulatory frameworks to accommodate blockchain without compromising
oversight.
Education for Businesses and Corporations
Many businesses in Vietnam, especially those in key export industries such as
agriculture, textiles, and manufacturing, may not yet fully understand the potential of
blockchain for optimizing supply chain management and reducing trade friction. There is
a need for widespread education campaigns and workshops to introduce blockchain’s
applications in supply chain transparency, payments, and trade finance.
Large enterprises and SMEs need specific training to learn how to integrate
blockchain platforms into their operations, ensuring smoother cross-border transactions,
better traceability, and compliance with international standards. Practical training on the
use of blockchain systems, such as smart contracts, digital identities, and decentralized
ledgers, will help companies transition to blockchain-based trade processes
Academic and Vocational Education
Universities and technical colleges in Vietnam can play a major role in building
the next generation of blockchain professionals. Offering specialized courses in
blockchain development, cryptography, and decentralized technologies will equip future
technologists with the skills needed to build and maintain blockchain systems.

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 3.2. Encouraging innovation in blockchain solutions for trade.
Collaborating with international blockchain experts and technology companies to
research and develop Vietnamese Blockchain model, like “TradeTrust” of Singapore.
Launching Blockchain competitions, initiatives at the university level, catalyze
students to come up with breakthrough ideas about BlockChain, utilize those ideas and
invest for long – term development.

VII. Conclusion
1. Summary of findings
Blockchain’s potential to reduce transaction costs and improve trade
efficiency in Vietnam.
Overall, BlockChain is an ideal technology for Viet Nam to develop cross – border
trade, not only by it ability in replacement for intermediaries, but also for it improvement
in security for international trade by creating Smart contract that help firms to ensure the
Customs and Compliance when trading. Thus, BlockChain can reduce the cost for cross –
border trade as the exporter and importer can directly make transactions, but remain the
transparency and generate trust between parties in trade. More to say, BlockChain also
can play an vital role in Vietnamese supply chain management, help Vietnamese
enterprises ,who included in the supply chain make it easier to manage and tracking the
raw material sources, recording each steps in production, which ensure the quality of the
goods.
Although BlockChain is supremely potential in reduce transaction costs and improve
efficiency in Viet Nam. However, the appliance of BlockChain in Vietnam’s supply Chain
are still in limitation. Once due to the high price of Research & Development of
BlockChain, other are due to the limitations in technological infrastructures and the
absence of framework in law to take BlockChain into management.
2. Long-term benefits
As Viet Nam is considered to be a country that heavily depends on Export, We
believe that BlockChain is absolutely crucial to surge Vietnamese’s export Volume, bring
Viet Nam to a new position in global Trade market. BlockChain can generate the
competitive ability of Viet Nam in worldwide trade by minimized the cost in various
management stages, increase transparency and reduce the transaction time to minimum.
3. Future research directions
Apart from international trade, BlockChain can also be performed at various
industries:
3.3. Food industry
As health crisis has always been controversial topic of debate, disease caused by
eating food is no longer a strange issue. In the past, it has taken weeks to find out the
source of these outbreak or the cause of sickness from what people are eating. Blockchain
assist expert to track the food delivery from each process more easily in order to find out
the source of disease that caused by food.
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 Moreover, when food tracking become easier, it will provide expert with hastier
information to prevent the outbreak of an disease. Specifically, due to the transparency of
blockchain, everyone can see the delivery of the food and wherever is suspicious, the
observator can see immediately and report it to the Food safety inspection department to
address the issue.
3.4. Banking & Financial
Generally speaking, Banking is one of the sector that gain benefit the most from
Blockchain
Financial institution only operates during business hours (usually are 5 days from
Monday → Friday). So if you make a transaction on Friday at 6:00 PM, only until
Monday morning that your account receive the money. Apart, Blockchain, works 24/7
Blockchain can also increase the speed of transaction as it only take about few
minutes to generate a new block and add it to the chain.

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