Vietnam’s decreased LPI may cause difficulties for exports

According to the World Bank’s 2018 Logistics Performance Index (LPI) Investigation Report, Vietnam placed 43rd out of 160 examined countries, whereas it placed 39th in 2018.

Vietnam’s logistics performance index decreased its ranking because scores on three key dimensions, including logistics capacity, delivery time and traceability, dropped.

Talking about the current situation of Vietnam's logistics industry, international consultant Ton That Tu said that road transport in Vietnam, compared to other means of transport, accounts for 74.4 percent of the total number of transport while inland waterway transport accounts for more than 19 percent; railway, sea and air accounts for a relatively modest proportion.

However, enterprises’ demand for sea transport accounts for more than 68 percent, followed by road, air and other means.

The huge disparity between enterprises’ demand for logistics and the reality has caused many businesses to face difficulties, especially export enterprises.

Ms. Do Thi My Le, Sales Director of Trung Minh Thanh Company, said that if using water transport, the company must pay 10 percent of the total product value meanwhile the transportation fee will be 2 times by using air freight, not mention sea transport managed by shipping container companies.

Therefore, enterprises have faced many difficulties and they sometimes delayed delivery due to having to wait for container pairing or waiting for a trip arranged by shipping container companies.

Mr. Hoang Manh Cuong, Director of Vinaxo Company complained that in the past 2 years, due to dependence on international shipping lines, the logistics costs of the company’s dried plastic products to the European and US markets have increased more than 10 times. On average, the company exports about 120 tons of dried fruit products every month.

He moaned that the logistics costs are so high that it has reduced the competitiveness of Vietnamese enterprises revealing that some enterprises even have had to leave some American and European markets to return to the domestic market.

Many businesses pointed out that the logistics industry in Vietnam has four limitations. First, the industry is fragmented, with many small and medium enterprises operating independently lack of coordination and standardization in services, which increases costs.

Second, many logistics service providers lack the technological capabilities and expertise required to provide high-quality services, resulting in poor inventory management and delayed deliveries. Next, the logistics infrastructure is inadequate although Vietnam has invested significantly in the development of logistics infrastructure.

However, it still does not meet the necessary conditions because the country mainly focuses on the road and railway network, so the efficiency is not high).

Finally, businesspeople complained about complicated customs procedures and strict licensing requirements which have slowed the development of the logistics industry.

Mr. Duong Anh Duc, Vice Chairman of the Ho Chi Minh City People's Committee, said that Vietnam's agricultural products and processed foods had been displayed in over 180 countries and territories.

Many industries in this field have contributed more than US$1 billion to the annual export turnover; especially seafood has contributed more than $10 billion.

Not only that, Vietnam has joined in many free trade agreements and export tax reduction conditions from markets around the world, which have opened up more opportunities for Vietnamese exporters.

However, to take advantage of this opportunity, it is necessary to improve the capacity of the logistics industry.

Regarding the solution, according to Mr. Ton That Tu, first of all, the Government can invest in improving infrastructure such as roads, railways, airports and seaports to create favorable conditions for the transport of goods across the country.

Along with that, simplified regulations and administrative procedures will encourage competition and innovation in the industry.

At the same time, skills development programs for freight workers, especially in the areas of supply chain management and information technology should be focused more to help improve the quality of human resources and the efficiency of freight operations.

On the other hand, the Government can encourage the adoption of new technologies such as warehouse automation, transport management systems and electronic data interchange (EDI) to improve the efficiency and accuracy of freight operations.

Private enterprises should be encouraged to invest in freight transport infrastructure and technology, especially in areas where private investment is limited.

According to Mr. Nguyen Tuan, Deputy Director of Ho Chi Minh City Investment and Trade Promotion Center (ITPC), the new trend is green logistics - an important link to green the food supply chain.

In 2023, more and more consumers prefer environmentally friendly products, and the "greening" of the logistics industry and application of green logistics is a mandatory requirement.

Green logistics includes any business practice that minimizes the environmental impact of the logistics network and delivery. This means that the logistics industry must have a variety of solutions, which is a mandatory requirement.

Thus, the logistics industry ought to restructure itself by optimizing delivery routes, and reducing the number of empty trucks or half-carrying goods on the road to save fuel and transportation costs for further development to meet the needs of exporting goods.

LPI (Logistics Performance Index) is a World Bank index that ranks the effectiveness and capacity of states’ logistics activities. The Logistics Performance Index (LPI) is calculated utilizing surveys of logistics service providers (including freight forwarding and transportation).

Source: SGGP