Small sized firms limiting Vietnam’s logistics potential

The Ministry of Industry and Trade reported at the Vietnam Logistics Forum 2018 that there are about 3,000 logistic firms in Vietnam, of which 90 percent have a registered capital of less than VND10 billion (US$429,100),

Just five percent have capital in the VND10-VND20 billion (US$$429,100-US$$858,300) range and another five percent have more than VND20 billion.

Deputy Prime Minister Vu Duc Dam said at the forum that the logistics sector contributes just 3%-4% to Vietnam’s GDP every year, while its costs are high. It is the other way round in other countries, he added.

The cost of logistics services in Vietnam currently accounts for 25% of the country’s GDP, while the rate stands at only 9.5% in the U.S., 11% in Japan, 16% in the Republic of Korea, and 21.6 percent in China, said the Vietnam Chamber of Commerce and Industry (VCCI).

The cost of transporting a container from Hai Phong 120 kilometers (75 miles) to Hanoi using a local company is three times higher than what foreign firms charge to ship a container from China or South Korea to Vietnam, according to the chamber.

"Vietnam needs to increase logistics contribution to GDP and lower it costs by improving the business environment and increasing competitiveness," Dam said, adding that the private sector should take the initiative in improving logistics services.

But Dam also acknowledged positive growth in the sector. In the last three years, logistics grew at 12%-14% a year.

This year, the World Bank has ranked Vietnam 36th of 160 countries in the world and third in ASEAN on the Logistics Performance Index, up 35 places from 2016.

World Bank country director Ousmane Dione said that the logistics sector in Vietnam has a lot of potential to grow, as over US$1 billion worth of goods cross Vietnam’s borders every day, a load that increases 10% a year.

Dione added that an effective cross-border logistics service would play an important role in increasing Vietnam’s competitiveness.