"The costs of commercial logistics services of Vietnam are less competitive than that of other countries in the region such as China, Thailand, and Malaysia. Improvement of the efficiency of logistics services can help increase sustainable productivity and sustain growth for Vietnam," remarked Paul Vallely, Senior Transport Specialist and Transport Cluster Leader of World Bank at the conference on transport costs in Vietnam, recently held by the Ministry of Transport in Hanoi.
According to the World Bank, the important factor to maintain economic growth in the period 1990-2010 was the trend of labour migration from rural area to urban area, causing a decline of young labour market and leading to improvement of productivity as a priority in the next phase of Vietnam. Besides, Vietnam has a favourable geographical location, political stability and impressive investment in infrastructure, which are the key conditions for the rapid development of industry and production, an increase in trade and stronger global connectivity.
However, in reality, the cost of logistics in Vietnam lies in the range of 20.9 to 25 percent of GDP, 10 percent higher than the average for developing countries in the region. If calculated by value, Vietnam, compared to countries with similar levels of development, is spending more than VND10-15 billion per year on logistics.
According to Hoang Anh Dung, World Bank's transport expert, logistics services in Vietnam are not only costly but also less effective. In 2012 alone, the inventory costs nationwide due to delays in customs procedures amounted to US$100 million and maybe up to US$121million in 2015 and US$182 million in 2020.
According to Mr Paul Vallely, the reason for the lower effectiveness of logistics activities in Vietnam, compared with other countries, is the lack of reliability throughout the supply chain. When the costs of logistics are measured based on different factors, none of which relates to the price of transportation, especially in the current situation when overloading of transport makes low cost but mainly due to the high costs of inspection and warehousing of goods.
The costs of warehousing and rotating supplies depends on the reliability and predictability of supply chains. At this time when Vietnam is competing on the international market and participating in the markets with high value commercial goods under short-term orders across the continents, the improvement of reliability becomes essential.
According to the study by the World Bank, the lack of technical efficiency and organisation in Vietnam cause lack of reliability in the supply chain. In particular, the government's regulations are often not easy to understand and the customs clearance is time consuming and less predictable. Besides, the lubricant cost between the companies and the freight partners are deemed "essential" to facilitate transportation at least delay time. The recognition of this hidden cost leads to a high proportion of the cost of lubrication, creating inflation in the costs for customs clearance, commodity inspection and road transport. This leads to lack of transparency in the process.
In addition, the planning of transportation infrastructure do not use a strategic approach to multimedia corridor and the necessary supply-demand analysis; the port and maritime system is managed fragmented, causing lack of coherence, high congestion, and lack of financial resources for the project to build ports and roads; the construction of industrial parks for warehouse and storage are still underdeveloped; the freight by rail is untapped. These are all the reasons of underdevelopment of the current supply chain.
Another reason is that the road transport industry is fragmented, which does not supply the standard services for cargo owners; the road transport market has too many smaller companies to compete on price rather than on quality of service, which makes the service reliability of the logistics of Vietnam less effectively.
“This challenge can and should be seen as an important catalyst for reform,” a World Bank representative said.
The results of the World Bank study showed that the cost of transportation activities of the total logistics costs of Vietnam is more competitive because of the reduction of the shipping cost in supply chain inventory.
In the next 5-10 years, to improve the reliability of the supply chain and enhance the competitiveness, Vietnam must ensure that the provisions of the government and operations under international trade are enforced transparently, consistently, and strictly. Besides, it is necessary to modernise the customs system and integrate multiple systems in planning transportation infrastructure to promote a professional transport industry.
Quynh Anh
Vietnamese
