Capital needed for logistics industry development

09:25 | 04/09/2019 Society

(VEN) - Lack of capital, skilled staff and experience makes Vietnam’s domestic logistics enterprises less competitive than their foreign counterparts.

capital needed for logistics industry development

Small scale

According to the Vietnam Logistics Business Association (VLA), Vietnam has about 3,000 logistics enterprises operating on road, railway, ocean shipping, waterway transport and aviation. Ninety percent of these enterprises have registered capital of less than VND10 billion each.

At those small sizes, Vietnamese logistics enterprises are only capable of providing single services in Vietnam, such as forwarding, packaging, warehouse leasing and customs services, while foreign companies offer international integrated services.

Tran Thanh Hai, Deputy Director of the Agency of Foreign Trade under the Ministry of Industry and Trade said logistics costs in Vietnam are still higher than the world’s average. There remains a lack of connectivity between service providers of a logistics chain, while the application of information technology requires boosting in the context of the Fourth Industrial Revolution or Industry 4.0, Hai said.

In recent years, Vietnam has participated in many new-generation free trade agreements, such as the EU-Vietnam Free Trade Agreement (EVFTA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which have made Vietnam one of the most open economies in the world with import-export value nearly double the country’s gross domestic product (GDP). This is an advantage for the development of Vietnam’s logistics industry. However, Vietnam needs to create a good institutional environment for logistics enterprises to develop quickly and on a sustainable basis if it is to take advantage of this opportunity.

Preferential credit needed

Tran Duc Nghia, Director of Delta International Co., Ltd. said conditions are needed for logistics enterprises to access capital. According to Nghia, loan interest rates are another matter of concern for small and medium-sized logistics enterprises. The Japan International Cooperation Agency (JICA) has launched a preferential credit program - one of the best programs of its kind - for small and medium-sized enterprises in Vietnam. Although it targets companies with a low asset value and small staff, the program benefits borrowers for only a very short time. Nghia suggests that the State Bank of Vietnam form a similar preferential credit program for logistics enterprises in particular, and small and medium-sized enterprises in general.

In recent years, the logistics industry has been growing at a two-digit rate and is expected to maintain this growth in

the future. Solutions must be found to help Vietnam’s logistics businesses improve their competitiveness for

sustainable development.

Quynh Nga