Nghe An: Why has the logistics sector not developed?

Despite many potentials and advantages available, Nghe An’s logistics sector has not yet really developed and thus, it has not met requirements from enterprises and the economy as well

Barriers not coming from transport costs and infrastructure only

Nghe An is located in the center of the North Central, in the East-West Economic Corridor. The province has Vinh International Airport. It has a coastline of 82km with a seaport system including Cua Lo Port, Cua Lo Deep-water Port, The Vissai specialized seaport, DKC petroleum port, and Dong Hoi Port… It also has both main border gateways and secondary border gateways, 15 cross-border crossing and systems of road, railroad and local waterwayfavorable conditions for both domestic and international trade activities. However, there have been difficulties in developing logistics services, and in coordination among various transport modals…

The main reason is still due to limited capital allocated for investment in traffic infrastructure, which is small-scaled and not timely invested. Besides, there are not many enterprises providing logistics services in Nghe An. In addition, there are not very tight connections among enterprises of import-export and logistics services. Most of them are small and medium-sized enterprises being in shortage of capital, having limited management ability and no formal training to deal with requirements from international integration.

Logistics services in Nghe An have mainly transporting cargo, mostly have been carried out by transport service enterprises. According to assessment from infrastructure investors as VSIP, Hemeraj and other enterprises operating in the field of import-export in the region, Nghe An’s logistics service sector have not yet met requirements for developments and its potentials. It is a bottleneck that is less attracting for investments for higher logistics service costs than that of other provinces and cities as Hai Phong, Danang and HCMC.

At a conference to summarize import-export activities held by Nghe An’s Department of Industry- Trade, Mai Dinh Quy- Manager of Import-Export Department, BSE Electronics Vietnam Co., Ltd. said the company had difficulties in transport activities and in seeking logistics services. There are enterprises of logistics and transport in Nghe An, however, their costs are normally higher than those from international logistics and transport providers. The company have to hire trucks to transport goods from Nghe An to Hanoi. It normally costs around VND 3m including taxes and fees if hiring a transport agency in Hanoi. It is from VND 4m to 5m if hiring a transport agency in Nghe An. The costs in Nghe An is 50%-70% higher in Hanoi with the same mean and the same modal of transport.

A leader of Nghe Tinh Port also said fishermen’s fishing boats often took Cua Lo Wharf as their anchorage place, obstructing the berth’s operation, maritime safety and security of the port. The water area in front of the wharf is frequently having deposition, causing annual maintenance costs. Navigation way of Cua Lo after being upgraded to -7.2m, it has been deposited to -5.7m so far, limiting operation of vessels from 10,000DWT to 25,000DWT load-off. In addition to the above difficulties, Nghi Son International Airport is currently offering various forms of promotion: reducing up to 40% of the ground price to attract goods from the Western Nghe An, which makes competitions fiercer. Meanwhile, cargo passing through Nghe An Port are of various types including container cargo, bulk cargo, bag cargo, liquid cargo, equipment cargo… the amount of cargo is small and scattered, therefore, it is hard to have investment in equipment for exploitation.

Necessary to have a synchronous solution

According the Master Plan of Developing The System of Logistics Centers Nationwide to 2020, orientation to 2030 approved by the Decision no.1012/QD-TTg dated July 3rd, 2015 by the Prime Minister, Nghe An, Thanh Hoa, Ha Tinh and Quang Bih provinces need to collaborate to establish a logistics center of class II connecting LCDs, seaports (Nghi Son, Cua Lo, Hon La and Vung Ang), airports, stations, coach stations, industrial zones and gateways serving import-export activities among provinces in the Northern Central.

Nghe An necessary to have a synchronous solution

Ministries and departments of the Government and Nghe An have been focused on speeding up the construction of North- South Expressway going through Nghe An, the coastal road of Nghi Son - Cua Lo and roads connecting economic zones and in regions the Northern Central to increase speed and volume of cargo being transported in Nghe An in particular and in the Northern Central to other regions nationwide. Besides, the Ministry of Transport and Nghe An have plans to upgrade and expand Vinh International Airport to increase freight volume, to expand logistics air service to develop logistics services- make it suitable to the current development trend.

In order to develop the logistics service and to solve the problems of optimizing resources, the province should have stronger and better connection among associations and shippers in Nghe An with logistics providers and should develop a logistics transaction floor for optimizing two-way transport and making good use of the existing infrastructure. There should also be solutions to develop high quality human resource to deal with the progress of international economic integration.