Developing logistics for the Central key economic zone

(Vietnam Logistics Review) According to economists, logistics cost accounts for 10% of the value of goods circulating in the country and 40% of those in the international market. With such an importance, the logistics sector in the Central key economic zone (CKEZ) should have new competiton strength in order to match with the regional potential.

CKEZ and potential of developing logistics

CKEZ is located along the 609-km coast and has especially important position in the strategy of social-economic development and defense for the Central coastal region. A system of important sea-ports as Chan May, Lien Chieu, Tien Sa, Ky Ha, Dung Quat and Quy Nhon…, together with a system of international airports, railroad and roads connecting to regional economic corridors. These are premises for developing logistics and for building logistics centers as well.

CKEZ is an important bridge in cultural economic exchange and it is also a connecting point for cargo transshipment to Tay Nguyen provinces, a gateway to the sea for region of Southern Laos, North East Thailand and North East Cambodia through East West Economic Corridor (EWEC).

CKEZ has potentials for developing services with high added values in logistics activities as import - export services, tourisms, fishing, oil, transport, seaport development, port and post-port services, ship repairing services…

In 2015, Vietnam officially became a member of ASEAN Economic Community (AEC). Around 90% of tariff among members will decrease to 0% and the rest of 10% will also decrease to 0% in 2018- a chance for enterprises in the area to approach larger markets.

Vietnam and CKEZ have many opportunities to develop international cooperation relationship, to expand export markets, to attract foreign investments, to push up progress of changing growth model and restructuring the economy. In 2015- 2016, Vietnam has implemented AFTA commitments, Free Trade agreements with various partners as the EU, Korea, Eurasian Economic Union and prepared for TPP, which will bring both opportunities and challenges for the CKEZ to develop.

Logistics in Vietnam has received more attention. After the Trade Code 2005 regulating logistics activities, the Government has issued a number of documents managing logistics activities as Decree 140NĐ/CP (September 5th, 2007) regulating Trade Code in details on conditions of doing logistics service business, Decision 169/QĐ - TTg (January 22nd, 2014) on developing logistics services in the field of transport to 2020, Decision 1012/ QĐ-TTg (July 3rd, 2015) on planning of a system of logistics center nation-wide to 2020, orientation to 2030… Danang city also approved the project of “Developing logistics service sector in Danang to 2015, vision to 2020” in accordance to Decision no. 1890/ QĐ/UBND dated March 27th, 2014… Although they are not adequate enough and no match with logistics activities reality, these legal documents have created certain legal basis to adjust logistics activities in the market.

Logistics in the central has many inadequacy

Legal framework in our country and in the CKEZ on logistics has currently had many inadequacies: there have been no strategies, no plans for developing logistics in State-level and region-level, and no strategies for social-economic development in CKEZ and other provinces. Plans of transport, trade and trade infrastructures have not connected to logistics by logistics activities via logistics centers - problems of optimizing in CKEZ’s development have not yet mentioned.

Systems of documents, policies on logistics have been inadequate both in State’s managerial levels and in regional managerial levels, especially logistics infrastructures both “hard part” and “soft part” are limited, there have been no logistics centers of regional level at points which are able to connect economic corridors in CKEZ.

So far logistics centers (rank 2) have not been built on the National Road 1A and in HCM Road, especially not connecting sea ports of CKEZ as Chan May, Tien Sa, Dung Quat, Quy Nhon…There is also the lack of railroad connecting these ports, which limits the development of logistics activities, causes congestions, traffic accidents, environment pollution…This results in the fact that farmers get rid of their produce in harvest times. At the same time, there is no such produce at other regions, or they are sold at very high price. Regional logistics enterprises carry out single services of small and medium sizes in local markets. It is a weakness in logistics system development in CKEZ.

These inadequacies are due to weak awareness of role, and logistics at different levels of authorities and sectors, lack of mechanism and logistics development policies in each areas. In addition, there have been no guidelines and supports from the Government and sectors to regional logistics activities.

Solution for developing the logistics

To realize the target of “building the CKEZ to a dynamic development area with fast and sustainable speed- a motive force of development for the Northern Central and the coastal Central, a gateway to the sea of Tay Nguyen provinces, the triangle of development Cambodia - Vietnam - Laos and the East-West Economic Corridor” (Decision no.1874/QĐ- TTg dated October 13th, 2014), the CKEZ and other areas should implement a number of solutions:

(1) Upgrading awareness of logistics, especially roles of logistics centers in carrying out regional economic connections. And then getting more supports to research, develop and build logistics systems from the Government, sectors, local authorities and enterprises. It is time to have national and regional logistics TV programs to transfer matters of optimization, cooperation among sectors, regions and enterprises, changing models of economic development and other matters as customs, trade, transport, IT and logistics market opening…

(2) Building a master plan of logistics development of the CKEZ to 2030, vision to 2050 as soon as possible- which can be used as basis to adjust, modify other existing plans, projects of areas in the region.

(3) On the basis of Decision no.1012/QĐ-TTg dated July 3rd, 2015 on approving the planning of developing logistics centers nation-wide till 2020, orientation to 2030, there should be plans and investment policies to build logistics centers connecting 5 regions of the CKEZ, effectively to exploit 5 economic corridors in the region, to improve goods flow, import- export and goods consuming for sectors and regions. Logistics center should be built at connecting points of various means of transport as roads, railroad, waterways and airways… and should be planned with a vision of from 50 years to 100 years, and to be built with the size of current industrial zones (rank 1) (as the model of a transport village in Germany), not simply to expand some functions of existings ICDs, to attract regional and international logistics groups and both local and foreign logistics enterprises.

(4) There should be policy in priority for investing in developing logistics infrastructures in CKEZ. A system of railroad connecting to seaports, and logistics centers in the area should be built in priority. Then, suitable management model should be applied at these centers… The policy of “connecting transport” is effective only it is carried out through logistics centers. At the same time, managing capital sources by mobilizing them, in accordance to plans of developing logistics infrastructures, including transport infrastructure, avoiding BOT projects that lack strategy, planning and vision as recent BOT stations.

(5) There should be policy for investing in developing IT logistics infrastructures in the CKEZ. Try to have seaports in the region have names in search tools of global container managing system (shippers, wherever they are, are able to know exactly where their cargo is: at what port and carried by what ship). Try to popularize the use of GPS in the region.

(6) Developing logistics system in the CKEZ should aim to the target of economic cooperation among sectors, local authorities, enterprises and economic corridors to exploit effectively regional potentials and advantages.

The development of logistics systems always requires the alignment among sectors, fields, regions in the area in the way of optimization. Therefore, management office of the CKEZ should be hold “as a conductor to coordinate and manage all systems and economic relations for regional logistics.”… Danang can be an intelligent city if the CKEZ logistics is invested properly.

(7) There should be policies to attract high-quality logistics resource and push up training tasks for the CKEZ and for logistics centers at first. Logistics training programs should be built up and logistics should be compulsory subjects in under-graduated and post-graduated curriculums in universities in CKEZ, especially university of economy, management and business administration. On April 6th, 2015, the Government office sent Document No. 2299/VPCPKTTH on developing logistics service sector to ministries to consider, in which there was the Ministry of Education.

(8) Study experience from countries with developed logistics industries as Germany, Netherlands, Sweden, Denmark, the U.S, Japan, Singapore…