Costly logistics act as drag on Vietnam exports

Costly logistics act as drag on Vietnam exports

Exports remain a key factor in Vietnam’s economic growth, but high logistics costs mean they are unable to achieve their full potential.

Economists and other experts, speaking at a conference on policies for economic growth, said the country’s export achievements would be even greater if it tackles issues like corruption, low value-addition, and, most importantly, the high logistics costs.

Pham Minh Duc of the World Bank said the country saw strong exports in the last two decades, with average annual growth topping 17 percent, but exports are “reaching their limit.”

Companies have to pay very high rates for logistics compared to global rates, he said.

 

Exports last year topped US$114.6 billion

News website Saigon Times quoted Paul Vallely, another World Bank official, as saying logistics costs account for a quarter of Vietnam’s gross domestic products compared to 19 percent in China and 8-9 percent in Japan.

Deepak Mishra, the bank’s lead economist in Vietnam, blamed the weak performance by state-owned companies on the high cost of logistics.

Do Xuan Quang, chairman of the Vietnam Logistics Association, was critical of the country’s infrastructure, saying many ports are not well-placed in terms of access to industrial zones and warehouses.

 

Trailing behind

Last year the bank ranked Vietnam 53rd out of 155 countries in terms of logistics performance, trailing behind almost all of its neighbors.

The country has been “nearly left behind” in terms of logistics services, Duc said.

To put things in perspective, in Vietnam it usually takes firms 21-22 days to complete customs procedures, four times the time it takes in Singapore.

So firms are convinced that they should pay “unofficial fees” to customs to speed up the process, the bank said.

But it said that the country achieved “a strong trade performance in a difficult external environment,” with exports rising 34 percent in 2011, 18 percent in 2012, and nearly 20 percent in the first quarter this year.

But it has been less successful in diversifying its export basket and moving up the global supply chain, it added.

The bank suggested that the country should establish a national committee for trade facilitation to enhance its competitiveness.

According to the logistics association, the country has around 1,000 logistics companies. While domestic firms make up 80 percent of this they account for only 20 percent of the market share.

 

Source Thanh Nien

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