Logistics firms told to cut costs

Cutting transportation costs will be vital to enhancing the competitiveness of the logistics industry, the Việt Nam Logistics Business Association has said.

Nguyễn Tương, Deputy General Secretary of the association, said at the conference held by the Việt Nam Chamber of Commerce and Industry on March 23, that heavy transportation costs continue to weigh down the sector’s competitiveness and hurt the economy.

Currently, Vietnamese logistics costs are equivalent to roughly 21 per cent to the gross domestic product (GDP), compared to the ratios of just 9-14 per cent in developed economies.

Tương said that transportation cost made up for a significant proportion in the total logistic cost, up to 60 per cent while inventory costs 34 per cent and management costs 4 per cent.

“Thus, it is important to reduce transportation costs so as to reduce logistics costs,” Tương said, adding that high road tolls remain a burden that account for around 10 per cent of road transportation cost, plus informal cost which makes up for at least 5 per cent.

The logistics association also proposed the collection of fees for use of infrastructure, service facilities and public utilities at ports in northern Hải Phòng City to be halted.

Under Resolution No 148/2016/NQ-HĐND of the municipal People’s Committee, which took effect from the beginning of this year, individuals and organisations storing shipments at bonded warehouses must now pay VNĐ2.2 million (US$97) to VNĐ4.8 million ($220) per container. This is an increase of nearly 70 per cent.

“The fees are too high and a heavy burden on export and import firms as well as logistics providers,” Tương said.

The collection of fees applied for foreign companies using bonded warehouses also has caused a decline in warehousing goods, badly affecting businesses of warehouse firms, according to Tương. He said that fee collection must be put into consideration.

The association’s statistics showed that Việt Nam’s logistics service industry was valued at $20-22 billion per year, accounting for 20.9 per cent of GDP, with an annual growth rate of 16 – 20 per cent.

There were more than 1,300 logistics firms operating in Việt Nam, 20 per cent of which were foreign firms but held a market share of 80 per cent.

The Prime Minister on February issued Decision 200/QĐ-TTg to boost competitiveness of Việt Nam’s logistics service by 2025, under which, logistics will become an important service sector to the economy.

Accordingly, by 2025, the logistic service sector hopes to contribute 8-10 per cent to GDP, have a growth rate of 15-20 per cent and reduce costs to 16-20 per cent of GDP.

Experts say that improving the connectivity of logistics infrastructure as well as capacity of local logistics service providers are important steps toward boosting the industry’s development. — VNS