Hotline: 0917 86 88 77Tiếng Việt

Is Vietnam’s logistics cost really “too high”?

On February 14th, 2017, the Prime Minister issued the Decision no.200/2017/QD-TTg on approving the Action Plan to Improve Competitiveness and Develop Vietnam’s Logistics Services to 2025. This is the first time we have an action plan of national level on developing the logistics service industry comprehensively. One of the specific targets set in the Action Plan is to reduce the logistics cost to approximately 16%-20% equivalent to GDP.

Where did “the number 20.9% as of GDP” come from? So far, we have had difficulties in totaling logistics costs. Besides the World Bank’s report delivered in March, 2014 on “Consulting services: Support to Ministry of Transport on Developing Multi-Modal Transport” by ALG, there have been no official reports on Vietnam’s logistics costs. According to WB’s report, “Vietnam’s national logistics costs corresponding to all national value-added productive sectors represent VND 413,141bn. This figure represents 20.9% of the total national GDP (VND 1,980,914bn in 2010). It is true that 20.9% is high cost level if we compare with U.S, Japan or Western European countries. However, it is true that if we compare with other countries of the same GDP as Vietnam‘s it is actually not a bad result.” “This can be easily understood when observing the WB’s Logistics Performance Index (LPI) values”.

ALG calculated particular logistics costs for 12 commodities including electronics, electric equipment & components, textile, automobile, pharmaceuticals, vegetable and fruits, footwear, seafood, rice, coffee, beverages and furniture. Then, they interpolated estimation and drew a conclusion that Vietnam’s national logistics cost corresponding with local value added productive sectors. Logistics cost in average (each product details was different) included transport cost of 60%- transport (59%) and port charge (1%); inventory cost and administration costs of 40%- storage (11%), handling (21%), packing (8%). The calculation is similar to those of the U.S, Western European countries, Japan and Thailand.…

ALG’s report also gave a specific number on proportion of logistics costs in production costs: electronics 1.2%; electric equipment & components 3.5%; textile 9.3%; automobile 2%; pharmaceuticals 0.3%; fruits and vegetables 29.5%; footwear 11.7%, seafood 12.2%; rice 29.8%; coffee 9.5%; beverages 19.8%; furniture 22.8%. Logistics costs calculated on 12 product sectors was 10.85%, excluding 10.70% of pharmaceuticals and beverages sectors.

It is a high time when relating State’s Agencies such as the Ministry of Planning and Investment and the Ministry of Industry and Trade officially announce Vietnam’s logistics costs annually in order to have effective management and development of the logistics service industry, a sector bringing about high added value to the economy and particularly the country’s importation and exportation of goods and for everyone to have right understanding about Vietnam’s logistics costs.

The percentage proportion of logistics costs equivalent to GDP depends on the total logistics costs and total GDP. In 2018, Vietnam GDP was VND 5,545.3bndouble that of 2011. Therefore, the GDP of 2018 was double the GDP of 2010 (VND 1,980.9bn) that ALG used to calculate.

Currently, Vietnam’s export structure has changed. There is an increase in electronics exported. In 2019, there are 29 commodities with export turn-over of over USD 1bn, accounting for 91.7% of the total export turnover. It is noticed that 9 commodities reached USD 5bn and 5 commodities reached over USD 10bn: phones and spare parts USD 50bn; textile USD 30.4bn (USD 11.2bn in 2010); electric goods, computer and spare parts USD29.4bn; footwear USD 16.3bn; aqua products USD 8.8bn (USD 4.9bn in 2010); fruits and vegetables USD 3.8bn; coffee USD 3.5bn. It is obvious that there have been large changes in logistics costs.

When comparing logistics costs of 10 out 12 product sectors researched in ALG report in 2010 and updating data in 2018, it can be seen that when sector structure changes, logistic costs changes correspondently: logistics costs reduced from 10.7% to 8.74% for 10 product sectors. (see the Table in the Vietnamese version).

