Vietnamese logistics firms remain small, overpowered by foreign services

90% of businesses have registered capital of less than VND10 billion and only 1% of businesses have more than VND100 billion.

Foreign logistics firms in Vietnam have big clients as they are parts of multi-national groups which sign contracts with large shipping lines, and have modern management technology.

Vietnamese firms only undertake simple jobs such as inland transport, customs agents and storehouse services.

Dang Dinh Dao, former director of the Hanoi institute Economics & Development Studies, said that MPI’s report showed problems which have existed for many years.

He said the legal framework, infrastructure, and logistics businesses in general are all weak.

Vietnam has a Commercial Law and legal documents related to Vietnam’s logistics development. However, the legal framework remains scattered with low feasibility.

Decision No 1012 in 2015 on the programming and development of logistics center system throughout the country was considered an important document because it aimed to connect means of transport and bridge economic zones.

However, the issues mentioned in the document still cannot be implemented.

The biggest problem lies in the weak connection: the railways don’t link to ports, and highways don’t link with provincial roads. As a result, logistics costs in Vietnam are much higher than other countries.

A report from the World Bank showed that the logistics cost in Vietnam is three times higher than Singapore. Logistics fees in Vietnam account for 20.9% of the country’s GDP, of which transport costs account for 60%, twice as much as developed economies such as Japan (11%) and EU countries (10%).

The Vietnam Chamber of Commerce and Industry (VCCI) reported that the cost to carry one container of goods from Hai Phong Port to Hanoi (100 kilometers) is three times higher than the cost to carry a container from China or South Korea to Vietnam.

Vietnam has had high hopes for the Ho Chi Minh Road. However, because of the lack of connection, it has been not fully exploited.

Meanwhile, Highway No 1 remains overloaded. What Vietnam needs to do is connect the road with Highway No 1 and railways to exploit the three routes in a harmonious way.

An analyst commented that Vietnam focuses on road and airway development. Meanwhile, the railways and sea transport which have great advantages have been ignored.