Top solutions for revitalised logistics

Tran Thanh Hai, deputy director-general of the Ministry of Industry and Trade’s Agency of Foreign Trade

Since Vietnam became a member of the World Trade Organization in 2006, its economy has integrated more deeply into the wider world. The opening of the economy became important motivation, contributing greatly to maintaining the country’s high annual economic growth.

Vietnam has attracted 33,000 foreign-invested projects from 140 countries and territories with total registered capital of $394 billion. A number of the world’s leading groups have selected Vietnam as their investment destination such as Intel, Samsung, LG, Canon, Foxconn, Toyota, and Honda, among others. In addition, Vietnam has signed 15 free trade agreements, with high market-opening commitments in all sectors.

The strong development of Vietnam’s international trade has enabled the country to boost imports and exports, as well as expand and diversify markets. The country’s total import-export turnover rose from $157.1 billion in 2010 to $543.9 billion last year. Exports increased about 14 per cent annually on average, making it an important driving force for economic growth.

Achievements

To gain such achievements, logistics plays an important role. It is a crucial part of the economy, contributing to supporting, connecting, and promoting socioeconomic development in the country, as well as in each city and province, thus helping increasing national competitiveness.

Logistics enables connectivity of activities in the economy and is the foundation of activities from production to distribution. When all of these activities operate smoothly, they contribute to boosting production and manufacturing.

Logistics also enhances regional and international links, and increases national competitiveness. Efficient logistics cuts transportation costs, reduces product prices, saves time, and facilitates the supply chain as well as manufacturing and distribution activities.

The prime minister in 2017 signed Decision No.200/QD-TTg approving the action plan on increasing competitiveness and development of logistics by 2025 which was supplemented and amended by Decision No.221/QD-TTg dated February this year. Accordingly, several tasks and comprehensive measures were approved with the aim to complete the legal framework on logistics, improve logistics infrastructure, increase the capacity of business and service quality, develop the market, and improve human resource quality, among others.

With support from ministries, agencies, localities, and businesses, Vietnam’s logistics has made significant improvements in past years. According to the Vietnam Logistics Business Association, together with GDP growth, industrial production value, import-export turnover, and retail sales and service revenues, logistics grew 12-14 per cent annually, contributing 4-5 per cent of GDP.

Vietnam’s logistics market now has more than 30,000 businesses, with the majority being railway transport, roads, and pipes at 59 per cent, and then warehouse and transportation supporting businesses at 33 per cent, followed by waterway transport, aviation transport, and post and delivery.

At present, the local market also attracts about 30 multinational corporations providing trans-national logistics services like DHL, FedEx, Maersk Logistics, Panalpina, Kuehne+Nagel, and more.

The legal framework and related policies on logistics have been improved and completed, with a number of business conditions and administrative procedures cut, while applying IT to facilitate business activities.

Moreover, manpower training, IT application, trade promotion, and international cooperation in logistics have been boosted. Also, more dialogues between state agencies and logistics businesses have been held, helping to deal with their problems.

In spite of the achievements, there are some shortcomings in Vietnam’s logistics. It fails to tap into the existing advantages of geoeconomics and the potential of each locality. Meanwhile, infrastructure serving logistics activities and linking with trade, transport, and IT infrastructure remains weak, leading to high costs and low quality of some services.

Future solutions

To boost the development of the logistics industry, Vietnam needs to pay attention to several measures. Firstly, it needs to complete policies on logistics and related sectors, especially those on investment in infrastructure, customs, exports, and imports, administrative reform, and IT. Secondly, Vietnam needs to develop logistics infrastructure to ensure consistency and connectivity. This includes checking and adjusting planning and local production in line with logistics infrastructure development; ensuring that planning and transport development plans go in line with strategies in various areas.

Next, the country must boost trade promotion and logistics market development activities, thus facilitating Vietnamese logistics firms to catch up with global development. Promotion cooperation and joint ventures among logistics firms and with manufacturing ones are required, as well as importers and exporters to help them increase competitiveness.

Fourth is a strengthening of international cooperation in logistics. Continuing to expand this connectivity with ASEAN member nations, Northeast Asia, and other regions is crucial to tap into multimodal transport, cross-border transport and transit. It is also needed to develop transport infrastructure, warehouses, and logistics centres connecting seaports in Vietnam with Laos, Cambodia, Thailand, and Southern China.

In addition, Vietnam needs to develop human resources for the logistics industry in terms of number and quality to meet development demands, while encouraging and supporting startups and innovations, sci-tech research, and technology development.

Sixthly, logistics service providers should increase IT application, and modernise management and operation methods in order to cut logistics costs and improve service quality. Finally, business associations and manufacturing enterprises should restructure the manufacturing process, optimise parts in the value chain, increase operational efficiency, and cut production costs, thus increasing competitiveness.