Logistics sector needs to up efficiency

Wednesday, Jan 08, 2014 08:52

Goods containers from Singapore are unloaded at Tien Sa Port in Da Nang City. Logistic costs in Viet Nam are said to be higher than neighbouring countries partly because of cumbersome administration, poor infratructure and poor connectivity among different modes of transport. — VNA/VNS Photo Van Son
HA NOI (Biz Hub)— While Viet Nam has seen strong economic growth over the past 20 years, developing the logistics sector was key to further boosting trade, according to a World Bank report released yesterday.

World Bank transport specialist Luis Blancas, leading author of the report, said that logistics operations in Viet Nam were costly relative to key regional peers like China, Malaysia and Thailand.

This primarily due to the unpredictability of supply chains, which increased logistics costs by making it necessary for business to carry more inventory than they otherwise would, he explained.

Logistics costs in Viet Nam were estimated to account for about 20 per cent of gross domestic production. In contrast, the percentage in the US was 9.2 per cent, while it was 12 per cent in Europe, 13.5 per cent in Mexico and 13.8 per cent around the world.

"The key root causes of Viet Nam's supply chain unpredictability are cumbersome and inconsistently-applied government regulations, lack of automation in key trade-related processes and fragmented modal planning in transportation," he said.

Moreover, Blancas added, Viet Nam's infrastructure projects still lacked a strategic multi-modal corridor strategy. He cited highway congestion, landside infrastructure failing to keep pace with port requirements, fragmented port terminals and the lack of international standard logistics parks.

Compounding the problem, shippers and logistics service providers in Viet Nam believed that facilitation payments or bribes to customs and police officials were necessary to avoid delays in supply chains.

Senior governance specialist of the World Bank in Viet Nam James Anderson said corruption was the biggest obstacle for trucking firms, according to the bank's Viet Nam urbanisation review in 2010, which surveyed 246 firms— one-fourth of the registered road transport companies in the country.

About 8 per cent of the costs of trucking firms go to "facilitation payment" such as bribes, while fuel costs amount to roughly 65 per cent and operating costs and salaries 16 per cent.

To make logistics more efficient, the report recommended minimising paper-based processes and ensuring transparent regulations, as well as defining and managing "multi-modal logistic corridors" with adequate infrastructure and minimal regulatory delays.

Transport Deputy Minister Nguyen Van Cong said that among the approximately 1,000 logistics firms operating in the country, foreign ones still held most of the market share, while Vietnamese firms were mostly small and less competitive in terms of management and finance.

He added that the government of Viet Nam sought to help the logistics sector by seeking resources to develop transport infrastructure, creating favorable conditions for logistics firms and boosting co-operation among domestic and foreign firms.

Also yesterday, the World Bank released a report that examines Viet Nam's inland waterway transport and coastal shipping sector.

According to this report, these sectors face significant under-investment in terms of capital and maintenance expenditures. Promoting waterborne transport can bring about significant economies of ship size, lowering emissions of pollutants and greenhouse gases. — VNS

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