70% of logistics service fees could fall into foreigners’ hands

The export costs and competitiveness of Vietnamese goods in the world market depend on logistics costs, but reports all show that the cost is very high in Vietnam.

According to Nomura Institute, the cost accounted for 21% of GDP in 2014, while it was 9% in Singapore and 10-14% in developed countries.

A report shows that the logistics costs for rice, vegetables and fruit, and wooden furniture enterprises account for 30% of total production cost.

The high logistics cost, according to Le Duy Hiep, CEO of Transimex, is one of the major reasons weakening local logistics firms’ competitiveness.

He said that more than 70% of logistics fees would fall into the hands of foreign shipping firms exporting Vietnamese goods.

The World Bank’s report on logistics services in the Mekong Delta in October 2016 – September 2017 pointed out the reasons for high logistics costs in Vietnam.

The logistics costs in Vietnam include fuel, road tolls, service at ports, underground fees and costs for the imbalance between imports and exports, as well as congestion at ports and on roads.

The expenses enterprises have to pay because of the road congestion is now a big concern. Infrastructure development in the last decade cannot keep pace with the increased demand for cargo transportation.

The traffic jams around Cat Lai Port are a challenge to efforts to improve the logistics services in the region. The volume of goods going through Cat Lai port has exceeded the designed capacity.

The LPI (logistics performance index) is decreasing rapidly, according to Connecting to Compete: Trade Logistics in the Global Economy, a report of the World Bank, released every two years.

In 2016, Vietnam fell to 64th among 160 countries, while Singapore stayed in the fifth position. The ranking meant a big step back compared with 2014, when Vietnam jumped to 53rd out of 155 countries from 148th out of 160 countries.

According to the World Bank, the domestic logistics cost accounts for 22.59% of total logistics costs. Of this, THC accounts for 5.13% and road transport fee 7.31%.

The World Bank also mentioned the underground fee which enterprises have to pay to accelerate the customs procedures process. The fee is US$21 per 40-feet container.

There are 3,000 domestic logistics firms in Vietnam, 70% of which are based in HCM City, and 29 multinational companies, according to the Ministry of Planning & Investment.