Vietnam's logistics sector confronts new challenges

Vietnam's logistics sector confronts new challenges. Photo: Le Toan

The Vietnam Logistics Summit 2024, themed "Transformation to Breakthrough", was organised by VIR in Ho Chi Minh City. The first panel discussion highlighted the current state of logistics infrastructure, as well as challenges in expanding and upgrading infrastructure to meet the growing demands of the industry.

Le Tuan Anh, director of the Department of Industrial and Service Economy, Ministry of Planning and Investment

Made-in-China goods are sold at competitive prices, given that China’s logistics system is more developed than other countries in the region. China grants construction licences far more quickly than Vietnam.

Take Tesla’s automobile factory for example – it only takes about 11 months from an investment decision to the factory's completion. Meanwhile, it takes less than three months for the completion of a shopping mall with the scale of AEON Mall. On the other hand, it takes years to complete an automobile factory in Vietnam.

China is now home to the world's longest expressway network, which helps connect economic regions to facilitate transportation and logistics smoothly. On the other hand, Vietnam is completing its expressway infrastructure. Vietnam set a target of having 4,000 km of expressways nationwide by 2030. Despite more favourable policies for investors, Vietnam needs to remove some policy bottlenecks.

Indeed, the government has made efforts to adjust policies while bolstering the development of infrastructure. Moving forward, Vietnam is expected to undergo a transformation in infrastructure to enhance its logistics competitiveness.

Bui Thien Thu, director of the Inland Waterways Administration, Ministry of Transport

Vietnam’s transport infrastructure is gradually developing. In terms of logistics infrastructure, Vietnam boasts 37 seaports and about 595,000 km of roads, including highways and railways. The country has a fleet of more than 1,000 ships serving sea routes. Vietnam’s inland waterway system has a length of 17,000 km. The waterway system in particular and the transport infrastructure system in general have served socioeconomic activities quite well.

As infrastructure development gains traction, logistics costs are on the downward trend, which makes a significant contribution to economic development. Specifically, logistics costs were equivalent to around 20 per cent of the country’s GDP and now account for 16.8 – 17 per cent of GDP.

Among them, the inland waterway system has recorded increasingly efficient performance, reducing logistics costs by 20 per cent. However, public investments in the inland waterway system stood at only 2 per cent, which has hindered the development of the system. If Vietnam can increase investment in inland waterways and boost connectivity between ports, the country can unlock the potential of its logistics sector.

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

Free trade zones are one of the solutions to drive the development of the logistics industry. Large-scale trade centres and fairs enable businesses to bring in duty-free goods to Vietnam. At the same time, businesses are allowed to develop facilities and services in the free trade zones, including logistics services like sorting, packaging, and other value-added services.

This will create a unique selling point. Given the establishment of free trade zones, goods from other countries will be transshipped to Vietnam, which creates additional demand for logistics services.

Many localities are keen on building free trade zones. The government has approved the pilot of a free trade zone model in Danang, and Haiphong and Ba Ria – Vung Tau will make similar proposals. These localities boast the advantages of local seaport systems.

Many localities have potential for a free trade zone model due to developed infrastructure and strong goods flows, such as Dong Nai with the Long Thanh International Airport in the pipeline, as well as border localities like Lang Son, Lao Cai, and Tay Ninh.

Yap Kwong Weng, CEO of Vietnam SuperPort

We need a strategic approach to develop multimodal logistics from rail to road, air, and sea to improve regional connectivity. Vietnam is considered a central connecting point in the region. To minimise policy risks, Vietnam needs to have a long-term vision of 50 years, not 10 or 15 years. The country must promote public-private partnerships in the logistics field. Together, Vietnam’s logistics industry will gain a more competitive advantage.

China offers a lesson about logistics capabilities. In 2000, China began to take off on global connectivity through water, roads, and air. With this overall strategy, China has accelerated the mobilisation of both public and private resources to develop the logistics sector with heavy investments in technology. Both public and private companies have ramped up investments in hardware and software. Today, China is home to tech companies worth billions of dollars.

Another factor is the government’s resources and policies to support China’s logistics market. It is worth noting that China’s logistics is efficient because they build large-scale logistics centres. Vietnam can learn from these lessons.

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