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Vietnam Logistics Firms Urged to Cut Costs

December 01, 2014

HCM CITY (Biz Hub) — Reducing logistics costs is important to enhance further integration into global value chains and increase Viet Nam’s competitiveness, speakers said at a forum held on Thursday in HCM City.

Speaking at the second Viet Nam Logistics Forum, Deputy Minister of Industry and Trade Tran Tuan Anh said: “With rapid growth of imports and exports over the past few years, logistics has become an important service sector in international trade.”

He said that logistics costs were too high in the country, up to 25 per cent of GDP, while the figure in developed nations was only 10 – 13 per cent of GDP.

One of the biggest difficulties at port areas is weak infrastructure connecting areas where products are distributed.

Other challenges include blockage of imports and exports at some ports, extra costs charged by foreign shipping companies, and insufficient co-operation between logistics companies and import-export companies.

“Gains from improving trade facilitation are higher than from reducing tariffs, and if all countries reduce supply chain barriers even halfway to global best practices, global GDP could increase by 4.7 per cent, or US$2.6 trillion,” said Pham Minh Duc, senior economist at the World Bank in Viet Nam.

With better logistics, businesses would have lower costs, reduce delays, and have faster customs clearance and release through predictable official interventions. In addition, they would have a more simplified commercial framework for doing both domestic and international trade.

Improved logistics would also increase participation of small- and medium-sized enterprises in international trade.

“Governments have benefited from better logistics, including increasing effectiveness of control methods, more efficient deployment of resources, correct revenue yields, improved trade compliance and accelerated economic development,” Duc added.

The chairman of Hoa Sen Group, Le Phuoc Vu, said that logistics services contributed two-thirds of his success.

Product quality with international standards, reasonable prices and fast delivery had improved, he added.

“Logistics services have significant influences on production and business activities, especially for exports,” Vu said.

He pointed out three weak points in logistics systems, including setbacks in operation of the port system; lack of ships for special purposes and container ships; and additional charges for international transport during peak periods.

“Suitable policies should be introduced to operate the port system efficiently in order to reduce transport costs and prevent some ports from being overloaded,” Vu suggested.

“It is necessary to introduce measures to control freight costs and additional costs charged by shipping companies in order to ensure stable freight costs within price limits, and to have more local shipping companies with big ships,” he added.

To improve efficiency in logistics, Ngo Thanh Minh, vice chairman of the Viet Nam Shippers’ Council, said that it was important to have awareness of logistics and its role in the development of the economy and production and trade.

“The Ministry of Industry and Trade should play a key role in providing guidelines and management, and work with other relevant authorities and ministries instead of the National Logistics Management Committee,” he asked.

“Many cost-increasing difficulties, such as load limits for trucks, high fuel costs and time-consuming formalities, and costs of import-export and logistics activities have hindered the development of the sector,” Do Xuan Quang, chairman of the Viet Nam Logistics Business Association, said.

The Viet Nam Logistics sector has moved up to the 48th position globally from 53rd in 2012, according to the World Bank’s Logistics Performance Index (LPI) 2014.

The average growth of the logistics market has increased 16 – 20 per cent per year in recent years. Import-export turnover for Viet Nam this year is expected to reach $290 billion.

The forum, organised by the Ministry of Industry and Trade, the Ministry of Transport and the World Bank on Thursday, aimed to reassess the problems faced by the logistics sector and propose solutions.

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