Vietnam makes effort to reduce logistics costs

Since the start of his term, Prime Minister Nguyen Xuan Phuc has consistently emphasised the goal of perfecting the institutions, of which comprehensive administrative reform is a part. And such a bold resolve has exerted a positive impact on the economy.

Vietnam’s logistics costs are equivalent to 20.9% of its GDP.
Vietnam’s logistics costs are equivalent to 20.9% of its GDP.

In 2017 Vietnam’s total export-import value reached over US$400 billion for the first time, with exports up by more than 20%. In the first half of 2018, exports were estimated at nearly US$114 billion, up 16% over the same period of last year, while imports also rose by 10% to over US$111 billion.

However, in order to increase the business performance of enterprises, it is necessary to deal with any unresolved issues, including logistics.

Statistics show that, among the various costs that Vietnamese enterprises are bearing, logistics is the highest. According to the World Bank, Vietnam’s logistics costs are equivalent to 20.9% of the GDP (of which transport costs account for 60%), compared with China 19%, Thailand 18%, Japan 11% and the EU 10%.

Such high costs directly affect the prices of products and the competitiveness of enterprises. Furthermore, enterprises have to bear not only taxes and other costs regulated by law but also other informal costs and complicated administrative procedures.

A high amount of logistics costs is creating a heavy burden on business performance and the competitiveness of the economy. According to the Vietnam Chamber of Commerce and Industry, the cost of transporting one container from Hai Phong Port to Hanoi or vice versa (roughly 100 kilometres) is triple the cost for the same container to be shipped from the Republic of Korea to Vietnam.

Experts have stated that the authorities concerned need to be fully aware of the impact of the great burden of costs on enterprises. More substantive efforts are needed to streamline administrative procedures with sufficient attention paid to lowering logistics costs.

In addition, informal costs must be contained so that they no longer weigh on enterprises.

Since logistics is an important service in the Vietnamese economy, with growth averaging 14%-16% annually, support for this sector will help increase the performance and the competitiveness of both enterprises and the whole economy.