Improving quality of Vietnam's logistics services

Monday, 2017-12-18 12:39:24
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Vietnam's logistics sector is developing strongly at a growth rate of 15-16% per year (illustrative image)
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NDO - The development of the logistics sector has made significant contributions to the national economic growth, market expansion and the transfer of economic structure, according to the Ministry of Industry and Trade.

Vietnam now has approximately 3,000 enterprises operating in the logistics sector including 1,300 enterprises, mainly small and medium-sized ones are participating actively in both domestic and foreign markets. Vietnam's logistics sector is developing strongly at a growth rate of 15-16% per year.

According to a report of the World Bank, Vietnam ranks fourth in ASEAN in terms of logistics development after Singapore, Malaysia and Thailand. However, there remains a big job for Vietnam to do in order to enhance the efficiency of its logistics as Vietnam’s ranking in the WB's Logistics Performance Index dropped from 48 in 2014 to 64 in 2016.

Vietnam's logistics sector shows many inadequacies which have not been solved for many years, such as the poor infrastructure of transport, trade and information technology; the loose connection with other countries in the region; and unqualified human resources in addition to the low competitiveness of domestic logistics enterprises.

Vietnamese logistics firms mainly supply domestic logistics services, such as domestic transportation services, seaport services, airport services, warehousing services, customs declaration, inspection and testing of cargo, loading and unloading of goods. They also take part in international logistics services as agents for foreign firms who are goods owners, ship owners or international logistic providers.

According to the Vietnam Logistics Business Association, logistics costs in Vietnam are still high, equivalent to 20.8% of GDP while the rate in developed countries is only 9-14% and logistics contribute about 3% to GDP.

The outsourcing rate is about 35-40% which is mainly due to the lack of cooperation between service providers and manufacturers and exporters. The total logistics costs of Vietnam in 2016 were US$41.26 billion, equivalent to 20.8% of GDP. Of which, the total turnover of the top 100 logistics companies in Vietnam in 2016 was US$8.74 billion, posting a growth rate of 15.6%.

Ousmane Dione, the World Bank Country Director for Vietnam said that the effective and efficient logistics and connectivity are essential to Vietnam’s regional and global competitiveness. "Logistics performance is particularly important for an economy like Vietnam that is highly dependent on participation in global value chains and exports. Ultimately, this will translate into productivity gains which Vietnam needs in order to to achieve its ambitious development objectives." he noted.
Thus, the WB recommended that Vietnam should overcome major obstacles on institutional and policy to improve logistics performance through reducing costs and increasing the stability.

Solutions should be focused on four main areas including promoting trade facilitation by simplifying customs and specialised management regulations; enhancing efficiency of trade-related infrastructure and the quality of connectivity; building a competitive logistics service sector; and strengthening interagency coordination and partnership with the private sector.

Both private and public sectors must contribute to the improvement of the logistics sector. The WB suggested that the Vietnamese Government and the private sector should have a clear agenda for reform if the quality of logistics services is to be raised in order to meet the demand of an increasingly sophisticated economy.

The involvement of the private sector is also important, as most logistics services are carried out by private firms.

According to the Vietnam Logistics Report 2017 recently released by the Ministry of Industry and Trade, the Vietnam's logistics sector has great potential for growth and integration into global logistics. The report recommended that Vietnam should focus more on strengthening administrative reform, reducing or simplifying administrative procedures related to logistics, and accelerating the progress of important logistics infrastructure projects in 2018.

Management agencies, associations and enterprises also need to pay attention to the market opening process, the expansion of the training network, and the improvements to the institutional framework and State management mechanism to develop the logistics industry.