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Planning for developing logistics centers in Vietnam and measures to attract investments

(VLR) (Vietnam Logistics Review) There has been much more attention from business community and policy planners to Vietnam logistics service sector. The problem on developing the sector has been gradually solved. The Prime Minister just signed the Decision no.1012 dated July 3rd, 2015 to approve the Planning for Developing Logistics Centers Nationwide to 2020, orientation to 2030.

(Vietnam Logistics Review) There has been much more attention from business community and policy planners to Vietnam logistics service sector. The problem on developing the sector has been gradually solved. The Prime Minister just signed the Decision no.1012 dated July 3rd, 2015 to approve the Planning for Developing Logistics Centers Nationwide to 2020, orientation to 2030.

The need for developing logistics center system and the plan no.1012

According to WTO roadmap, Vietnam opened door for foreign logistics enterprises to invest in Vietnam with incentive policies which have also been offered to local ones. In addition, statistics show that trade activities have played an important role in growth and in the country’s economic structure shift (the annual average growth is 8%). Vietnam enterprises operating in logistics services are mostly small or medium sized ones and they are not really professional. And thus only ¼ of the demands have been met. So far, Vietnam has not had any enterprise with proper material potentials and management skills for logistics chains, even in narrower scope: goods flow chain. Only the development of logistics centers is able to provide professional services with high quality, keeping goods flow from the point of production to the point of consumption at lower price and at fastest speed… Therefore, it is necessary to have plan for logistics center system.

In 2011, the Plan for Developing ICD system by the Ministry of Transport was approved by the Prime Minister by the Decision no.2223/QĐ-TTg (December 13th, 2011). However, particular implementations of the plan have been limited. The Decision no. 1012/ QĐ-TTg on developing logistics center system has many things similar to those in the Decision no.2223/QĐ-TTg. Thus, enterprises in the sector can expect those plans will soon be implemented for better social - economic effects.

Content of the plan for developing logistics center system to 2020, orientation to 2030

According to the Plan 1012, there will be three types of logistics centers: first-class, second-class and specialized.

- First -class logistics centers are located in places by sea-ports/ airports or places enabling to connect to sea-ports/ airports with fully integrated functions of a logistics center. It is able to operate as a port, a container yard, bonded-warehouse, or a CFS with an area of up to 20ha and with serving radius of at least 100 kilometers.

- Second -class logistics centers are located at economic centers, large consuming markets, or production areas with main functions of a logistics center’s, operating as a container yard, a bonded warehouse, a CFS with an area of up to 10ha and with serving radius of at least 50 kilometers.

- Specialized logistics center, with area of at least 3ha, are connected to or have convenient connecting roads to airports.

From the Decision 1012, there are two directions of development.

• First, first-class logistics center plays a role of root centers. From them, second-class logistics center of regional levels, sub-regional levels and economic corridors will have fan-shaped development, supporting goods flows from the stages of production, import to the stages of consumption and export of regions, subregions and economic corridors, connecting to transport hubs (seaports, ICDs, airports, railroad stations, road networks, national and international gateways, gateway economic zones, production zones…)

• Second, specialized logistics centers should be built to connect to airports, together with first-class and second-class logistics centers to support import- export activities or transshipment by multi-modal transport, to support industrial production inputs and outputs of industrial parks, high-tech centers, and large-scale production zones.

According to the above orientation, national logistics center system are planned in the three regions (North, Central, and South) as shown in the following table:

a) North region will have 07 first-class and second-class logistics centers and 01 specialized logistics center connecting to airports at regions, sub-regions and economic corridors.

b) The Central region and Tay Nguyen will have 06 first-class and second-class logistics centers and 01 aviation specialized logistics center at regions, subregions and economic corridors.

c) The South regions will have 05 firstclass and second-class logistics centers and 01 specialized logistics centers at regions, subregions and economic corridors. It can be seen that the North region has the most number of logistics centers (08) and the South has the least number of logistics centers (06). This seems contradictory to the reality: trading activities (including import- export activities) are mostly carried out in the South region.

