Lower logistics costs needed to boost competitiveness

Logistics solutions play an important role in raising the competitiveness of businesses and opening doors for the exportation of Vietnamese products to promising markets in the Europe-America region.

Vietnam’s logistics industry has grown rapidly, at an annual average of 14-16 per cent each year, contributing 4-5 per cent of the country’s GDP, according to Deputy Minister of Industry and Trade Do Thang Hai.

The country ranks eleventh out of the 50 countries in the 2022 Emerging Market Logistics Index released recently by logistics and freight provider Agility.

The Europe-America region is considered important for Vietnam’s exports and is already a leading trade partner of Vietnam.

Between January and November, trade turnover between Vietnam and the Europe-America region increased 11.8 per cent to $212 billion, of which exports surged 16 per cent to $171 billion year-on-year.

However, Vietnamese businesses still face many difficulties due to limited logistics infrastructure and transport and high logistics costs when conducting trade with the world, particularly the Europe-America region.

The information was revealed at a recent Logistic Forum with Europe and the Americas 2022 held in Ho Chi Minh City.

Overlapping customs procedures and a lack of information and links between logistics businesses contribute to the high logistics costs in Vietnam, which are a burden on enterprises.

Nguyen Chanh Phuong, Vice Chairman of the Ho Chi Minh City Fine Arts and Woodworking Association, predicted that domestic logistics costs would increase further.

Many businesses must pay logistic costs that account for 20-30 per cent of product value. For example, a business will have to pay $4,000-9,000 in logistics costs for a container of wooden products valued at $20,000-30,000.

He said the wood and furniture industry is heavily affected by shipping costs because of the huge volumes involved. When shipping costs rose in 2021, many export orders had costs exceeding the value of goods, which has a detrimental effect on product prices and competitiveness.

Vice Chairwoman of the Ho Chi Minh City Logistics Association Vo Thi Phuong Lan said average logistics cost in Vietnam are equivalent to 16.8-17 per cent of product value. She agreed that many businesses still pay up to 20-25 per cent of product value on logistics costs.

Analysts at the forum suggested that businesses gain greater insights into customs clearance regulations at international ports and seek solutions to optimize logistics costs and utilize the synchronous networks of large foreign transport companies in order to gain entry into new transport channels.

Local firms should also focus on connecting logistics service infrastructure for the export of agricultural products in the Mekong Delta as domestic costs remain high.

Marketing Director of the Saigon New Port Corporation Truong Tan Loc suggested that enterprises shift to transporting goods by waterways instead of road freight, to reduce transport costs.

He also proposed that authorized agencies invest in building wharves in southern Dong Nai and Binh Duong provinces to facilitate the transportation of goods.