Vietnam Logistics: "Makeover" but many congestion points

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Lazada's center for classifying goods is located in Hateco Logistics Center with a modern large scale operation. Photo: Nguyen Thanh.

"Completely transform into a new look"

Tran Thanh Hai - Deputy Director of Import and Export Department (Ministry of Industry and Trade) stated: “3-4 years ago, we rarely heard about the logistics story. Presently however, the Prime Minister, ministries and agencies are very interested in this issue and have expressed legal documents such as Decision No. 200/QD-TTg dated February 14, 2017. The Government approved the Action Plan to improve competitiveness and develop logistics services in Vietnam until 2025. Recently, Vietnam’s logistics service industry has made rapid and strong development steps at a growth rate of between 13 and 15%. This is considered as an industry with great potential for the economy”.

Regarding this issue, Nguyen Tuong - Deputy General Secretary of Vietnam Logistics Business Association said that in recent years, the logistics service industry has grown very quickly. According to the World Bank's survey report on logistics performance index – LPI (2018), Vietnam is ranked 39 of 160 surveyed countries, up 25 places compared to the ranking of 64 in 2016. "We are currently striving to improve another 5-10 places, meaning that at 30th place we are on par with developed countries," Tuong said.

One of the outstanding logistics zones in the North is now Dinh Vu Industrial Park (Hai Phong). Few people know that only 5 years ago, the "peninsula" Dinh Vu was still very pristine. Nguyen Thanh Phuong - General Director of Sao Do Group a Dinh Vu Industrial Park investor said: “At the moment, the unit is investing in developing new areas as ports and logistics. We are investing in South Dinh Vu Industrial Park on a scale of 1,329 ha. This is a general industrial zone and is evaluated by investors as having many advantages. There are many subdivisions in this industrial zone, especially in port and logistics areas. South Dinh Vu Industrial Park, especially South Dinh Vu Port is located in a very convenient location, qualifying to form a large logistics center in Hai Phong.

Phuong added: Logistics development is an inevitable global trend. In Vietnam, potential to develop this industry is huge because of weak logistics infrastructure and logistics costs in the field of freight transport. Enterprises have plenty of room to invest in development.

Speaking about the operation of South Dinh Vu port, Nguyen Manh Ha-Director of South Dinh Vu Port Joint Stock Company said: It only came into operation from 2/2018, but after 10 months of operation, the port has welcomed about 200 shipments, from international routes such as Japan, South Korea, Singapore,... with a cargo volume of about 200,000 TEU. "South Dinh Vu port is one of the most modern ports in Hai Phong area in terms of scale and equipment for handling front and rear lines and warehousing systems," said Ha.

The "makeover" of the logistics industry is also clearly seen at Hateco Logistics Center (Sai ​​Dong Industrial Zone - Hanoi). At this center, there is a large scale, modern operation to classify Lazada goods. Dinh Duy Linh - General Director of Hateco Group Joint Stock Company said: “Hateco logistics center has an area of ​​nearly 13 hectares and we are focusing on modern logistics centers and applying 4.0 technology to cut the cost. The goal is an integrated logistics center, especially in e-commerce and express delivery.

Many congestion points

Although there has been a clear positive change, Vietnam’s logistics industry has many congestion points that need to be removed to promote development.

Tran Thanh Hai analyzed, first of all, although Vietnam has made improvements in logistics infrastructure, especially on road and air infrastructure, there is still a lack of connectivity among other forms of transportation, especially the lack of connection between roads, sea and rail. In addition, logistics costs in the field of transport are still quite high due to the large volume of goods transported by road. The reduction of logistics costs is still very difficult when waterway and railway means are not exploited.

Also according to Hai, another bottleneck is the competitiveness of logistics enterprises. “Currently, according to Vietnam Association of Logistics Services Enterprises, there are about 4,000 enterprises operating in logistics, mainly small and medium enterprises. Besides the capital factor, experience and skills are weaknesses of enterprises. Vietnam logistics enterprises have not been able to reach the international market according to many surveys. This is what makes businesses less competitive. In addition, the synchronous linkage between enterprises providing different stages of logistics services is quite poor. For example, there are enterprises that provide warehouse services, provide transport and support services, however, those services are not directly linked. This is the weakness of Vietnamese enterprises compared to foreign enterprises,” Hai said.

Hai also mentioned the market issue. Vietnam has the advantage of being in the center of Southeast Asia, a long coastline that can serve as a transshipment service for neighboring countries. However, this has not been promoted or exploited well. In addition, the main weakness of the logistics industry is now applying technology in the industrial age 4.0. Although some logistics centers have applied technology, high level automation is not available. This is needs to be improved in the future.

For the actual operation of South Dinh Vu port, Ha points out: A very important point for the port is the ability to release goods as quickly as possible. However, this also depends on the logistics chain, including road transport, water transport and railway. Currently, the volume of goods delivered by road accounts for 70% of goods shipped in Vietnam. In the northern region, this number reaches over 80%. Rail is almost absent.

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"With the current traffic pressure, it will certainly affect the progress of goods delivery and release from port. I propose authorities to study planning issues, reduce road pressure, improve inland waterways and railways to reduce costs, improve logistics service quality and reduce time of cargo storage at ports and warehouses. Comparing inland waterways with roads, the current cost of using inland waterways is a saving of 30%. If there is a breakthrough solution in the future, the cost can be reduced by a further 20-30%. That means, logistics costs can be halved with the improvement to inland waterway transport and rail transport services.” Ha stressed.