Vietnam Logistics service businesses at the door step of 2014

According to the commitments when joining WTO, Vietnam logistics service sector has only a few moments left before stepping to another period – the period of complete open-door for foreign businesses.

There have been rumors and critics that the potential young market of Vietnam – a hot cake – has been devoured by foreign businesses while Vietnam ones has been playing roles of employees in their own market for the lack of competency.

At the door step of 2014, will no small amount of Vietnam forwarding and logistics businesses be dissolved? And what will there be any reactions from the Government, management organizations and associations?

VIETNAM FORWARDING AND LOGISTICS SERVICE SECTOR HAS GROWN TO MATURITY

Compared to the time before joining WTO, Vietnam forwarding and logistics sector has remarkably developed both in the quantity of businesses and in the professional of those providing services. There are annually 200-300 businesses in average joining the sector nationwide and there have been over 1,000 businesses operating in the forwarding and logistics sector so far.

They are small or medium-sized businesses who are “well-armed” with good knowledge and experience and derived from state-owned businesses or JVs. They have been operating in new fields: on-line distribution or delivery and sending bills with a staff using motorbikes and having professional service manner, enabling dealing with hundreds of orders daily. Another example is Co-op Mart – a distribution business with high competition ability in Vietnam retail market- who has managed its logistics system as well as foreign ones… And there have been so many businesses who are agents of forwarding, shipping carrying out various activities serving their customers or who invest in equipment, warehouse or IT carrying out 3PL services with their good knowledge on their own regions.

Using Logistics Performance Index (LPI) from WB instead of “cake portion” to value, Vietnam logistics sector is in its development period with the rank of 53/155 (2011) – a rather fair-average rank both in the region and worldwide.

There are ideas that the competition ability of Vietnam logistics service providers has been better through the process of integration. It is quite easy to understand for world logistics “deep-pocketed” businesses had fully gathered in Vietnam, even before the time the country joined WTO, one way or another. And it is also unfair to say that Vietnam forwarding and logistics businesses are just employees in their own market for a global logistics chain cannot be carried out by a single business, but by allocation and co-operation among members in the chain according to their abilities and advantages. Vietnam businesses, compared to their foreign counterparts, now have fewer advantages in competency, capital, network and professional… It is just a matter of time. Six years after joining WTO, especially in the difficult period of 2012, most businesses in the sector (especially those in sea transport for their distinctive features) have effectively dealt with the situation and remained stable. According to surveys, there have been only 2-3% members of VLR who stopped their businesses and dissolved.

It does not mean that we satisfy with our current position, competency and business situation with assistance from the Government. The open-door period of 2014 can surely be much tougher, and it should be very careful to give out a wise solution.

PREPARATION AT THE DOOR STEP OF 2014

Six years after joining WTO, although there have been issues in mechanism, management, infrastructure investment and human resource training, it can be said that it is preparation from the Government, relevant ministries and industries that gives Vietnam logistics a new face. Its role and function in the development of the country have been fully recognized and mentioned in strategies, social-economic development targets in each period of time.

About legal corridor, to fulfill the commitments of WTO and to facilitate commercial activities of businesses, a number of paving-way decisions for the logistics sector have been issued as Decision 140/2007/NĐ-CP detailing the Trade Code 2005 on conditions of doing logistics business, Decision 115/2007/NĐ-CP on conditions of doing sea transport business, Decision 87/2009/NĐ-CP in 2009 on multimodal transport… In 2009 and in the following years, a series of decisions to 2020 with vision to 2030 on transport planning, sea ports, railroad, waterways and airways were also issued… In 2011, Decision 175/QĐ-TTg on master plan for development to 2020 of service zone of Vietnam was approved. It is the first time Vietnam has a logistic service strategy. There are many documents from ministries and departments for guidance, adjustment, facilitating disturbing procedures or speed up activities of the logistics and logistics service sector. Recently, there was Decisions 87/2012/NĐ-CP on e-customs with many reforms in customs procedure. In the year of 2012, Decision 950/QĐ/TTg on action program to carry out import-export strategy for the period of 2011-2020 with orientation till 2030 was approved by the Prime Minister, in which socializing logistics services, investing in warehouse in large sea ports and clearance spots, planning nationwide logistics system, improving transport market share for Vietnam transport businesses were mentioned. Customs code currently has under the process of adjustment for facilitating logistics and commerce and for making it relevant to regional and international codes.

After joining WTO, infrastructures, roads, sea ports and airport has been invested in and upgraded to meet the need for goods transport, giving advantages for the development of the logistics and import-export.

There have been co-operations among associations in the logistics sector and their members for communication, updating knowledge, and training in order to create a workforce with qualifications of regional and international standards. They have campaigned to have policies from the Government for development of the logistics sector, for suitable mechanism. Vietnam Shippers Council – another organization of cargo businesses closely connected to the logistics sector of Vietnam -was founded in 2010.

In the same move, at the beginning of 2013, Vietnam Freight Forwarders Association (VIFFAS) was approved to change its name to Vietnam Logistics Association (VLA) with a larger duty in a new period.

Although there have been remarkable efforts from the Government, Ministries, Industries and associations, there are issues that need to be solved as the lack of a management authority, a transparent logistics service market, and mechanismization of 3PL market.

At the present-in the process of establishing action plans for 2013 or 2014, we should propose to the Government, especially the Ministry of Industry and Trade, that Decision 140/2007 CP be adjusted, modified or replace for it is no longer suitable to the current situation.

VIETNAM LOGISTICS BUSINESSES AT THE DOOR STEP OF 2014

From the 7^th World Cargo Symposium at Doha (March 1^st, 2013), there came a two-point message to upgrade competition ability of the air transport service industry: e-freight and risk-based approach to ensure security for supply chains. These are also applied to sea transport and to other modes of transport.

From Latest recommendations from UNESCAP at Forums for freight forwarders, multimodal transport and logistics service providers, freight forwarders, logistics service providers and N.V.O.C.Cs should study Code of Professional Conduct to upgrade competition ability serving their customers.

From these ideas above, a wise solution for Vietnam logistics businesses at the door step of 2014 should include:

Upgrading competition ability: investing in IT, equipments, human resource to meet national, regional and international standards.

Developing services to 3PL (packaging service, integration), offering more value-added services to customers.

Offering flexible, effective and cost-effective solutions; making good use of regional advantages when working with foreign businesses.

Approaching customers with risk-reducing approach and serving the whole supply chain.

Not ignoring “made in Vietnam” element when approaching Vietnamese shippers; persuading them to give up traditional methods in buying/ selling and using new ways (INCOTERM 2010).

At the door step of 2014, a new milestone for Vietnam logistics businesses, together with effort from logistics service businesses, it can be sure that the Government, management ministries, and associations cannot be merely “observers”.

Right in 2013, the Ministry of Industry and Trade, in its role as a management organization and together with relevant ministries and associations, should hold forums or conferences on preparation for the open-door process. Things should be done before it is too late.