VietNamNet Bridge – Vietnam, which expects the export turnover increase by three folds by 2020, is now calling for investments in the logistics industry in order to improve its competitiveness.

Bad logistics services install barriers to foreign trade

In principle, good infrastructure system and logistics services would help increase the GDP by one percent, and if the logistics expenses can be reduced by 10 percent, Vietnam would save the natural resources worth two percent of GDP to develop economy.

The transport fees, logistics and border service management expenses have been described as the “trade barriers,” which are nearly equal to 70 percent of the tariffs of 70 out of the 91 surveyed countries.

According to the General Statistics Office, in 1997-2011, while the cargo transportation volume increases by 12.1 percent per annum and trade by 18 percent per annum, the investments in infrastructure and transport services did not grow. Especially, the minus investment growth rates were seen in 2004, 2005, 2006, 2010 and 2011.

As a result, the trade infrastructure system and logistics services remain very poor, which has put Vietnam on the lower positions than its regional rivals in terms of time, expenses and reliability, according to Pham Minh Duc, a senior economist of the World Bank Vietnam.

Vietnam has got considerable improvement in the Enabling Trade Index (ETI) report by the World Economic Forum in recent years with the grade upgraded from the 89th in 2010 to 71st in 2011 and 68th in 2012. However, Vietnam is still on the lower grades in the customs management efficiency index and the transparency in border management due to the unreasonable procedures conducted manually, thus causing corruption.

Meanwhile, the World Bank has found out that enterprises would have to bear 0.8 percent of the value of the goods for every day of getting stuck at the border gates.

Vietnam vows to develop logistics industry

Duc of the World Bank said that it is reasonable for Vietnam to push up the investments in the logistics industry, since it hopes to see the export turnover increasing by three times by 2020.

Former Deputy Minister of Industry and Trade Luong Van Tu noted that the logistics industry has not developed, even though there are thousands of logistics companies. The problem is that they are all small which lack experiences and financial capability.

However, investments in the sector would gobble up a lot of money, while the financial capability of Vietnam remains limited once it heavily depends on public investments.

In principle, Vietnam can think of developing the logistics industry under the mode of private public partnership PPP, the one being applied in many other countries in the world. However, PPP, though having been activated in Vietnam for a long time, still has not become a favorite choice, because of the disagreement between the state and the investors in sharing profits and risks.

In fact, Vietnam has been repeatedly calling for the investment in PPP transport infrastructure projects for a long time. Nevertheless, very few projects have been developed under the unfamiliar mode.

The government of Vietnam has been urged to set up necessary legal documents on PPP-mode investments which can harmonize the benefits of the State and the investors. Only by doing this, will Vietnam be able to successfully mobilize capital from non-state different investment sources.

DNSG