Efficient Logistics: A Key to Vietnam’s Competitiveness

World Bank report on Efficient Logistics: A Key to Vietnam’s Competitiveness

Key Findings:

•    While Vietnam has attained a strong track record of economic growth over the past 20 years, the drivers that fueled this growth are rapidly depleting, making it critical to develop new drivers of growth going forward.

•    More competitive transport and trade logistics can become a new driver of sustained growth through their positive impact on productivity and their direct influence on business competitiveness.

•    Logistics operations in Vietnam are costly relative to key regional peers like China, Malaysia, and Thailand, primarily because of the prevalence of unpredictability in supply chains.

•    Unpredictability in supply chains increases logistics costs by making it necessary for businesses to carry more inventory than they would otherwise need to manage their everyday operations. Vietnam’s key root causes of supply chain unpredictability are:

–    Cumbersome and inconsistently-applied government regulations;
–    Lack of automation in key trade-related processes such as trade clearance;
–    Fragmented modal planning in transportation;
–    A belief among shippers and logistics service providers that facilitation payments are necessary to avoid delays in supply chains;
–    Low barriers to entry in trucking; and
–    Major supply-demand imbalances in infrastructure provision.
•    It is estimated that Vietnam’s shippers spend approximately US$100 million annually in extra inventory carrying costs due to import-export clearance delays, an amount that is projected to reach US$180 million by 2020.

Key recommendations:

•    Minimize paper-based processes in the customs and technical clearance of imports and exports.

•    Ensure transparent and consistently interpreted, applied, and enforced government regulations and operations related to international trade.

•    Define and manage “multimodal logistics corridors” where containerized flows on trucks and barges can move on adequate infrastructure and with minimal regulatory delays.

•    Improve hinterland connections to deep-water ports at the Northern and Southern gateways; and develop and execute a plan to match supply and demand in container terminal handling at these gateways.

•    Facilitate the entrance of international players to the freight forwarding and third-party logistics service-provider market and encourage collaboration between foreign and domestic players.

•    Promote a more sustainable supply-demand balance in the trucking industry.

From World Bank