ICD shortfall may lead to fresh funding

July 29, 2021 | 10:41
As inland container depots are failing to meet growing demands placed on the seaport system, Vietnam is planning to develop more facilities in order to lower logistics costs and entice private investors.
ICD shortfall may lead to fresh funding
ICD shortfall may lead to fresh funding

One businessman in the town of Phu My in the southern province of Ba Ria-Vung Tau said that he often has to go back up to Ho Chi Minh City or the neighbouring province of Dong Nai to get empty containers to pack goods, even though he exports commodities via the Cai Mep-Thi Vai port area of Ba Ria-Vung Tau.

“The journey causes extra cost for businesses. The extra cost for a container is at least VND800,000 ($35). This is the reason why over 80 per cent of container cargo for this business is exported via Cat Lai in Ho Chi Minh City,” said the businessman.

Along with this company, many other shippers are facing a similar situation due to a lack of inland container depots (ICDs).

A leader of the Maritime Administration of the northeastern province of Quang Ninh said that before 2015, shippers of containers in temporary import for re-export to China had to use the cargo port in the northern city of Haiphong, while their headquarters were located in Mong Cai city in Quang Ninh. Procedures were long, cumbersome, and expensive.

“Since 2015, with the process of customs procedure completion moving in line with prevailing standards, re-export of commodities became more favourable,” he explained.

In spite of this advantage, many regions are still in a shortfall of depots. The Cai Mep-Thi Vai port area is yet to see any ICDs, leading to less capacity to attract commodities. Worse still, the shortfall of ICDs also occurs in the Mekong Delta region, forcing import-export businesses to pay extra costs for goods.

One expert said that in the Mekong Delta, besides the ICD of Saigon Newport operating efficiently, others in Can Tho city and Chau Thoi area in the region’s An Giang province are still less attractive due to underdeveloped infrastructure.

As a result, import-export businesses in the region have to go to Ho Chi Minh City for empty containers and then send them back to Cat Lai Port for export. According to estimations, the process causes an extra cost of VND4 million ($175) for a 20-feet container of rice and VND8 million ($350) for a refrigerated container.

A lack of connection methods is the other barrier in the existing system. According to Nguyen Anh Vu, director of the Maritime Administration of Haiphong, the city has three ICDs approved by the Ministry of Transport, in Dinh Vu-Quang Binh, Tan Cang Haiphong, and Hoang Thanh.

“Location adjacent to a seaport makes ICDs less competitive than others as goods from industrial zones are exported and imported directly via ports without using intermediate depots. Moreover, insufficient and undiversified connection methods make local ones less efficient,” Vu noted.

According to Le Do Muoi, director of the Transport Development and Strategy Institute (TDSI), to increase the efficiency of ICDs more plans should be made to develop them along with economic corridors in each region and area. For instance, in the north, they should be developed along the Lao Cai-Hanoi corridor linking with railways. On the corridor of Hanoi-Haiphong, it is necessary to invest in ICDs linking with inland waterways along Phu Dong and Giang Bien.

“For the Hanoi-Lang Son corridor, more ICDs in Lang Son, Bac Giang, and Bac Ninh provinces should be studied and developed,” Muoi added.

He elaborated that the development of such depots and their links will be carried out in line with the master planning on ICD development during 2021-2030 with a vision towards 2050, which is being jointly built by the Vietnam Maritime Administration, TDSI, and external consultants. “The development will be carried out and private investment will be called for,” Muoi said, noting that the moves are expected to open fresh opportunities for potential investors in the months to come.

ICDs are an attractive segment to domestic and foreign investors in the transport sector. In late 2020, the work on Vinh Phuc Logistics Centre funded by a consortium of T&T Group and YCH-YCH Holdings Singapore was kicked off in the northern province of Vinh Phuc. Costing nearly $200 million, the project has a scale of 83 hectares and a design capacity of through-goods of about 530,000 twenty-foot equivalent units.

Also last year, Hateco Logistics JSC received approval from the MoT to develop the Long Bien ICD project, making it the seventh such scheme in the north.

In early 2021, the market welcomed the Tay Ninh Logistics Centre project worth VND3.6 trillion ($156.5 million) from a consortium consisting of Tat Ninh Logistics JSC, International Services and Trading Investment JSC, and ASG Logistics JSC. Located in the southern province of Tay Ninh, the centre is expected to be put into operation in 2023.

Meanwhile, many others are looking for business and investment opportunities in ICDs. Saigon Newport Corporation is seeking to partner with Vietnam Railways to develop depots and warehouses at Song Than, Dieu Tri, Yen Vien, Dong Anh, and Dong Dang stations, with the plan to develop more to meet the demand.

By Tung Anh

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