According to the plan, Vietnam is going to have “proper” logistics centers which are able not only to provide synchronous package logistics services to delivery networks in nationwide market but also to provide effective services to import-export activities. However, there comes a question: How investments to the centers should be to achieve the planned targets?

However, the plan 1012 is proper in term of logistics center scale: the largest one in the North has the size of 50ha; but the largest one in the South, in proportion, hasthe size of 100ha. And those in the Central and Tay Nguyen have no smaller size than those in the South – a thing that shows ambition of development of the area in the future.

Compared to the Plan no.2223/QĐ- TTg in 2011, there will be a different in term of the number of ICDs in the Plan no.1012/QĐ-TTg. In the Plan to 2020, orientation to 2030, Vietnam ICD system has the number as follow:

» 05 ICDs in the North at economic regions and economic corridors.

» 05 ICDs in the Central at economic regions and economic corridors.

» 03 ICDs in the South at economic regions and economic corridors.

Measures to attract investments in logistics center system according to the plan no.1012

Full implementation of the Plan at the same time is impossible. Therefore, the Plan no.1012 suggest 07 logistics projects of investment priority in the stage of 2015- 2020 (stage 1):

So specialized logistics center will be developed in priority in the North. Those of area up to 50ha have not yet developed in the North, the Central and Tay Nguyen. But in the South, those of 30ha or maybe up to 50ha have been developed, which proves the great demand for goods exchange in the South.

A number of measures relating to investment attraction have been offered.

First, various economic sections are encouraged to build, manage and operate logistics centers. The government will change, adjust or modify existing mechanisms and policies to mobilize both local and foreign sources. In the coming time, particular regulations on type of investments (BOT, BT, PPP…) will be introduced to encourage and facilitate investments to planned logistics centers.

• Second, the plan emphasizes the fact that the Government will have regulations on extending and diversifying types of investments in socialized direction, and will flexibly apply supporting policies to suit particular economic-social conditions of each regions in terms of credits, taxes, prices, fees, technology transfers and franchise… But how to avoid the state of monopoly when an enterprise or a group of enterprises invests in various logistics centers. Australian experience on not allowing an enterprises not to invest in or to operate no more than an airport is worth considering.

• Third, the Government will evaluate and choose a number of important works (7 projects according to the plan) to apply investment regulations in form of publicprivate partnerships. Besides, the Government will upgrade existing logistics centers which suit the Plan and have effective operation in the recent past. In fact, there have been large companies methodically investing in warehouse systems or logistics centers in model of “One stop shop”. Thus, the Government should have cooperation with the companies to minimize ineffective investments from the Government and from enterprises as well. The form of public- private cooperation can be considered an effective one in building, managing and operating logistics centers.

• Fourth, the Government will choose enterprises with appropriate qualification and experience to invest in the logistics centers, especially aviation specialized logistics center with particular requirements and standards of safety and security.

• Fifth, region (in the places of logistics centers) will have to be flexible in implementing land policies to support construction of the logistics centers. With locations of advantages, bidding for the land use rights in accordance to the law regulations is necessary and objective in choosing best investors.

• Sixth, in every enterprises, the matter of human resource is of importance. Therefore, the Government should have supports to have a qualified human resource for tasks of managing and operating the logistics centers. And it is enterprises investing in the logistics centers that also have benefits from the Government’s supports.

It is visible that measures to attract investments in the logistics centers in accordance to the Plan no.1012 are rather flexible, with no distinction of FDI enterprises from local ones. The measures put emphasis on the form of public- private cooperation, an effective measure at the time. It is expected strong innovations are able to attract both local and foreign investors to the field that can be a lever of the economy. However, the above measures should be more particular and there should be more determinations from Ministries, Sectors and local authorities by incentive policies, supportive policies to develop an important field of the economy - logistics.

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