Drastic infrastructure boost pivotal

Delegates at the Logistics Summit pored over the potential of the sector for Vietnam, Photo: Le Toan

At VIR’s Logistics Summit last week in Ho Chi Minh City, experts agreed that current development of logistics infrastructure will not be enough for the sector to reach its potential, thus partly contributing to lowering its competitiveness of Vietnam’s imports and exports.

Pham Thi Bich Hue, founder and chairwoman of Western Pacific Group, said the development path of the local industry is promising as her business and others in the industry have seen good signals from the government, as well as the businesses themselves who recognise the role of logistics in economic development.

However, Hue admitted that to enter a promising greener path that involves reducing logistics costs in the national GDP, there are still many hurdles ahead.

“Infrastructure bottlenecks have remained for years. Such development planning still lacks synchronisation and localisation appropriate to regional characteristics and actual customer needs. Regions lack planning for development of logistics centres, and they are yet to meet actual needs and local strengths,” she added.

Tran Thanh Hai, deputy director of the Ministry of Industry and Trade’s Agency of Foreign Trade, added that suitable infrastructure is one of the most important components for logistics development, along with other factors such as legal frameworks, business capacity, and human resources, as well as technology.

Hai elaborated that the country has been making efforts to strongly develop infrastructure, and the government has offered a clear direction in terms of plans to develop roads, airports, seaports, and railways.

“National transport infrastructure is managed by central-level government agencies, while local infrastructure for logistics centres and the like are managed and planned by municipal and provincial authorities. However, awareness about the importance of logistics differs from locality to locality. Some have advantages, but have low awareness. This is a barrier for businesses,” he said.

Over the past two years, many key infrastructure projects and roads to connect regions have been built, as part of the country’s goal to have 3,000km of expressways by 2025 and 5,000km by 2030. In addition, plans have been laid out for new coastal roads, connecting roads, airports, and seaports, contributing to increasing the competitiveness of the economy, as well as helping to reduce logistics costs for businesses.

Since the beginning of the year, a series of logistics centres have been put into operation in provinces and cities. In particular, September saw three large logistics begin operations to meet the increasing demand for goods storage of businesses in Bac Ninh, Binh Duong, and Long An provinces.

The interest in logistics centres has been growing all year. In early August, representatives of A.P Moller Maersk Group from Denmark visited Binh Duong to work with local authorities on the possibilities of investing in a large-scale logistics centre. Similarly, Warburg Pincus from the United States met with leaders of the same province to discuss investment plans for a cross-border e-commerce centre project.

Experts at last week’s summit agreed that strong recent moves yet to fully reverse the fortunes of the sector. Road transport still accounts for over 70 per cent of the total freight transport market share, which makes logistics costs in Vietnam much higher than elsewhere in the region.

“Vietnam’s imports and exports now go to 200 markets around the world, but the logistics service only stops at the Vietnamese border. Few names can go abroad, and ministries and businesses must continue to work together to solve this challenge,” Hai said.

“Vietnam has big advantages for import and export growth through trade deals and investment shifts. As new trends in the logistics sector now inch towards the green-digital transition, the country and businesses need to quickly change and improve to stand strong and to increase competitiveness,” he added.

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