In 2018, Vietnam’s LPI was 39/160, a remarkable advancement compared to the rank of 53/160 in 2010, ranking the third in ASEAN countries, after Singapore and Thailand. It can be seen that Vietnam’s logistics costs have been largely improved. In line with ALG’s calculation, Vietnam Logistics Business Association (VLA) calculated that Vietnam logistics cost in 2017 was 14.5%-19.2% equivalent to GDP. The average figure currently is around 16%-17% (Page 59, VLA’s Whitebook 2018). This figure is worth credible.

Developed countries and the countries in the region calculate and announce their national logistics costs annually, which help the management and development of their logistics service industry. Some international research organizations such as Armstrong& Associates, Inc. (the U.S) have the annual research and announcement of the main countries’ logistics costs based on their official announcements. According to the Company’s report in February 2018, the U.S had the logistics cost of 8.2%, China 14.5%, Malaysia 13%, the Philippines 13%, Thailand 15% and Singapore 8.5%. Thailand in its logistics development strategy in 2007-2011 set a target of reducing logistics costs from 19% in 2005 to 16% in 2011 and to 15% in 2017. It is noticeable to us.

Direction no.21/CT-TTg dated July 18th, 2018 on Implementing Solutions to Reduce Logistics Costs, Effectively Connecting Transport Infrastructures assigned the Ministry of Planning and Investment to set up a system for statistic index and collection of statistic data on logistics. It is a high time when relating State’s Agencies such as the Ministry of Planning and Investment and the Ministry of Industry and Trade officially announce Vietnam’s logistics costs annually in order to have effective management and development of the logistics service industry, a sector bringing about high added value to the economy and particularly the country’s importation and exportation of goods and for everyone to have right understanding about Vietnam’s logistics costs.

Ho Chi Minh City: Making logistics a spearhead economy

Time 21/10/2019 at 14:29

The project of developing the logistics sector in HCMC to 2025, orientation to 2030 ofthe Department of Industry Trade of HCMC was approved by the People’s Committeeof HCMC have paved the way to make the logistics sector a spearhead economy not only for the city but also for the whole area. With the project, HCM expects to raise its contribution proportion from the logistics sectors’ to 8%-10% of GDP, with the growth of 15%-20%. At the same time, they expect to have a professional logistics sector, helping to raise the logistics service outsourcing proportion to 50%-60% and to cut Vietnam’s logistics expense to 16% of GDP in the year of 2025.

The 13th ASEM: Improving Vietnam's customs' stature

Time 11/11/2019 at 13:38

Carrying out its member’s duties in the framework of ASEAN- EUROPE Meeting (ASEM), the General Department of Vietnam Customs successfully hosted the 13th ASEM Customs Directors-General and Commissioners Meeting (13th ASEM Meeting). The meeting took place in 2 days October 9th - 10th in Ha Long City, Quang Ninh.

Rice export facing difficulties

Time 05/11/2019 at 15:47

According the the Department of Agricultural Processing and Market Development, the Ministry of Agriculture and fhf Developfment, Vietnam’s rice export is facing difficulties when the export value of the first 8 months of 2019 reduced 15% year over year in 2018, reaching only USD 2bn.

TBS Logistics: 10 years together to build up the future

Time 08/11/2019 at 16:30

10 years in not a very long time to the development history of an enterprise. However, with its planned business strategies and achievements today, TBS Logistics has affirmed the growth of the brand of TBS Group. And TBS Logistics has always been accompanying its partners and customers to provide them the best logistics services, which is also a contribution to the develop of Vietnam logistics sector.

Result of The 1st international logistics photo contest in Vietnam

Time 04/11/2019 at 14:43

Three months after the start, the 1st International Logistics Photo Contest in Vietnam received 1,427 photos from 217 photographers from various countries in the Southeast Asia. After two rounds of scoring, the Board of Judges chose 12 best ones for the awards of the contest.

Saigon port: Steady steps toward the future of Open World

Time 22/10/2019 at 09:28

Saigon Port J.S Co., previously Saigon Trade Bureau, has had a progress of development over over 150 years- the progress closely connected to the development of old Saigon-Gia Dinh and then the lovely active HCMC nowadays. Saigon Port is proudly the Heroic Unit in the Renovation Period of Vietnam’s Maritime Sector, the gateway port serving the Southern Key Economic Zone.