Vietnam's logistics sector too expensive to compete with foreign rivals: experts

Vietnamese logistics companies are growing in number thanks to strong imports and exports, but that does not mean the services they provide are becoming more affordable.

In fact, they are still more expensive than services provided by foreign firms, making them less competitive, according to experts, Nhan Dan (People) newspaper reported.

Data from the Vietnam Logistics Business Association (VLA) shows that the country's logistics sector has been growing strongly at an annual rate of 15-16 percent.

Around 1,300-1,500 logistics firms are performing well in Vietnam, accounting for 80 percent of the total companies in the sector.

With the import-export industry developing positively, securing a total revenue of more than $400 billion in 2017, the highest since 2006, the logistics sector has considerable room for expansion.

In 2014, the World Bank ranked Vietnam’s logistics performance index at 53rd out of 160 markets. Two years later, the country dropped to 64th and stood fourth in Southeast Asia after Singapore, Malaysia and Thailand.

The cost of logistics services in Vietnam currently accounts for 25 percent of the country’s GDP, while the rate stands at only 9.5 percent in the U.S., 11 percent in Japan, 16 percent in South Korea, and 21.6 percent in China, said the Vietnam Chamber of Commerce and Industry (VCCI).

The cost of transporting a container from Hai Phong 120 kilometers (75 miles) to Hanoi using a local company is three times higher than what foreign firms charge to ship a container from China or South Korea to Vietnam, according to the VCCI.

Le Duy Hiep, chairman of the VLA, was quoted by Nhan Dan as saying that limited scale, capital, experience, management, high-tech application and staff are to blame for the high costs of Vietnamese logistics services.

Nguyen Thi Thuy Duong, director of Minh Nhat Co Ltd, a logistics company in northern Vietnam, said local firms have to pay a variety of fees not applicable to foreign companies in Vietnam, explaining the higher costs of their services.

The quality of staff in the domestic logistics sector is low, which makes it less attractive than foreign rivals, she said.

To increase the competitiveness of Vietnam’s logistics sector, she said the government should focus on staff training, increasing cooperation between different means of transportation and simplifying administrative procedures.