Developing Logistics to Drive Exports

New generation free trade agreements such as CPTPP, EVFA and RCEP coming into effect pose a strong development requirement for the logistics industry in Vietnam. This is an important service sector that plays a role in enhancing the economy's competitiveness, especially in supporting exports.

Lots of room for growth

According to the World Bank Report 2018, Vietnam's logistics performance index (LPI) ranked 39 out of 60 countries participating in the study, an increase of 25 places compared to 2016, and ranked third among the ASEAN countries.

According to Deputy Prime Minister Trinh Dinh Dung, despite the adverse impact of the COVID-19 pandemic, Vietnam has succeeded in preventing and controlling the pandemic, recovering and gaining the appreciation of the international community. This result is contributed to by all industries, levels, and the business community in all economic sectors. In which, the logistics industry has made an important contribution.

Deputy Prime Minister Dung assessed that, over the past time, the system of policies and legislation on logistics has been increasingly completed. Major changes have been made in logistics infrastructure in recent years. Many large and modern projects have been invested and put into operation. Vietnam's logistics services have a relatively high growth rate of 12-14%. The rate of businesses outsourcing logistics services is about 60-70%, contributing about 4-5% of GDP.

Regarding the advantages of the logistics industry, Mr. Le Duy Hiep, Chairman of the Vietnam Association of Logistics Services (VLA), said that Vietnam has a geopolitical advantage, lying on an important maritime route of the world where about 85% of goods from East and West are transported, connecting mainland China with ASEAN countries. Import and export goods of Vietnam are transported mainly by sea, over 90%. Vietnam has a road, air and rail network connecting countries in the GMS, ASEAN and Europe. The economy developed at a high growth rate of GDP before the COVID-19 pandemic. Along with that, Vietnam is the destination for the transformation of the commodity supply chain due to the COVID-19 pandemic. Therefore, Vietnam can become a logistics hub of the ASEAN region in the 2030s and will move further in the future.

Sharing about the relationship between Free Trade Agreements (FTAs) and the logistics industry, Mr. Tran Tuan Anh, Minister of Industry and Trade, said that, in general, commitments to open the market for logistics services in New-generation free trade agreements such as CPTPP and EVFTA are not too far from Vietnam's commitments in the WTO and are basically consistent with current laws and policies. Particularly for logistics services, these agreements can affect development prospects from two angles: commitment to open markets in the transport sector; and commitments in areas that affect the capacity of the logistics service market from a scale perspective due to increased service demand, service quality, the need to expand capacity, investment and service delivery.

Challenges and solutions

Besides the results achieved in recent years, Vietnam's logistics industry still has shortcomings and limitations. Logistics services costs in Vietnam are still high, increasing costs and reducing the competitiveness of Vietnamese goods. The basic reason is that the planning work between sectors and fields still have not been closely connected.

“More than 95% of the enterprises providing logistics services are SMEs. The application of new technology remains low. There is no effective cooperation between logistics service providers and shippers, especially agricultural products,” said Mr. Le Duy Hiep.

Mr. Hardy Diec, Managing Director of FedEx Express Indochina, offered a solution to make Vietnam stand out in the global supply chain context. In his opinion, the main objectives are to improve connectivity through national highways, railways and airways, while also allowing logistics companies to reduce transportation and service costs; further simplify tax and customs procedures, and expand the team of talent including professionals specially trained in logistics to serve future needs.

“We see that smart sourcing and moving to digital will be key to building stronger, smarter supply chains and ensuring long-term recovery. Vietnam will certainly benefit from this change, as countries look beyond China in goods and services and explore new trade routes within the AMEA. Intra-regional trade now accounts for more than half of Asian trade,” said Mr. Hardy Diec.

Mr. Nguyen Duy Hong, Deputy General Director of Smartlog Company, said that currently applying 4.0 technology in logistics is the needs of users and suppliers. The application of 4.0 technology for shippers and vehicle owners is a great need. It can be seen that IT application is an important activity contributing to improving the efficiency of logistics services, reducing costs and improving the competitiveness of businesses. In the context of the current industrial revolution 4.0, the application of information technology is a necessary step to catch up with the trend.

Clearly defining the opportunities and challenges in the coming time, the Government has issued six groups of key tasks for ministries and agencies, including focusing on completing the system of regulations, mechanisms and policies related to logistics; and reviewing plans to ensure the synchronous connection of the infrastructure system with the goal of developing the logistics service industry and mobilizing resources to complete infrastructure.

By Huong Ly, Vietnam Business Forum