National logistics conference: Let no high price sink the ship of economy

(Vietnam Logistics Review) On the morning of April 16th, 2018, PM Nguyen Xuan Phuc hosted the National Logistics Conference. Solutions of cost-cutting and efficient connections to transport infrastructure systems were discussed at the conference with participation from ministries, sectors, local authorities, and associations of production, logistics services, transport, and transport assisting nationwide.

What do enterprises and the economy need?

The conference took place a year after the Decision no.200/QĐ-TTg approved by the Prime Minister on Action Plan to Improve Competition Abilities and to Develop Logistics Services to 2025. There were also participations from hundreds of logistics enterprises, transport associations and agencies as representatives for various sectors in Vietnam logistics chain.

Reports from ministries, related sectors, VLA, Vietnam Commerce and Industry Chamber, World Bank... on reality of Vietnam logistics services were delivered. The Ministry of Transport would focus on solutions to cut costs, and to connect efficiently transport infrastructure systems.

World Bank evaluation showed Vietnam’s Logistics Performance Index in 2016 ranked 64/160 coutries. Annual average growth rate of Vietnam logistics sector was around 14%-16%- one of the service sectors with sustainable growth these days. Vietnam logistics costs was equally 20.9% GDP (transport cost accounts for 60%), almost double that of developed economies (China, 19%; Thailand, around 18%; Japan, 11%; EU countries, 10%).

However, expert said Vietnam logistics sector has had great potentials. Especially the time when Comprehensive and Progressive Agreement for Trans-Pacific Partnership coming into effect will surely be a great chance for the logistics. The matter is whether or not enterprises can catch opportunities.

At the conference, delegates- leaders from ministries and sectors- listened to ideas and recognized difficulties from enterprises, and then reached solutions to solve inadequacies and to help enterprises cut logistics service costs and to connect efficiently transport infrastructures systems.

At the opening speech of the logistics conference, PM Nguyen Xuan Phuc repeated a saying of Benjamin Franklin- one of the founder of the U.S: “Beware of little expenses. A small leak will sink a great ship”. He said this is one of 15 conference planned to be hold this year to solve key matters, aiming at 4 contents: improving competition abilities, reducing costs, removing difficulties for production and services, and then encouraging sustainable developments and creating a better business environment.

A burden of cost- a great barrier

According to the Prime Minister, although matters of logistics have been mentioned in documents from the Party’s Conference and ministries and sectors have been implementing them, there have been a lot of limitations in implementing them. Logistics cost is still high, extremely high.

Beware of little expenses. A small leak will sink a great ship.

We asked for full participations of local authorities, sectors nationwide for better recognition and better implementation”, said Prime Minister. The idea of logistics is not new but a few people fully understand it. Transport as they simply think are one way road transport only.

Prime Minister affirmed the role of logistics to Vietnam economy. This is a business that many foreign and local companies carrying out. “If we do not do, they will do, especially when we have not had large company in the field of logistics. There should be a large enterprises carrying out logistics with support from the Government: mechanism, policies, and plans. Logistics functions are not forwarding only but include various stages of storage, packaging, goods rotating and dealing with damaged things…

According to the Prime Minister, good logistics implementation will save much transport cost and storage cost. “Can logistics cost accounting for a large proportion sink the ship of business?

“Therefore, there should be an awareness that the burden of cost is a great barrier to Vietnam enterprises these days: high logistics costs are also great barriers to competition abilities of Vietnam’s economy. Besides, inadequate investments among transport modals increasing operation fees and logistics cost,” said Prime Minister. Together with innovations of administration policies and improvement of business investment environment, the Government has actively pushed up international integration taken part in agreements in the world and region. Therefore, there should be enough attention to cost cutting for enterprises with particular actions from the whole political system, enterprises and people as well.

Therefore, Prime Minister had a decision to approve the Action Plan to Improve Competition Abilities and Develop Vietnam Logistics Sector to 2025. Delegations should fully understand the plan for implementation, especially at key sectors. “There should be involvement from the Government. Therefore, Deputy PM Trinh Dinh Dung, ministers, deputy ministers, Party’s organizations, Assembly and I am here to discuss and make clear the matter,” said Prime Minister.

What regulations need to be either changed or modified?

The conference focused on 4 matters with efficient solutions suggested by the Prime Minister.

First, in term of mechanism and policies: what current regulations on logistics need to be either changed or modified? Putting more emphasis on role of storage in logistics. PM mentioned a case in which the area has good inland port but without storage near it. Therefore, the transport cost is higher.

Le Duy Hiep, President of Vietnam Logistics Association (VLA), on behalf of the Association, delivered the Report on Opportunities to Cut Logistics Costs in Vietnam. The report gave a general view about Vietnam logistics: How much is logistics cost in Vietnam? How to calculate? Which stages produce high logistics costs? And suggestions by VLA on solutions to cut logistics cost. Prime Minister assigned to VLA the task of making a plan for developing logistics and cutting its cost, holding seminars to VLA’s member on industry revolution 4.0, encouraging awareness on cutting logistics costs, applying high technology, and improving competition abilities as well.

Second, in term of infrastructures and connecting infrastructures of various fields of transport. Connections among transport routes to ports, stations, airports, and ICDs are not synchronous. Therefore how to connect logistics centers and transshipment ports to cargo from ports and airports? And what should be done to improve connections among investors and construction works in an area?

Third, the matter of connectivity of forms of transport is also a limitation. Prime Minister said although waterway and railroad transport have low cost, their market shares are small (seaway 4.7%, local waterway 17.7%, railroad 0.39%) while road transport accounts for about 80%. ‘which leads to accidents, congestions and road damages…”

Fourth, Prime Minister suggested delegation to have discussions on how to develop business and resources serving logistics. There should be a human resource to develop logistics service.

At the end of the conference, PM Nguyen Xuan Phuc stated clearly logistics should be an important service sector in a complex structure of the economy and the logistics sector should be developed to be an economic sector bringing back high values and connected to import-export. There should be a healthy logistics environment with equal opportunities for enterprises from various economic proportions. He required ministries and sector to have synchronous solutions by checking legal regulations in the direction of developing storage system, connecting forms of transport, and especially improving competition abilities of enterprises of the logistics service sector by using information technology and investing in human resource…