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Govt strives to cut logistics costs
The Saigon Times Daily
Monday,  Apr 16, 2018,22:02 (GMT+7)

Govt strives to cut logistics costs

The Saigon Times Daily

HCMC - The Government is determined to slash logistics costs which account for almost 21% of gross domestic product (GDP), equivalent to over US$46 billion last year, reported.

The Prime Minister last year issued Decision 200 approving an action plan on logistics development and capacity enhancement.

The plan set many targets towards 2025, including the sector contributing 8-10% of GDP and achieving annual growth of 15-20%, logistics costs being reduced to 16-20% of GDP and the country’s Logistics Performance Index (LPI) ranking 50th or higher.

Following the decision, relevant agencies have worked to realize such targets and achieved some results. However, many challenges abound.

According to assessments of the World Bank (WB), Vietnam’s LPI stood at the 64th place out of 160 countries in 2016. The logistics sector posted annual growth of 14-16% on average and was one among the sectors achieving steady growth in the past time.

However, while logistics growth has been steady, logistics costs in Vietnam are still high and equivalent to 20.9% of GDP, with transport costs making up 59%, eroding the economy’s competitiveness.

Ousmane Dione, country director for the WB in Vietnam, said logistics costs of Vietnam by GDP are almost two times higher than those of developed economies, and are also far higher than the global average of 14%, according to

According to Deputy Minister of Transport Nguyen Van Cong, logistics is an indicator of economic development. The more developed an economy is, the lower logistics costs are.

Vietnam’s logistics is having growth potential, especially after the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) comes into force. But the point is whether or not enterprises can seize opportunities of the trade deal.

Advantages of Vietnamese firms concern logistics facilities and an understanding of the market. Besides, seaports of the country are big and can handle ships of over 100,000 tons, and there are 70 international air services.

While local importers earlier mainly purchased goods under CIF (cost, insurance, freight) conditions, they have shifted to the free on board (FOB) form, opening up big opportunities for Vietnamese logistics firms.

Nonetheless, Vietnamese businesses are spending a lot on logistics services.

According to experts, undeveloped multimodal transport and small sizes of logistics firms are among the reasons why the logistics sector has not achieved breakthroughs and the costs are high.

Le Duy Hiep, chairman of the Vietnam Logistics Association (VLA), said that weaknesses of Vietnamese logistics firms are uncompetitive service costs and poor quality of certain services, resulting from small business sizes, limited experience, management skills and technological application, and low quality of human resources.

At a recent seminar in HCMC, VLA general secretary Nguyen Duy Minh said that customs clearance durations also lead to a rise in logistics costs. “Each year enterprises spend 28.6 million days and VND14.3 trillion on specialized inspections. Over 100,000 products have to under such inspections, and the ratio of goods facing two to three inspections is 58%.” 

These facts point to a need of comprehensive, consistent solutions and determination of relevant authorities.

A logistics conference is scheduled to take place this week to shed light on difficulties faced by enterprises, improve logistics services and discuss solutions to cut logistics costs.

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