Gov­ern­ment laments lousy lo­gis­tics lim­i­ta­tions

Viet Nam News - - BUSINESS -

HAØ NOÄI — High lo­gis­tics costs and in­ef­fi­cient lo­gis­tics net­works con­tinue to pro­vide a chal­lenge for pol­icy mak­ers, ham­per busi­nesses, and threaten com­pet­i­tive­ness.

Prime Min­is­ter Nguyeãn Xuaân Phuùc, dur­ing his speech at a na­tional lo­gis­tics con­fer­ence yes­ter­day, reaf­firmed the im­por­tance of ca­pa­ble lo­gis­tics in­fras­truc­ture in Vieät Nam’s eco­nomic growth. The in­dus­try is val­ued at bil­lions of US dol­lars, and is one of the 12 pri­or­ity in­dus­tries sup­ported by the ASEAN com­mu­nity.

And yet, this at­trac­tive ser­vice sec­tor may soon be taken over by for­eign firms, see­ing as do­mes­tic ones have yet to be­come fully es­tab­lished on the mar­ket, said the PM.

He quoted Ben­jamin Franklin, “Be­ware of lit­tle ex­penses. A small leak will sink a great ship”, em­pha­sis­ing the po­ten­tial harm that high lo­gis­tics costs and in­ef­fec­tual trans­port can cause to the econ­omy.

As as­sessed be­fore by the World Bank, lo­gis­tics costs in Vieät Nam are equiv­a­lent to about 20.9 per cent of to­tal GDP, of which trans­port costs ac­count for 60 per cent.

The same num­ber in China is around 19 per cent, while it is 18 per cent in Thai­land; 11 per cent in Japan and roughly 10 per cent in Euro­pean coun­tries. This puts Vieät Nam at num­ber 64 out of 160 coun­tries on the World Bank’s Lo­gis­tics Per­for­mance In­dex.

“High lo­gis­tics costs are among the big­gest bar­ri­ers for Viet­namese en­ter­prises’ com­pet­i­tive­ness, mainly due to un­rea­son­able in­vest­ment and poor con­nec­tions be­tween dif­fer­ent modes of trans­port,” said the PM.

There­fore, the Gov­ern­ment must ac­tively pro­mote re­duc­ing the cost of lo­gis­tics for busi­nesses via con­crete deeds, such as the re­cently ap­proved Ac­tion Plan to im­prove Vieät Nam’s com­pet­i­tive­ness and de­velop lo­gis­tics ser­vices by 2025.

There should be strong State sup­port mech­a­nisms and pol­icy plan­ning in the sec­tor, since its func­tions are not just lim­ited to freight for­ward­ing, but also in­clude other ac­tiv­i­ties such as ware­hous­ing, pack­ag­ing and cargo han­dling.

“If the lo­gis­tics sec­tor is well and good, it will save trans­porta­tion and prod­uct costs, and in­crease firms’ com­pet­i­tive­ness and profit”, added PM Phuùc.

Speak­ing at the con­fer­ence, Deputy Prime Min­is­ter Trònh Ñình Duõng ad­dressed four cur­rent is­sues fac­ing the lo­gis­tics sec­tor, as well as pos­si­ble so­lu­tions to be en­forced.

The first and fore­most prob­lem in­volves in­sti­tu­tions and pol­icy, as cur­rent le­gal reg­u­la­tions on lo­gis­tics may need to be amended to keep up with present day in­dus­try de­mand. There is also in­di­ca­tion that some lo­cal­i­ties with do­mes­tic ports have yet to prop­erly lo­cate ware­houses and ship­yards to store goods, thus push­ing trans­port costs up.

The sec­ond is­sue that the Deputy PM men­tioned was re­lated to in­fras­truc­ture de­vel­op­ment, chiefly with re­gard to con­nect­ing trans­port routes be­tween lo­gis­tics cen­tres such as ports, rail­ways, air­ports, and cargo trans­ship­ment ports.

Thirdly, he dis­cussed in­ef­fi­ciency in link­ing dif­fer­ent modes of trans­port, high­light­ing some dif­fi­cult to ex­plain is­sues such as mar­ket favoura­bil­ity for high cost trans­port modes. Sea and rail­way trans­port ac­count for 4.7 and 0.39 per cent of to­tal trans­port re­spec­tively, while road trans­port ac­counts for nearly 80 per cent, yet road trans­port is favoured over the cheaper al­ter­na­tives.

Fi­nally, he sug­gested that lo­gis­tic firms fo­cus on the oper­a­tion scale ex­pan­sion and hu­man re­sources train­ing.

Mean­while, Deputy Min­is­ter of Trans­port Nguyeãn Vaên Coâng stated that the do­mes­tic avi­a­tion sec­tor is ac­cel­er­at­ing air cargo ser­vices de­vel­op­ment and es­tab­lish­ing its own freighter net­work, en­cour­ag­ing in­vestors to fi­nance re­gional cargo air­ports with the ap­pro­pri­ate in­cen­tive mech­a­nisms.

Ac­cord­ing to the Min­istry of Trans­port (MoT), the es­ti­mated cost of trans­port­ing a 40 foot long con­tainer (about 12 me­tres) by road from Haø Noäi to HCM City (ex­clud­ing the cost of load­ing and un­load­ing at both ends) is about VNÑ40 mil­lion (US$1,780), prac­ti­cally 10 times more ex­pen­sive than by sea, and 2.5 times more ex­pen­sive than by rail.

Coâng said that the high cost is due to un­fair com­pe­ti­tion, mainly through in­ter­me­di­aries, which has done lit­tle to op­ti­mise the na­tional trans­port sec­tor. No­table ex­am­ples are high petrol prices and Build–Op­er­ate– Trans­fer (BOT) charges.

Rail­way, in­land wa­ter­ways and se­away trans­porta­tion are lower in cost, but trans­port time is much longer, with higher load­ing and un­load­ing fees and out­dated car­ri­ers.

Coâng added that in or­der to re­duce lo­gis­tics costs, the MoT should in­vest in the for­ma­tion of a na­tional high-speed road net­work, ded­i­cated to en­sur­ing ef­fi­cient con­nec­tions be­tween in­dus­trial parks, key eco­nomic cen­tres, and im­por­tant traf­fic hubs, as well as be­tween sea ports, rail­way sta­tions and in­land wa­ter ports. — VNS

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