Vietnam wants to cut logistics cost to improve goods competitiveness

By Anh Thu   November 27, 2020 | 10:15 pm PT
Vietnam wants to cut logistics cost to improve goods competitiveness
Containers being handled at Quy Nhon Port in central Binh Dinh Province. Photo by VnExpress/Anh Duy.
The government wants its agencies and businesses to reduce logistics cost to enhance the competitiveness of the country’s goods, Deputy Prime Minister Trinh Dinh Dung has said.

Speaking on Thursday at the Vietnam Logistics Forum, he said the cost for logistics remains high, leading to higher product costs and lower competitive advantages for Vietnamese goods and its economy.

Concurring with Dung, Vu Tien Loc, Chairman of Vietnam Chamber of Commerce and Industry (VCCI), said Vietnamese enterprises were facing many logistics challenges.

Citing studies by U.S. supply chain management market research and consulting firm Armstrong & Associates, Loc said logistics service cost in Vietnam was equivalent to 20.9 percent of its GDP, much higher than other countries in the region, like China, Malaysia, Philippines, Thailand and Singapore.

This cost is almost double that of developed countries and 14 percent higher than the global average.

"Transport costs are too high, equivalent to 30-40 percent of the product cost, while this ratio is only about 15 percent in other countries. This significantly reduces the competitiveness of Vietnamese enterprises," Loc said.

Heightened costs stem from reliance on land-based transport and inefficient delivery systems. Take the Hai Phong – Bac Ninh waterway for example. The waterway allows ships with a capacity of 120 TEU (20-foot equivalent units), and they can cover the distance in 8 to 11 hours, three times longer than by road, but at 20 percent lower cost, said Dao Trong Khoa, vice president of the Vietnam Logistics Business Association.

Dung said the goal is to double logistics services’ share of GDP to 8-10 percent and total logistics costs to 16-20 percent of GDP. To achieve the targets, unnecessary procedures need to be immediately eliminated, he added.

Khoa said it is necessary to promote the use of digital transformation in logistics via integrating blockchain and artificial intelligence technologies to existing digital platforms for transport and port and warehouse management.

He underlined the importance of developing international rail links and waterways in the northern Red River Delta and southern Mekong River Delta. These would help reduce costs for logistics service providers, manufacturers and import-export companies.

The cost of logistics services in Vietnam in early 2019 accounted for 25 percent of the country’s GDP, while the rate was just 9.5 percent in the U.S, 11 percent in Japan, 16 percent in South Korea, and 21.6 percent in China, according to the Vietnam Chamber of Commerce and Industry.

According to the Vietnam Logistics Business Association's latest survey, there are around 30,000 logistics companies in the country, including 4,000 international ones.

The industry has been growing at 12-14 percent annually and is now worth $40-42 billion.

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