ENORMOUS ROOM FOR VIETNAM LOGISTICS GROWTH

According to Mr Thanh, by becoming a member of the ASEAN Economic Community (AEC) and participating in numerous free trade agreements of the new generation such as: the Trans-Pacific Partnership Agreement (TPP), the Vietnam-EU Free Trade Agreement (EVFTA), Vietnam was on the way to become a processing centre of the world; trade volume in ports enjoyed sustainable increase (reached 427 million tonnes and 12 million TEU in 2015, exceeding expectations), creating a fertile market for logistics. Moreover, Vietnamese businesses were now under restructuring to strengthen domestic and international competition which would drive the demand for logistics higher. Especially, when the TPP takes effect and comes with it the elimination of 18,000 tariff lines as well as non-tariff barriers, goods flows between countries will be given a boost, as well as the opportunity to expand markets and engage in the chain of production and global supply for both Vietnam businesses and FDI enterprises.
 
However, besides huge opportunities, Vietnam's logistics industry still has some intrinsic shortcomings. According to Mr Scherbey Nestor - Senior Advisor of the Vietnam Trade Facilitation Alliance (VTFA), an overview into the logistics industry of Vietnam showed many limitations, from legal framework, ports, logistics centres, facilities, technology to human resources, infrastructure.
 
Expressing a different viewpoint from Mr Nestor Scherbey, Mr Bui Quoc Nghia - Director of the Vietnam Institute of Logistics (VIL) said that “the biggest knot” in Vietnam logistics was the infrastructure. Over the years, Vietnam had made much investment to develop the technical infrastructure for logistics but the efficiency remained low, the infrastructure remained underdeveloped (focus too heavily on roads), the quantification from the national, and regional to manufacturing sector level lacked accuracy.
 
Besides an unsynchronised development of infrastructure, slow technology updates and limited manpower, another reason behind the high cost of logistics in Vietnam was because businesses had yet to have proper awareness about the importance of logistics as well as to develop an interest in using professional services. With current logistics services, domestic enterprises were still mainly self-supply. “This is thought to help reduce costs, but in fact drives the cost higher. The key now is that we need to bring logistics services to each business as it is an indispensable tool for restructuring, improving competitiveness of businesses in the market,” said Mr Nghia.
 
According to several surveys, Vietnam logistics market currently accounts for approximately 25 percent of GDP - a relatively high rate compared with 10 percent of developed countries and is the direct cause behind the ballooned prices of products, the weak competitiveness of the economy in general and Vietnamese commodities in particular on the international market. According to VIL, there are about 2,000 registered logistics providers in Vietnam, but all are small and medium scale, only capable of providing part of the logistics chain; meanwhile the number of customers in demand of logistics services has climbed to about 300,000. These numbers reflect the incompatibility between logistics development and the number of firms having actual demand for this service. “This limitation needs resolving as soon as possible because only when the demand for logistics increases, can Vietnam logistics market grow strong, which means more competitive cost and prices, bringing practical benefits to businesses as well as the country's economy,” stressed Mr Nghia.

Source: VCCI