Vietnam needs to reduce logistics costs to compete: PM

By Phan Anh   April 16, 2018 | 11:58 pm PT
Vietnam needs to reduce logistics costs to compete: PM
Vietnamese PM said Vietnam’s logistics cost needs to be reduced, as heard in a conference in Hanoi on Monday.
Heightened costs stem from reliance on land-based transport and inefficient delivery systems.

Vietnam’s inflated logistics costs are putting a strain on local businesses and need to be cut in order to make firms more competitive, said Prime Minister Nguyen Xuan Phuc.

The PM was speaking at a conference held by the Ministry of Industry and Trade in Hanoi on Monday.

Vietnam’s logistics costs accounted for 20.9 percent of GDP in 2016, according to the World Bank, and were higher than regional peers China, Thailand and Japan.

The reason for this is the cost of transporting goods via land, Phuc said.

In Vietnam, transportation accounts for 59 percent of all logistics costs, said Deputy Minister of Industry and Trade Nguyen Van Cong during the conference.

The cost of transporting a 40-foot container by land from Hanoi to HCMC is about VND40 million ($1,785), which is 9.7 times more than transporting it by water and 2.5 times more than moving it by train, Cong said.

According to a 2016 report released by the ministry, 77.2 percent of goods are transported by land in Vietnam, while just 5.22 percent go via water and 0.42 percent by train. 

Insufficient infrastructure development is to blame for the disparity, with rail links lacking connections to storage depots, and waterway transport taking from 3-5 times longer than by land, according to experts. 

On top of that, 45 percent of delivery trucks aren't reloaded after dropping off their cargoes, PM Phuc said.

Phuc said infrastructure improvements are needed so Vietnam can stop relying on land-based transportation, while delivery trucks should always be loaded.

The PM said he wanted the country’s logistics costs to drop to 16-20 percent of GDP by 2025, but at the same time, he also said logistics companies should aim for revenue growth of 15-20 percent by 2025.

In 2016, the World Bank ranked Vietnam 64th out of 160 countries on its Logistics Performance Index, a weighted average of a country’s score on numerous aspects of logistics performance, including efficiency of the clearance process, quality of infrastructure and ability to track and trace consignments.

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