Alignment with EU can address logistics issues

October 13, 2024 | 08:00

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Despite the growth in trade turnover so far this year, import and export activities between Vietnam and the EU continue to face unpredictability, a fragile recovery of consumer demand, and knock-on effects of geopolitical strife.

Nguyen Thao Hien, deputy director of the European-American Market Department under the Ministry of Industry and Trade, told a Ho Chi Minh City logistics event in mid-September that the EU-Vietnam Free Trade Agreement (EVFTA) has played a major role to help both sides maintain growth momentum in bilateral trade cooperation.

Alignment with EU can address logistics issues

There are currently around 40,000 businesses in warehousing and transport involved in Vietnam, Photo Le Tpan

In the first eight months of this year, the bilateral trade turnover between Vietnam and the EU reached nearly $45 billion, an increase of 15.8 per cent over the same period last year. Of those, exports from Vietnam to the EU reached $34.1 billion, an increase of 17.4 per cent on-year.

“These figures reflect the economic recovery in the EU and the adaptability of Vietnamese enterprises in taking advantage of opportunities brought by the EVFTA in which, there are positive contributions from the Vietnamese logistics industry and partners in the EU,” Hien said.

However, Hien noted that the market and consumer demand is still quite fragile, while political turbulence is another challenge for Vietnam’s logistics sector.

“In addition, target export markets, especially the EU, are increasingly demanding greening of the value chain including production and transportation of goods,” Hien said. “In that context, to increase export efficiency, along with the efforts of manufacturing enterprises, the Vietnamese logistics industry needs to continue to improve infrastructure, enhance operational capacity and reduce costs to compete.”

Carlos Zepeda, a senior maritime economist from the Port of Rotterdam, also said that Vietnam is emerging as a major supplier of consumer goods and fashion to Europe, after China and Turkey.

“Vietnam has also positioned itself as a major supplier of other value-added products, becoming the third-largest supplier of high-tech goods to the EU market after China and the United States. With the current growth rate of manufacturing, the volume of container trade between Vietnam and Europe is forecast to double by 2050,” Zepeda said at the seminar.

“The factors affecting Vietnam’s production and export activities are raw materials, energy, market size, labour and expertise, business environment, supply chain integration, and infrastructure. Vietnam needs to make efforts to improve infrastructure, integrate large-scale port operations, and combine with industrial parks and clusters to maximise efficiency and cut logistics costs,” he added.

In addition, experts said that in the context of global greening, logistics is also an industry assessed to have considerable emissions and very high energy consumption.

Juergen Weber, chairman of the European Chamber of Commerce in Vietnam’s Transport and Logistics Sector Committee, explained, “Developing green logistics is an urgent issue that needs to be addressed by businesses. For the logistics industry, greening has become a mandatory requirement for businesses to be able to participate in the supply chain of global manufacturers and suppliers.”

Weber believes that cutting emissions from logistics activities is urgent to slow down the process of global warming.

“For Vietnam’s logistics, reducing carbon from transportation activities can be applied by optimising freight routes, switching to low-carbon transport modes, and reducing the carbon content of energy used for logistics,” he added. “Logistics plays an important role in the climate crisis, and addressing its impact requires a comprehensive approach that includes technology, policy and behavioural change.”

According to statistics, there are currently over 40,000 businesses participating in the logistics market in Vietnam operating in transportation and warehousing, including names such as DHL, CJ Logistics, Maersk, and many others.

Vietnamese businesses also have strong businesses such as Transimex, Sotran, and Tan Cang Saigon, which are capable of competing with foreign businesses operating in this country, the seminar heard.

Tran Ngoc Quan, trade counsellor Vietnam Trade Office in the EU

Before 2020, the EU’s logistics activities were developing strongly. However, post-pandemic, many seaports fell into a situation of severe labour shortage.

The Russia-Ukraine conflict has caused many ports and sea transport routes in those nations to be restricted, and intermodal rail transport has also been disrupted. The Red Sea tensions have further complicated the transportation of goods to and from the EU. Sea freight rates from Vietnam to the EU have more than doubled since the beginning of 2024 caused the fact that freight rate of some products sometimes even higher than their price, making it difficult for Vietnamese goods to compete.

In that context, the EU continues to require transformation in the logistics system, most notably the application of technology and digital transformation to reduce labour needs, create efficiency, and cut costs. In addition to the Carbon Border Adjustment Mechanism, Vietnamese exporters need to pay attention to the EU’s requirement to control emissions for maritime transport, which may increase international logistics costs.

Truong Tan Loc, marketing director Saigon Newport Corporation

The challenge for Vietnamese port enterprises today is limited infrastructure, only able to receive ships with a capacity of 14,000 TEU or less, while ships of large shipping lines, departing from the EU, usually have a capacity of 24,000TEU.

In addition, in the past few years, due to the impact of the economic downturn, consumer demand in the markets has decreased, causing the number of goods transported through the port to decrease significantly. Vietnam’s major export markets such as the US and EU have fluctuated continuously, together with the freight rates turbulence have also affected port operations.

In the context of developed markets requiring green standards for supply chains, Tan Cang Saigon’s port system has proactively converted to solar energy systems, applied automation to optimise the process of receiving and delivering goods, and converted vehicles using fossil fuels to clean energy. Tan Cang has ports: Cat Lai in Ho Chi Minh City and Cai Mep in Ba Ria-Vung Tau, meeting Asian green port standards.

Tan Cang Saigon has also expanded cooperation with international shipping lines and ports in greening the logistics chain to promote the export of goods to the EU market.

Chandler So, CEO, GEODIS Vietnam

Vietnam’s participation in many free trade agreements has helped boost production growth for export. Trade wars and pandemics have forced manufacturers to diversify their transportation networks. These factors have helped Vietnam emerge as a top manufacturing hub in ASEAN.

Logistics connectivity between Vietnam and the European market not only helps promote trade but also brings great opportunities for both sides. Thanks to investment and modern technology, logistics has now become an important bridge, helping Vietnamese goods access the European market more easily than ever.

Challenges facing businesses and opportunities for growth in a changing global trade landscape, and investing in technology is an important factor in optimising efficiency and reducing transportation costs.

Cao Minh Nghia, deputy head of Economic Development Research Ho Chi Minh City Institute for Development Studies

To move towards green logistics, the state needs to accelerate the digital transformation process, promote the application of IT, limit the use of conventional printed documents, save time for information processing, and build infrastructure for green logistics activities.

Other key issues are completing a synchronous legal framework for green logistics activities, especially regulations on air pollution control, regulating exhaust emissions, and limiting CO2 emissions from means of transport; issuing policies to encourage enterprises to develop green logistics; and developing a set of criteria to measure the level of green logistics development and capacity.

In particular, from the business side, it is necessary to build a green logistics development strategy, control green logistics at warehouses, improve the quality of transport, deploy advanced technology, and take advantage of state incentives and cooperation between logistics service providers and users.

Vietnam Logistics Summit 2024

The second Vietnam Logistics Summit, themed “Transform to Breakthrough”, will take place on Thursday, October 31 at JW Marriott Saigon Hotel in District 1 of Ho Chi Minh City.

With the participation of more than 300 domestic and international participants, the event, which will be held by Vietnam Investment Review under the auspices of the Ministry of Planning and Investment, will analyse the most pressing issues of the logistics industry such as new trends, modernising infrastructure, enhancing supply chain efficiency, promoting digital transformation, and developing new business models.

Information about the forum will be reported on VIR’s online platforms and regularly updated at www.logsummit.vir.com.vn.

By Bich Ngoc

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