The Logic of Improved Logistics

Vietnam occupies a vital geographical position in Asia, providing a dynamic and diverse cargo transport system. However, the logistics industry in Vietnam has not developed as rapidly as in regional countries like Thailand and China. For this reason, Vietnam is very concerned about boosting the industry to aid its subsequent integration with the region in the near future.

There are more than 800 mostly small-sized logistics businesses in Vietnam, and they remain modest in terms of capital, technology and manpower. In addition, logistics infrastructure is inadequate, and there are many legal barriers hindering the development of logistics in Vietnam.

Gopal R , the director for transport and logistics practice of the Frost & Sullivan Company, said that the Vietnamese logistics industry has great potential for development, which domestic businesses have not yet made the most of. At this time, domestic companies handle just 18 percent of total import-exports, with the rest being catered for by foreign logistics companies. Inadequate logistics infrastructure including incomplete road systems running to seaports, warehouses, and airports has resulted in increased logistics costs. This disadvantage has hampered the development of the Vietnamese logistics sector.

Vietnam must entirely open the logistics market for foreign companies in 2012 following its commitment to the World Trade Organization (WTO). This is a big difficulty for Vietnamese logistics businesses that have to compete with foreign companies that have greater capital and better competitiveness.

Trinh Ngoc Hien, the deputy chairman of the HB Group, and the chairman and the CEO of the Vinafco Joint Stock Company, said that most domestic logistics companies were transformed from state transport enterprises and are inflexible in their business practices. Most Vietnamese logistics websites are simple as they just show their profile and services, rather than utilities like tools for monitoring orders, ship schedules and paperwork (factors that ship owners are very concerned about while choosing a logistics service provider).

To keep up with the increasing demand for logistics, Gopal R said that Vietnam needs to improve and develop the nationwide logistics system and diversify transport systems to include road, air and sea routes to better facilitate transport. Vietnam takes advantage in trans-border transport and so it needs to make the most of this advantage to boost the development during regional and global integration.

Experts said that Vietnam needs to consider investment in transport infrastructure as the basis for logistics development following the Seaport Plan for 2020 and the Direction for 2030, the Overland Transport Development until 2020, particularly Project VITRANSS2, regarding comprehensive research into sustainable development of the transport system, and the priority to invest in major logistics projects. In addition, the state needs to put in place policies to support and encourage private or PPP (Public-Private Partnership) investment, set up sound solutions on investment in manpower to stay abreast of the demand for logistics development, improve the law system to foster the development of logistics and domestic 3PL (Integrated Third Party Logistics Service) businesses, launch the EDI (Electronic Data Interchange) system and the non-paper transaction system at customs offices and border crossings, reform administration and make public services transparent. There is also a need to ally businesses and associations to develop together and make them more able to compete with businesses in the region and the world.

It is expected that Vietnam will be among the top 30 or 40 world economies in terms of World Bank-reported Logistics Performance Index (LPI). It is also expected that the logistics cost as a percentage of the GDP (Gross Domestic Product) will reduce from 25 percent now to 20 percent in the near future and that the logistics service market in Vietnam will maintain the average growth at 20-25 percent annually. – VEN

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