Notwithstanding numerous difficulties and challenges, the Vietnamese logistics service industry still achieved very encouraging results and made positive contribution to the country’s gross domestic product (GDP). Basing on internal strengths and external resources, Vietnamese logistics companies are outlining new strategies to utilise and catch bigger opportunities on this potential market in 2011.
Huge potential
According to logistics companies, although the Vietnamese logistics market is only at an early stage of development, compared with other Asian countries and territories, this is a market with fast economic growth, especially in manufacturing and retailing industries - decisive factors to the success and development of logistics industry. According to a report released by the World Bank (WB), Vietnam, along with China, India, Thailand, Uganda, the Philippines and South Africa had the most impressive economic growth among developing nations. Particularly in the Logistics Performance Index (LPI), Vietnam ranked 53rd out of 155 economies. Its general LPI score was 2.96 points and infrastructure score was at the lowest of 2.56 points on the scale of five points, according to the WB. Additionally, although there is no statistics on total logistics costs in Vietnam, the logistics industry contributes no less than 20 percent of the gross domestic product (GDP) as other countries in the region. This shows Vietnam is solving its transport problems with improvements in warehousing, delivery, transporting and distribution.
Mr Nguyen Hong Truong, Deputy Minister of Transport, in spite of relatively solid steps, the fledging logistics service industry in Vietnam is exposing a lot of shortcomings and weaknesses. Vietnam now has some 1,200 companies operating logistics-related services but most of them are of small scale. Therefore, Vietnamese firms mainly act as agents for large foreign transnational companies. This means domestic companies only deal with some small stages of logistics activities. Besides, they can now meet only about 25 percent of the market demand. Qualification gap between domestic and foreign companies is very large while Vietnamese firms hardly provide inclusive logistics services.
Deputy Minister Truong said only about 20 percent of foreign firms set up joint ventures with local partners to provide logistic services. However, these joint ventures account for about 80 percent of the Vietnamese market share. Especially from 2014, foreign logistics firms will be allowed to set up wholly foreign-invested entities in Vietnam in accordance with Vietnam’s commitments to the World Trade Organisation (WTO). At that time the market will be crowded and more developed.
Strengthening linkage
The decisive factor for the sustainable development of the logistics industry is a highly skilled and professional labour force. Thus, Vietnam must focus on improving human resources for logistics industry in both dimension and in depth. This resource needs to be trained of legal knowledge and professional skills.
At the micro scale, according to experts, Vietnamese companies, typically of small scale, should join hands together to promote their strengths in competition with foreign rivals. On the other hand, they can also enter joint ventures with foreign logistics units to acquire technology, and accumulate capacity, capital and experience to be able to operate independently in the future.
According to Dr Cao Ngoc Thanh of the Ho Chi Minh City Research and Development Institute, international trade between Vietnam and the world is has flourished. This is a very favourable condition for the development of Vietnamese shipping industry. The development must be driven by modernity, high quality, affordability, security, environmental protection, energy savings, competitive strengthening to integrate into and expand to the world market.
Viet Hoang
Vietnamese
