Despite progress, logistics sector faces long road

The signing ceremony for a cooperation deal in the field of logistics

Impressive growth

Deputy Minister of Industry and Trade Cao Quoc Hung told participants that the logistics service sector grew an average 12-14 percent annually in the past three years thanks to the growing impetus of the entire economy and foreign trade, in particular. Under the guidance of the government, ministries and sectors have accelerated administrative reforms in order to save time and money for businesses.

In the Logistics Performance Index (LPI) 2018 report recently issued by the World Bank, Vietnam moved up 25 places to rank 39th among 160 surveyed countries, from the 64th position in 2016. Vietnam’s position is highest compared with other emerging markets and lower-middle income economies. The LPI 2018 report showed Vietnam’s improvements in the two indicators of Logistics Competence (up 29 places to the 33rd position), and Tracking and Tracing (up 41 places to the 34th position). These improvements were attributed to the effective application of information technology.

Improved logistics infrastructure and increased number of companies in various stages of supply chains are effectively serving industrial and agricultural production, domestic circulation of goods and foreign trade activities.

The improved logistics performance has contributed to the continued growth of the economy in the first nine months of 2018. Investment attraction and effectiveness improved. Agricultural production grew 2.78 percent compared with the first three quarters of 2017; industrial production growth reached the highest level in the past 12 years; the export value increased by 15.4 percent - higher compared with many other ASEAN countries; foreign trade yielded a surplus of US$5.39 billion. Domestic trade continued developing, especially e-commerce.

Sector limitations

Deputy Prime Minister Hue praised the results achieved by the domestic logistics sector. However, he also indicated its limitations compared with other countries. The sector’s contribution to Vietnam’s gross domestic product (GDP) remains low but logistics costs are still high, reducing the competitiveness of the economy. The number of logistics service companies in Vietnam has reached 3,000, but 96 percent of them are small and micro-sized. The domestic logistics sector still lacks large-sized companies and groups that can compete with rivals in the region.

“Vietnam needs to develop the logistics business community and promote their participation in value and service chains in order to increase the logistics sector’s contribution to the country’s GDP, reduce logistics costs and enhance the competitiveness of the entire economy,” the deputy prime minister said.

To promote the development of the domestic logistics sector, in the opinion of Deputy Minister of Industry and Trade Cao Quoc Hung, logistics service facilities must be improved. In many places, trade, transport and information technology infrastructure remains poor. The linkage between domestic and foreign logistics companies is still loose.

Due to their limitations in terms of experience, management skills, information technology application and the quality of human resources, domestic companies are yet to meet the requirements of international logistics activities.

Economic zones

Tran Thanh Hai, Deputy Director of the MoIT’s Foreign Trade Agency, said Vietnam has economic zones located in different geographical areas with specific advantages, such as seaports and favorable conditions for production, animal husbandry, cultivation and cross-border trade. Therefore, he believes Vietnam needs to promote linkages between economic zones in order to prevent waste of resources and bring their advantages into play.

In his opinion, modern logistics centers should be established and their operations should be managed with advanced technologies. Appropriate policies should be created pertaining to land, infrastructure, e-commerce and related fields. Logistics companies need to diversify their services and improve their human resources.

Deputy Prime Minister Hue believes promoting green logistics is crucial in the era of the Fourth Industrial Revolution or Industry 4.0, which requires joint efforts of the government, ministries, sectors, localities, associations and businesses. In his opinion, efforts to promote Vietnam’s trade and investment cooperation, as well as its infrastructure linkages with other ASEAN countries, will contribute significantly to the development of the domestic logistics sector.