Logistics costs are difficult to reduce due to the deviation of investment from transport infrastructure

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The transport sector should encourage investment from the private sector into the port system, while the state budget focuses on investing in the development of transport infrastructure. (PHOTO: XUAN THAO)

The imbalance in investment

The imbalance between types of transport is due to different investment levels for transport types compared to road investments. According to statistics of the Ministry of Transport, in the period of 2011-2015, the total investment for roads accounted for 89.93% of the 5 types of transport, this is a shortcoming in investment of the Transportation in Vietnam today. The inconsistency in scale, especially on the implementation process between investment projects to build the technical infrastructure system is greatly affecting the operational capacity and efficiency of the entire transport infrastructure system.

According to the transport sector, in terms of the volume of goods transported, although road transport is high cost, it accounts for 77.2% of the market share. Mass transport with low cost like inland waterways and seaways account for only 17.14% and 5.22%; respectively. Rail transport accounts for only 0.42% and air transport accounts for only 0.02%.

According to the report on sustainable development of inland waterway transport in Vietnam by the World Bank (WB), increasing investment and effective management of infrastructure networks plays a key role in maintaining a competitive advantage of inland waterway transport. In particular, the investment in improving and maintaining inland waterway infrastructure network plays a decisive role in helping Vietnam directly connect with seaports to serve export needs. This will also boost the trend of container shipping by new industries.

WB Country Director for Vietnam Ousmane Dione said that over the past decades, Vietnam has achieved significant achievements in transport infrastructure development. The Vietnam road network has expanded to nearly 400,000km, with most of the commune centers connected together, despite any weather conditions. However, the inland waterway network plays a key role and transports a huge volume of goods, accounting for nearly 20% of the total cargo volume in tons per kilometer (in 2016) and currently is largely lacking in investment. According to the WB's review, in the period of 2011-2015, the inland waterway sector accounted for 2-3% of the annual investment budget for the transport sector, but in the period 2016-2020, this dropped to only 1.2% of the estimated budget.

This level of investment is not adequate for the expansion of transportation and maintenance capacity. After decades of development, the length of inland waterway network capable of receiving barges of over 300 tons accounted for only 30% of the 7,000 km of the entire route. This rate is very low compared to other successful commercial inland waterway transport systems in the world. This fact shows that investment is vital in this infrastructure system. “Allocate the public human resources in a strategic way, and mobilize the participation of the private sector in funding and service provision”, said Ousmane Dione.

Encourage investment from the private sector

Restrictions on infrastructure conditions, especially waterway corridors, hinder Vietnam's inland waterway industry. Specifically, only 29% of the national waterways (about 2,033km) are capable of operating barges of at least 300 DWT due to the depth of the canal, vessel size and low bridge clearance. In particular, many ports have outdated facilities with a low level of mechanization, while connecting with other modes of transport is weak.

The World Bank said, reducing the proportion of investment in road infrastructure by 2-3% will not cause much impact on transport efficiency. But if investment increases for water transport by 2-3%, there will be a transformative impact on waterways, while only making a small change in the speed of road network development. However, the World Bank team recommended that the Ministry of Transport should carefully consider investing in ports because it would disperse scarce investment capital that could have been invested in the waterways sector. The transport sector should encourage investment from the private sector into the port system, while the state budget focuses on investing in the development of transport infrastructure.

Mr. Hoang Hong Giang, Director of Vietnam Inland Waterways Department, said that WB5 and WB6 projects on development of waterway infrastructure in the South and North, after being implemented, helped to increase cargo transport volume by 20% on the waterways. The question now is to to provide solutions to better exploit the system of waterway infrastructure which has been upgraded and improved, especially in key waterway areas.

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In order to reduce logistics costs and enhance transport efficiency, Ms. Yin Yin Lam, WB's transport expert, suggested that Vietnam needs to invest in infrastructure and promote the use of transportation using "container transport by barges" to increase the use of inland waterway transport. To further promote the development of coastal transport on the North - South route and integrate logistics centers and urban centers in domestic container port planning.