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Competitive logistics sector is vital for Viet Nam's economy

Update: March, 12/2013 - 09:51

Do Xuan Quang, chairman of the Viet Logistics Association (VLA), spoke to the Government's news portal about the country's lacklustre logistics sector.

How do you assess the role and development potential of our logistics services in recent years?

Logistics plays a very important role in our national economy. Its development will help to increase the competitiveness of Vietnamese commodities and import-exports enterprises. In other words, logistics can be considered as a lever pushing the national economy to develop. However, in reality, logistics costs in our country remain much higher than that of other regional countries. For example, in Japan, logistics cost accounts for about 11 per cent of the GDP, Singapore 8 per cent and Indonesia 13 per cent while in our country it is about 25 per cent.

Logistics services include customs consultancy services, customs brokerage, sea freight services, air freight services, warehousing and distribution, fairs and exhibition services, and others. That's why the logistics sector plays a very important role in national economic development.

However, quite a few people say that the operation of Vietnamese logistics enterprises is fragmented and "being defeated right in our own back yard".

How do you respond to such comments?

I have to concede that logistics enterprises have not fully understood their own advantages in the domestic market. Transport is the main factor leading to the bottleneck in logistics flow and high cost. Co-ordination among road, sea, air and water transport at present is poor and obsolete. Meanwhile, our rail industry is outdated. So are many weak bridges. In addition, our human resources are in short supply and there is a lack of expertise in information technology, administration and management.

All these are attributed to "the loss right in our own backyard".

So what are the strengths of our logistics sector?

Firstly, a good system of warehouses owned by Vietnamese enterprises. Secondly, the enterprises know the domestic market, the Vietnamese clients' psychology and culture much better than their foreign rivals. And Vietnamese people are hard-working and intelligent. In reality, the logistics market in our country is dominated by foreign firms. However, I'm confident that our logistics enterprises will gain experience in their business and a bright future is awaiting them.

What can help logistics enterprises gain back their market share?

The immediate thing they have to do is to invest in human resources development and technology and reform their business mode so they can compete with foreign firms. The VLA has established an Institute on Studies and Development, which has co-operated with the International Federation of Freight Forwarders Association and the International Air Transport Association to organise training courses in international standards for logistics staff.

What are the strategies Viet Nam should adopt to help its logistics enterprises to develop?

First, we have to change our business habits. Regrettably, in 2012 our export turnover reached $115 billion, but only less than 25 per cent of the total exported goods used the logistics services offered by Vietnamese enterprises.

Answers to the problem are very simple. The exporters used the two main modes, Free On Board, up to 80 per cent, and Cost Insurance Freight about 20 per cent.

In addition, it is important to establish a close co-ordination between the export and logistics sectors so that we can transport between 60-70 million tonnes of cargo annually inside Viet Nam and about 170-180 million tonnes a year to other countries.

Do you have any suggestions to promote the development of our logistics sector?

Viet Nam should establish a National Committee on Logistics. Once the committee is established it will have a legal ground to help the sector to develop, particularly with infrastructure and the legal framework. Another important factor is the need to have a long-term and strategic investment policy in human development.

The VLA has already established the Institute on Logistics Studies and Development and we want the Government to allocate a budget and help us with infrastructure to run it so that in a few years many more high-quality personnel will be trained. — VNS

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