Da Nang plans to become ASEAN logistics centre

A crane loads cargo at Tien Sa Port’s container yard in Da Nang. The city plans to develop a logistics complex with total investment of US$620 million.-VNS Photo Cong Thanh

The complex will be located in the northwest part of the city on 312ha with total investment of VND14 trillion (US$620 million).

The decision was announced at the city’s people’s council meeting in July. Da Nang’s complex will include a series of logistics centres linked by a system of roads and rail lines. The major nodes in the complex will be the newly designed Lien Chieu deep-sea port, Hoa Nhon; the newly built Kim Lien railway station; an airport and hi-tech park with international-standard warehouses; an inland clearance depot railway and entry point to road connections.

Vice chairman of the city’s People’s Committee Dang Viet Dung said the city intended to build the Lien Chieu port as a key entry point into logistics chains providing services for the central and central Highlands regions, as well as the import-export exchange among ASEAN partners via the East-West Economic Corridor (EWEC) that links Vietnam, Laos, Thailand and Myanmar.

“We aim to build up Da Nang as a regional logistics centre to meet import and export needs among domestic and foreign direct investment enterprises. Partners in ASEAN could boost trading with Vietnamese businesses along the EWEC transport system and via Da Nang ports,” Dung said.

“The logistics complex will provide 50 per cent of logistics services via the airport and sea ports and 40 per cent via the railway system by 2050,” he said.

He added that a single railway line will be built to connect the Kim Lien cargo railway station with the airport cargo logistics and high-tech park. A road system will link the National Highway No 1 with Lien Chieu port.

General director of Da Nang port joint-stock company Nguyen Huu Sia said the city has potential to develop into a key logistics centre of Viet Nam and ASEAN.

“The city is situated in central Vietnam and at a convenient cross-roads of the railway and road system as well as the airport. It sits at the end of the EWEC and near the complexes of industrial parks and economic zones in Thừa Thien-Hue, Quang Nam, Quang Ngai and Quang Tri provinces,” Sia said.

‘The city also has a deep-sea port system and well-invested infrastructure in connection with the newly-built Da Nang-Quang Ngai Expressway, the north-south national highway and railway system,” he added.

He said the sea port system, which was designed for handling 12 million tonnes of cargo each year, currently hosts 23 cargo ships from 15 shipping agencies from Europe, the US, Hong Kong and Singapore per week.

Tiên Sa port alone could allow access to 70,000DWT (deadweight tonnage) ships, 4,000TEU (twenty-foot equivalent units) container ships and 150GT (gross tonnage) cruise ships, he added.

Sia said the city’s port system, including Tien Sa, Lien Chieu and Son Tra, would handle 29 million tonnes of cargo by 2030, while the port’s warehouse could accommodate 500 TEU.

As planned, the city will upgrade Lien Chieu port as an integrated port to ease the overloading at Tien Sa – which will handle mainly cruise ships and fewer cargo ships. Lien Chieu is scheduled to begin operation as a cargo port in 2022.

Sia, however, said that one major challenge was the poor quality of some 1,450km of roads on the EWEC transport corridor. This meant cargo transported via the road system to the Da Nang port was limited. According to a report, only 3 per cent of cargo from the EWEC is cleared via the Da Nang port, while tourism linkages between Thailand, Myanmar, Laos and Viet Nam are not yet strong.

According to the Economic Research Institute for ASEAN and East Asia (ERIA), smoother traffic and procedures on the 1,450km road of EWEC will help Da Nang boost its Regional Gross Domestic Products by 2.29 per cent more than current projections for 2025.

Poor service

Director of the Joint-Stock Transimex-Sai Gon Corporation, Da Nang branch, Nguyen Tan Man said Da Nang and the central region lacked completed logistics centres as well as international standard storage.

“We have not yet seen logistics providers that could supply comprehensive services from manufacturing and cargo management to forwarding to final consumers in Da Nang and the central region,” Man said.

“The local logistics companies could only handle part of logistics chains such as transport, customs clearance or warehouse service only. That’s the reason big investors still hesitate to pour funds into the region, or they (investors) have to use logistics service from foreign companies,” he said, adding that local logistics companies operated as sub-contractors of logistics service from foreign logistics companies.

Man also pointed out that the number of international standard warehouses in Da Nang and central Vietnam is small. There are only four or five warehouses with total capacity of 60,000 tonnes (meeting just five per cent of demand).

Meanwhile, unloading services at ports in the region are seen as still poor with 10 to 15 minutes needed for unloading a container, compared to only five minutes in HCM City.

He also said logistics companies had few choices for ports in the central region as Da Nang was seen as the only key port where container ships can dock.

Man said his company had invested VND80 billion ($3.5 million) to build the first international standard cold/chilled storage space at Hoa Cam Industrial Zone (IZ), serving local and FDI investors in the region with a high quality warehouse for worldwide exports.

The tailor-made SOP (Standard Operating Procedure) storage also provides various logistics services of air and sea freight, bulk cargo and trucks in connection with the trading route in the East-West Economic Corridor and a system of deep sea ports at Tien Sa and Lien Chieu, as well as airports.

According to Chairman of Vietnam Logistics Association (VLA) Le Huy Hiep the central region has 20 deep sea ports, but the system only handles 55.5 million tonnes of cargo – 13 per cent of the country’s sea ports per year.

There are only 40 foreign shipping companies in Vietnam, accounting for only 5 per cent of the country’s total number of shipping firms, but they transport up to nearly 90 per cent of Vietnamese import and exports, mostly to Europe, the US, the Middle East and Africa.

Production capacity in industrial zones (IZs) across the region has not yet developed to supply enough cargo for logistics businesses.

According to Yoshitaka Kurihara, senior advisor to the Japan External Trade Organisation (JETRO) HCM City Office, chaotic road traffic, slow rail traffic, a shortage of warehouse space and poor condition of seaports preclude investment.

As scheduled, Da Nang has been working with Japanese consultants to develop the first stage of the Lien Chieu Port at an estimated cost of US$247 million.

It is expected that the Lien Chieu Port, which currently handles 50,000 DWT (deadweight tonnage) container ships, will be able to handle 100,000 DWT ships with a loading capacity of 8,000 twenty-foot equivalent unit (TEUs) starting from 2025.