Creating Momentum for Vietnam's Logistics to Take Off

For further analysis, Deputy Minister Tran Tuan Anh said logistics has played a more important role in strong export- import growth and international trade. But over time, Vietnam's logistics firms have not really shared common ground with the importers and exporters, created tight links with importers and exporters, or promoted the development of Vietnam business community. This results in many side impacts on exporters in the country. For example, enterprises are suffering from the high fees, thus reducing the competitiveness of Vietnam's products in international markets. Specifically, the current cost of the Vietnam logistics operations accounts for approximately 25 percent of GDP and production and the manufacturers and exporters have to pay for the logistics activities in Vietnam 1 to 1.5 times higher than those in other countries in the region and 2 to 3 times higher than those in the developed countries. Deputy Minister Tran Tuan Anh emphasised that the reduction of logistics costs will definitely help enhance Vietnam's competitiveness among global economies. To achieve this goal, Vietnam needs to comprehensively review issues related to the logistics system such as infrastructure, institutional and legal framework, service providers, and service users.

 

Agreeing with Deputy Minister Tran Tuan Anh, Mr Bui Thien Thu, Deputy General Director of Vietnam National Maritime Bureau, Ministry of Transport, said that the logistics activities are fragmented and not professional. Currently, logistics providers are only providing the basic services with price competition but the value of services is low. Besides, logistics providers are mainly outsourcing for the foreign transportation companies of 3PL and 4PL; the infrastructure is weak and the logistics firms are limited to capital resources. These challenges prevent the logistics Vietnam from "taking off".

 

Analysing the weaknesses of the logistics industry in Vietnam, Mr Do Xuan Quang, President of the Vietnam Logistics Association (VLA) cum President of the ASEAN Federation of Forwarders Association, said Vietnam's logistics operation is relatively inefficient compared with other countries. This is resulted from a lack of trust throughout the supply chain of Vietnam with the rest of the world. It is caused by a lack of efficient techniques and comprehensive system of logistics operations. Specifically, the legal documents related to the amendment on the logistics is not easy to understand; the hidden costs for the carriers to accelerate the delivery process; the infrastructure is not consistent and lacks the multi-lateral corridors; the road transportation has not met the requirements of the clients; and the potential of the ports have not been fully tapped while about 90 percent of the imported goods of Vietnam are transported on sea. According to Mr Quang, the biggest drawback to the development of Vietnam's logistics services is not only the issues related to current infrastructure and transportation such as traffic safety and the load regulation but also administrative procedures such as cumbersome and inconsistent customs procedures.

 

Mr Do Ha Nam, General Director of Intimex Corporation, said: "It is sad to recognise that the logistics firms of Vietnam, despite the small scale and fragmented operation, have chosen unfair competition in price to win service contracts rather than associating with each other for further development. This causes local businesses to be less competitive than other foreign companies in the logistics market. Another fact is that while the domestic logistics firms are competing with each other, the largest shipping groups in the world have been gradually integrating in Vietnam's logistics market and dominating the market."

 

To propose solutions to create a breakthrough in the logistics industry, Mr Quang suggested that the authorities in the logistics industry should provide a consistent operating system, in terms of framework and policies. In addition, Mr Quang also raised the need to set up a national committee on logistics. The committee will act as a bridge linking business community and the government agencies for strategic planning, policy making and action planning to develop the logistics industry of Vietnam.

 

Mr Le Phuoc Vu, President of Hoa Sen Group, showed his expectation that the government will have a master plan for the industrial parks near the ports to facilitate businesses' import and export operations. Besides, to remove the imbalance of the high-demand ports and low-demand ports, Mr Vu suggested that the government should frame up a good mechanism and set of policies to coordinate the activities of shippers to implement activities at many different ports in Vietnam in order to fully exploit the capacity of the ports, optimising the export goods at each location to avoid over-concentration in a number of major ports as today.

 

To reduce the business costs of the importers and exporters related to the logistics operations, Mr Do Ha Nam said that the government should develop comprehensive and consistent solutions, with a focus on drafting and approving plans related to production, transportation and industrial parks and planning how to promote the development of the freight methods at low costs. Besides, the government should pay more attention to administrative procedures, particularly customs procedures at borders. Also, Vietnam should focus on enhancing the role of logistics firms in linking local and international businesses, and between the exporters and importers to minimise the transportation costs.