Vietnam Can Become ASEAN Logistics Center

Vietnam can become an ASEAN logistics center, Mr. Le Duy Hiep, Chairman of the Vietnam Logistics Business Association (VLA), said in an interview granted to Vietnam Business Forum on Vietnam's logistics development. Huong Ly reports.

What do you think about logistics development in Vietnam in recent years? Can Vietnam become an important logistics center in the global supply chain?

The logistics service industry has witnessed a lot of positive progress following the Prime Minister's Decision 200/QD-TTg dated February 14, 2017 on approval of the Action Plan for logistics service competitiveness improvement and development to 2025.

According to the Logistics Performance Index (LPI) 2018 released by the World Bank (WB), Vietnam ranked 39 out of 60 surveyed countries and 3 in ASEAN after Singapore and Thailand. In 2020, the World Bank had no ratings because of the Covid-19 pandemic. The logistics service industry grew by 12% -14% a year. Outsourcing rate increased, reaching over 60%. Logistics accounted for about 4% of GDP and logistics cost was 16.8% of GDP (in 2018).

More than 95% of logistics service companies are SMEs. The biggest obstacle to Vietnam's logistics service industry is higher cost than developed countries in the region, thus weakening export, import and economic competitiveness. New technological application remains low. There is no effective cooperation between logistics service providers and shippers, especially agricultural products.

Vietnam has a geopolitical advantage as it lies on an important maritime route of the world, which accounts for about 85% of East-West freight transport and connects mainland China with ASEAN countries. Vietnam’s imports and exports are transported mainly by sea, accounting for over 90%. The country has road, air and railway networks linking to GMS, ASEAN and European countries. The GDP growth was high before the Covid-19 pandemic outbreak. In addition, Vietnam signed many new-generation free trade agreements (FTAs), most recently the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA), under which reduced tariffs will robustly boost imports, exports, production and investment, thereby creating the premise for freight, transport and logistics infrastructure, helping the logistics service industry to develop quickly. Besides, Vietnam is a destination for redirected global supply chains as a result of the Covid-19 pandemic. Therefore, I believe that Vietnam can become a logistics center of the ASEAN region by the 2030s and will then advance further.

Can you judge the impact of Covid-19 on the logistics sector in Vietnam?

The Covid-19 pandemic has produced a strong impact on economies and social life of the world, disrupting and reversing global supply chains, including logistics. The country's logistics service industry is hit by that negative impact. From 20% to 50% of logistics service providers, depending on service types, suffered from operational shrinkage and revenue reduction. Air, railway and road transport services were hardest hit. Currently, Vietnam's logistics service industry is recovering but logistics businesses are still facing numerous difficulties.

What should logistics companies do to restrict Covid-19 impacts and create momentum to promote business development recovery?

Enterprises have started restoring production and business. The Government has made specific and effective decisions, action plans and measures to support enterprises to quickly overcome this difficult period.

VLA has launched an action plan to help service companies overcome this difficult time. The program focuses on three main goals: Increasing corporate finance, advancing digital transformation in logistics services and developing high-quality logistics human resources.

The association promptly sent requests from enterprises to the Government and central authorities to offer low lending rates and reduce or delay tax payment. For example, corporate income tax is reduced by 50% to 10% and seaport and airport fees are slashed. Specifically, a 50% discount or exemption of infrastructure fees in Hai Phong are applied in one year. A 20-30% reduction of toll fees for BOT roads and expressways is applied to freight vehicles in six months to one year. A 30% discount of inspection fees is applied to vehicles. The Ministry of Transport and the Ministry of Finance have measures to control foreign container shipping lines by increasing surcharges and charges in the time of pandemic; strictly control ports, depots, CFSs and ICDs; not increase the cost of lifting containers, loading, unloading, and storing freight to support businesses; delay or exempt social insurance premiums for employees in 2021; and introduce new customers and markets to VLA members.

In addition, VLA members are actively carrying out consistent solutions like cutting down on administrative spending for enterprises; strengthening international cooperation, not depending on certain markets and customers; and making use of new-generation FTAs, especially EVFTA. Companies need to recruit enough qualified personnel and provide necessary training for existing employees and new recruits.

They need to accelerate scientific and technological application in the context of capital shortages. VLA needs to support its members in this work by promoting e-DO project research and application and boosting learning and exchange among major members that are applying new technological solutions in logistics services and help its members apply them to daily activities. On the other hand, they need to expand e-commerce, e-logistics, digital technology and government portal to expand operations in the time of pandemic.

What do you forecast about logistics development trends in Vietnam?

Given active digital transformation in the logistics service industry, transnational e-commerce development and rapid e-logistics development, especially after Covid-19, directly serve people’s daily needs. The Industrial Revolution 4.0, with disruptive breakthroughs in artificial intelligence, integration of artificial intelligence with the internet of things (IoT) and modernization tools begin to change the panoramic landscape of the global logistics industry.

Our economy is recovering and developing when the Covid-19 pandemic is controlled. Exports and investment will grow strongly in the coming time. The enforcement of new-generation FTAs, especially EVFTA, will create conditions for Vietnam's logistics service industry to develop strongly and actively restore and develop the supply chains.

Source: Vietnam Business Forum