Logistics firms told to cut costs

Nguyen Tuong, Deputy General Secretary of the association, said at the conference held by the Vietnam Chamber of Commerce and Industry on March 23, that heavy transportation costs continue to weigh down the sector’s competitiveness and hurt the economy.

Currently, Vietnamese logistics costs are equivalent to roughly 21% to the gross domestic product (GDP), compared to the ratios of just 9-14% in developed economies.

Tuong said that transportation cost made up for a significant proportion in the total logistic cost, up to 60% while inventory costs 34% and management costs 4%.

“Thus, it is important to reduce transportation costs so as to reduce logistics costs,” Tuong said, adding that high road tolls remain a burden that account for around 10% of road transportation cost, plus informal cost which makes up for at least 5%.

The logistics association also proposed the collection of fees for use of infrastructure, service facilities and public utilities at ports in northern Haiphong City to be halted.

Under Resolution No 148/2016/NQ-HĐND of the municipal People’s Committee, which took effect from the beginning of this year, individuals and organisations storing shipments at bonded warehouses must now pay VND2.2 million (US$97) to VND4.8 million (US$220) per container. This is an increase of nearly 70%.

“The fees are too high and a heavy burden on export and import firms as well as logistics providers,” Tuong said.

The collection of fees applied for foreign companies using bonded warehouses also has caused a decline in warehousing goods, badly affecting businesses of warehouse firms, according to Tuong. He said that fee collection must be put into consideration.

The association’s statistics showed that Vietnam’s logistics service industry was valued at US$20-22 billion per year, accounting for 20.9% of GDP, with an annual growth rate of 16 – 20%.

There were more than 1,300 logistics firms operating in Vietnam, 20% of which were foreign firms but held a market share of 80%.

The Prime Minister on February issued Decision 200/QĐ-TTg to boost competitiveness of Vietnam’s logistics service by 2025, under which, logistics will become an important service sector to the economy.

Accordingly, by 2025, the logistic service sector hopes to contribute 8-10% to GDP, have a growth rate of 15-20% and reduce costs to 16-20% of GDP.

Experts say that improving the connectivity of logistics infrastructure as well as capacity of local logistics service providers are important steps toward boosting the industry’s development.