When Will Vietnamese Logistics Enterprises Get Out of Being Hired by Foreigners?

There are more than 1,000 domestic companies and 25 foreign companies operating in the field of logistics in Vietnam. According to statistics from the Vietnam Freight Forwarders Association (VIFFAS), 80 percent of the domestic enterprises have registered capital ranging from VND1 to 1.5 billion. With their limited capital and little well-trained labour, home logistics companies operate on a small scale, only being able to provide simple services such as customs declaration, or being hired by foreign companies operating in Vietnam, etc. Becoming a "subcontractor" of foreign enterprises made domestic logistics companies find hard to cooperate with each other and associate with the import and export enterprises. This loose linkage led to the fact that the import and export enterprises have to pay for logistics services in Vietnam 1 to 1.5 times higher than other regional countries which significantly affects the domestic export operation.

According to Deputy Minister of Industry and Trade Tran Tuan Anh, one of the reasons for the lack of domestic logistics enterprises is due to the complex institution and legal framework which lacks the close involvement of the related agencies. Moreover, complicated administrative procedures and the overlap among management agencies and legal documents have reduced the operational efficiency of domestic logistics enterprises.

 

Additionally, many Vietnam import-export businesses still believe that they have no more responsibilities after products are loaded on trucks or ships, and consign all responsibilities for foreign enterprises in using logistics services. Inadequate infrastructure especially road traffic is also a reason for the situation of logistics services.

 

To get out of being hired by foreign firms, domestic logistics enterprises need their own efforts and support from the State.

 

According to Mr Do Xuan Quang, Chairman of the Vietnam Logistics Association ( VLA ), it is imperative to have a state-level organisation to manage and supervise logistics activities; thus, forming a bridge connecting enterprises and the state in planning strategies, policies in favour of the development of logistics industry attached to import –export and production. In addition, the State needs to manage freighters to operate in various ports instead of centralising in only a few ones to fully exploit their capacity.

 

Cost in logistics services is an issue of great interest among companies. Mr Nguyen Huu Thang, Chairman of Hanoi Trade Corporation presented a petition to the State in favour of planning stockpiles, manufacturing warehouses, etc., near the port to facilitate import and export operations as well as reduce transportation costs.

 

However, for the development of logistics operations, domestic logistics enterprises should strengthen links with each other as well as with exporters along with the support of the State. Besides, the use of Vietnam services including logistics, transportation and insurance should be encouraged. Recently, the Orient Commercial Joint Stock Bank (OCB ) and Tan Cang - Long Binh ICD Joint Stock Company (under the Saigon Newport Company) has signed to deploy an integrated package of financial and logistics solutions for import – export enterprises. According to the estimate of OCB, through closed logistics and financial solutions, businesses will reduce five percent of logistics costs and about 20 percent of international payments costs. This proved benefits of connecting banks and logistics companies with export companies.

 

With regard to import - export businesses, it is essential to know the benefits of changing the traditional purchasing practices as well as take the right of transportation in signing import – export contracts to reduce costs creating value added competitive edge in the supply chain.