Golden opportunities for logistics industry after the pandemic

High logistics costs are one of the weaknesses that hinder the development of Vietnam's logistics industry. Photo: Ngoc Linh

Breakthrough

Saigon Tan Cang Corporation is Vietnam’s leading port operator with market share of import-export containers accounting for more than 90% of the southern region and more than 60% of the country.

Evaluating the development opportunities of Vietnam's logistics industry, Truong Tan Loc, Marketing Director, Saigon Tan Cang Corporation, said that Vietnam's economy would continue to recover when socio-economic indicators in the first quarter of 2022 showed growth.

Meanwhile, according to the World Bank's forecast in April 2022, Vietnam's GDP will reach 5.3% in 2022 and then stabilize at around 6.5% in 2023.

The free trade agreements (FTAs) are gradually implemented more effectively, leading to strong growth in Vietnam's import-export market, especially for electronics, machinery and equipment, furniture, plastic, textiles, and seafood.

In general, in the field of transportation, warehousing, postal services, and delivery, Vietnam's logistics market is attracting more than 30,000 enterprises. In particular, most of them are railway, road, and pipeline transport enterprises (59.02%); warehouse enterprises and transport support activities (33.26%); and the remainder are waterway transport enterprises (5.27%), air transport (0.02%), and postal transmission enterprises (2.34%). Notably, there are about 30 transnational logistics services operating in Vietnam with big brands such as DHL, FedEx, Maersk Logistics, APL Logistics, CJ Logistics, and Kuehne Nagel.

“This is an opportunity to develop port and logistics services to serve the needs of connecting goods with global major markets. The expansion of trade policies makes it easier for foreign companies to penetrate the Vietnamese market, leading to an increase in demand for international quality warehouses, especially special types of warehouses to preserve high-value goods,” said Loc.

Deputy Minister of Industry and Trade Nguyen Sinh Nhat Tan said that up to now, Vietnam has signed many FTAs, including new generation FTAs with high commitments of the parties in all fields, counting traditional and non-traditional.

Their scope is not only confined to commitments to open the commodity market but also in the field of services, investment, and intellectual property. Vietnam's international trade activities have grown strongly, helping to increase import and export turnover, expand markets, and diversify the types of goods participating in import and export. Total import-export turnover from 2010 up to now has increased 4.25 times, from US$157.1 billion in 2010 to US$668.5 billion in 2021.

The latest information from the Ministry of Industry and Trade showed that, despite facing many difficulties due to the pandemic, high transportation costs, and conflict between Russia and Ukraine, Vietnam's export turnover in April 2022 continued to recover strongly, estimated at US$33.26 billion, up 25% over the same period last year. Generally, in the first four months, export turnover was estimated at US$122.4 billion, up 16.4% over the same period last year.

“Thanks to its special geographical position located in the dynamically developing region of the world with a busy flow of goods, Vietnam is favorable to promote production, export, and logistics services, especially after the pandemic is controlled, production and business activities recover and grow again,” said the leader of the Ministry of Industry and Trade.

Some economic experts also believed that Vietnam's logistics industry was welcoming many opportunities from the FTAs ​​and the strong development of e-commerce. Vietnam’s logistics industry is facing golden opportunities after the pandemic. Notably, Vietnamese logistics enterprises have had useful experiences when they overcame the second most difficult year of the pandemic, so the next time will be the time when logistics breaks and thrives.

Accelerate the development of logistics infrastructure

Currently, import-export activities, as well as production and circulation of goods in the country, are strong, which is a good opportunity for logistics enterprises. However, Tran Thanh Hai, Deputy Director of Import and Export Department (Ministry of Industry and Trade), said that most logistics enterprises were small and medium units.

The weakness of businesses now, in addition to capital, is experience and management skills. That is why Vietnamese logistics enterprises still lose in competition as well as are not yet able to reach out to the international market. “Enterprises that provide different stages of the logistics chain such as warehousing and transportation services do not have a chain link. This is also a weakness of Vietnamese enterprises compared to foreign units," said Hai.

According to Mai Xuan Thieu, Chairman of Vietnam Logistics Human Resource Development Association, Vietnam logistics reports in recent years showed that the growth rate of the logistics industry has reached 14 - 16% per year, but logistics costs have been high, equivalent to 15 - 19% of GDP. Thus, improving the capacity of enterprises and cutting logistics costs is a matter of survival to enhance the competitiveness of the economy and each enterprise.

Talking about difficulties and obstacles for businesses, Loc said that the price of fuel increased sharply in 2022 (up about 33% compared to the average price of 2021) affecting the costs of enterprises. Besides, the road transport system has not developed synchronously, and its implementation was slow, which greatly affected the speed of vehicle rotation, the speed of goods movement, and increased the costs of enterprises.

To seize development opportunities, Loc suggested several solutions for logistics infrastructure development, such as continuing to review, supplement, and complete the master plan of Vietnam's inland port system in the 2021 – 2030 period; review, supplement, and complete the overall and detailed planning of the logistics center system in the whole country; and quickly implement road traffic projects, such as Ring Road No. 3, Ring Road No. 4, Bien Hoa - Vung Tau Expressway, and upgrade Ho Chi Minh City - Long Thanh Expressway.

“The government needs to build a mechanism to develop green logistics in the direction of reducing the proportion of fossil fuel use per one km of transport (water or land), contributing to thoroughly implementing the commitment of the Government of Vietnam at COP26, especially developing the inland waterway transport system with current natural advantages, and create a good mechanism for enterprises exploiting watercraft, reducing traffic congestion, saving costs for developing land transport infrastructure, and reducing environmental pollution," said Loc.

Le Thi Ngoc Diep, Head of Trade Department, SLP Vietnam Company, proposed that Vietnam needed to promote technology application in the logistics industry to improve efficiency, optimize operational productivity, and save operating costs for businesses; closely connect development and operational logistics units to improve operational efficiency such as production, warehouse, and transportation units; and encourage investment in Vietnam’s logistics market.

On the side of the Ministry of Transport, Nguyen Cong Bang, Deputy Director of the Department of Transport, affirmed that following the Government's direction, relevant ministries and branches have made efforts to make the best adjustments and reduce cost pressures for businesses.

The Ministry of Transport has established a group related to transportation modes to assess the impact of increased fuel prices, thereby proposing appropriate solutions to the Government and the National Assembly. The price of logistics infrastructure exploitation in Vietnam is relatively uniform. Accordingly, customers can base on services and business lines to make a suitable choice of their logistics services.