Let logistics become a lever for agricultural exports

VCN - Overcoming the shortcomings and limitations of the logistics system will help Vietnamese agricultural products increase their competitive advantage in the international market, bringing sustainability to all stages in the supply chain.
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Let logistics become a lever for agricultural exports
Weak production, processing, and storage infrastructure make the loss rate of Vietnamese agricultural products high. Photo: N.H

Struggling in all ways

According to the Ministry of Agriculture and Rural Development, although Vietnam is a large exporter of agricultural, forestry, and fishery products with many export products ranked first in the world, the scale of agricultural production is still small, production under the linked chain is still limited,post-harvest losses are still high, the preservation and processing industry is not modern. Therefore, business efficiency and the competitiveness of agricultural products are not high, it happens in the situation where harvests are good but prices are low. One of the important reasons for these problems is that support services for agribusiness are limited, especially logistics services.

According to VLA statistics, logistics costs compared to Vietnam's gross domestic product (GDP) are at 16.8%, compared to the world average is at 10.7%. In the ASEAN region alone, Vietnam's logistics costs are higher than other countries such as Singapore (at 8.5%), Malaysia (13%), and Thailand (15.5%).

As the owner of a large fruit export company, Mr. Nguyen Dinh Tung, Director of Vina T&T Vina Company pointed out that despite being the country's king agricultural product, but logistics services of many localities in the Mekong Delta Long had not yet developed. Specifically, large means of transport cannot go to the raw material area for purchasing. Therefore, the company had to use many intermediate means such as canoes, boats, motorbikes, tricycles, and small trucks... to bring agricultural products to the factory for preliminary processing and packaging.

Mr. Nguyen Thanh Binh, Chairman of the Vietnam Fruit and Vegetable Association (Vinafruit), also said that the production, processing, and storage infrastructure was still weak in Vietnam, causing the loss rate to be high, up to 30-35%.

The report of the Ministry of Agriculture and Rural Development also showed that services such as preliminary processing and packaging in concentrated production areas were not available or had not met the requirements, farmers had to transport to other places for preliminary processing and packaging, so the cost was high. For example, in some provinces of the Central Highlands, enterprises had to rent and build warehouses in provinces and cities such as Dong Nai, and Ho Chi Minh City… to gather goods, leading to high product prices and difficult competition. For processing enterprises, the warehouse systems were scattered in different places. In industrial parks, the storage and preservation plants did not have enough capacity. In particular, the agricultural sector still lacked inspection and irradiation centers qualified and granted practice certificates in key agricultural areas. Currently, Vietnam had only two irradiation units, one in the South and one in the North.

Not only inadequacies in domestic logistics but also when exporting, Vietnamese agricultural products are also under higher pressure than many countries. Ms. Nguyen Tu Uyen, Director of CMU Logistics Company, said that although the quality was not inferior, Vietnamese agricultural products faced challenges in terms of transportation costs compared to a regional competitor, Thailand because this country had the advantage of many flights to the US, Europe, Australia, the Middle East... with regular frequency every day. For sea freight, shipping lines in Thailand had 70 destinations in Asia, India, and the Middle East. Accordingly, the freight rate of Thailand to international markets was lower than that of Hanoi and Ho Chi Minh City from US$1 to 1.2 per kilo.

Similarly, according to statistics from the Vietnam Logistics Business Association (VLA), logistics costs compared to Vietnam's gross domestic product (GDP) are at 16.8%, compared to the world average is 10.7%. In the ASEAN region alone, Vietnam's logistics costs are higher than other countries such as Singapore (at 8.5%), Malaysia (13%), and Thailand (15.5%). According to VLA, the high logistics costs in Vietnam are due to the great dependence on foreign carriers, which makes Vietnamese exported agricultural products not compete with other countries, especially Thailand in spite of many advantages.

Turn inadequacies into leverage

Ms. Le Thi Thanh Thao, country representative of the United Nations Industrial Development Organization (UNIDO) in Vietnam, assessed that agricultural products were commodities that required stricter quality management and control than other common consumer goods. Therefore, the role of exporters must be connected closely with the logistics system, because this was not only a bridge, but also considered a lever to promote Vietnam's agricultural exports.

According to the Ministry of Agriculture and Rural Development, the agricultural product supply chain involved many stages, agricultural products were seasonal and seasonal, and many agricultural products need to be fresh, perishable, easy to infect, and only valid for a short period. Many agricultural products need to be stored at low temperatures, and the temperature for different agricultural products needs to be controlled differently under the other period; quality and design were inhomogeneous, and food safety issues...Therefore, agricultural logistics services with distinct characteristics must be associated with production areas and must ensure an integrated process from production, harvesting, processing, packaging, storing, transporting, and distributing to the final consumer. So that, logistics in agriculture should be focused on investment and development of warehouse and yard infrastructure; cold transportation, packaging, irradiation, and inspection services in key agricultural areas...

Ms. Nguyen Tu Uyen said that over the past time, the Government had made efforts to build many connecting routes to raw material areas such as Son La, An Giang, and Khanh Hoa..., helping to reduce the time of transportation from there to the focal points of the seaport, air freight. However, the Government also should further promote investment in building well-connected road transport infrastructure from raw material areas in the Mekong Delta so that farmers, cooperatives, and enterprises have the opportunity to bring agricultural products to export markets with the best quality. At the same time, plan to build logistics centers for agricultural products, including cool storage for sorting, preserving, and preliminarily processing to improve quality and stabilize prices. Increase investment in logistics infrastructure for agricultural products, especially in concentrated and key agricultural production areas. Connect waterways, roads, and railways to promote the overall strength of domestic logistics.

To solve difficulties and inadequacies and help logistics become a lever for agricultural exports, the Ministry of Agriculture and Rural Development is developing a draft project on developing a logistics system to improve the quality and competitiveness of Vietnamese agricultural products to 2030 and a vision to 2050. The draft project sets out the task of reviewing the logistics system in key production areas and locations where logistics centers would be built. At the same time, review, adjust and supplement the planning of the logistics system in general and the agricultural logistics system in particular. Accordingly, the agricultural logistics system needs to be associated with key production areas, aquaculture areas, disease-free breeding areas, wood material areas, and a system of logistics centers across the country.

The draft project has built a three-level agricultural logistics center system, including a dynamic, large-scale regional agricultural logistics center connecting the domestic and export markets; agricultural logistics centers in concentrated production areas to support efficient production, ensure quality and add value for agricultural products, connect with regional logistics centers, export logistics centers and agricultural logistics for export in provinces where have border gates and ports for exporting agricultural products.

By Nguyen Hien// Binh Minh

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