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Vietnam logistics 10 years after implenting The Decision 175/QD-TTg

On January 27th, 2011, the Prime Minister issued the Decision no.175/QD-TTg on Approving the Overall Strategy to develop Vietnam’s service sector to 2020, including orientations and basic targets to develop services of transport and logistics to 2020. After 10 years of implementation, Vietnam’s logistics sector has gained a number of basic achivements.

After 10 years of implementation, Vietnam’s logistics sector has gained a number of basic achivements

Achievements

Based on the strategy’s indexes

Paticular indexes assigned by the Strategy and real developments of Vietnam’s logistics services in the past 10 years (2011 - 2020) shown in the table:

Vietnam’s logistics services in the past 10 years (2011 - 2020)

It can be seen from the table only outsourcing rate reached the target.

In addition, result of logistics infrastructure development has been relatively positive: Road infrastructure system has increased in both quantity and quality. Seaport and airport infrastructure are more modern. There have bee positive changes in railroad and waterway transport infrastructures, but they are slow. The connection among various modals of transport at hubs (seaports, airports, stations and logistics centers) has been limited.

Developing logistics service enterprises

In the period of 2012 - 2020, the average annual growth rate in the number of logistics enterprises reached about 47% pa. Vietnam’s logistics market has currently attracted around 30,000 enterprises (in the fields of transport, warehousing, post and delivery)- mostly enterprises of railway, road and tube transport (59.02%); followed by warehousing and transport assisting enterprises (33.26%); waterway transport (5.27%); air transport (0.02%) and postal delivery enterprises (2.34%).

According to Orbis Research, most of logistics service providers, in nature, are small and mediumsized enterprises providing low value-added logistics services: 90% of them have registered capital of under VND 10bn; only 5% of them have the capital of around VND 10-20bn; the rest have over VND 20bn. There have been more logistics providers serving e-trade. Transport options (combining multimodal transport) or logistics package options have been offered by logistics service providers. However, connections among various transport modals to cut costs have been a matter.

Logistics service sector’s performance

According to report by World Bank, Vietnam’s LPI in 2010 was 2.96 points- higher than the global average one (around 2.87); in 2018, it was 3.27, but lower than the global average one (2.87). In LPI ranking, Vietnam ranked 53 in 2010; 39 in 2018- an increase of 14 ranks after 8 years and ranked first in newly emerging markets and had high rank in the group of average low income countries.

Law and development policies

Logistics is a vast field, relating to many sectors. Legal regulations and policies for it are complicated.

In the period of 2021 - 2030, it is expected the logistics service sector will experience fast extensive changes thanks to IT application. It is required that the sector have proper strategies and action plans in the new situation, achieving sustainable developments and high value-added to the Vietnam’s economy in the coming time.

Regulations on developing logistics services have been imporved: from the Trade Law 2005 to the Decree 163 (replace by the Decree 140). In general, Vietnam legal system on logistics service development is basically adequate, consistent with law and international agreements. From June 2019, with the modifications of functions and tasks for logistics service development by the National Steering Committee on ASEAN one-door mechanism, the national one-door mechanism and trade facilitation, weakness of the lack of a focal consulting agency for the Government and the Prime Minister on developments of logistics services in Vietnam has been basically overcome.

However, there has been inconsistency in regulations on doing logistics business that should be studied and changed to facilitate logistics service provider. Particularly, there should be agreement in conditions of doing logistics service business in the Decree 163 and conditions of doing transport services, for example, sea transport services, for example, sea transport to facilitate enterprises when they apply for business registration.

Logistics has been recognized as an economic sector in the system of Vietnam's economic sectors (sector code 52292). Athough it is not really reasonable, developments of the sector has attracted attention from the Government. Logistics service development policies have been issued to approve projects and action plans (the Decision 200), encouraging investments in logistics centers from the central to local levels.

Comments and conclusions

After 10 years of implementing strategic targets of developing the logistics service sector in the Decision no.175/QD-TTg and the Decision 808, all targets have been basically archieved, and the growth of Vietnam’s logistics service sector is likely to increase. However, its quality is a matter that should be considered for the logistics costs are higher than those from regional countries and other countries worldwide.

Main reasons that led to inadequacies in the developments of Vietnam’s logistics sector in the past 10 years:

Limited planning works with the lack of connectioni

The logistics infrastructure planning has been fragmented and focused on single modals mostly as plannings on road networks, port system and ICD systems. Plannings on logistics hub connection or multimodal transport are limited. There has been no effective plannings connecting road and waterway transport (the two main modals in transporting domestic goods).

Long-term planning work normally cannot keep up with the real development of the sector.

Policies and mechanism is not advantages for private sector participation

There has been shortage of mechanisms and encouraging policies facilitating port-owners, ship owners, shippers and maritime service providers to have considerable investments to enhance connection in waterway transport, railroad transport and road transport…

From June 2019, with the modifications of functions and tasks for logistics service development by the National Steering Committee on ASEAN onedoor mechanism, the national one-door mechanism and trade facilitation, weakness of the lack of a focal consulting agency for the Government and the Prime Minister on developments of logistics services in Vietnam has been basically overcome.

Logistics enterprises need large capital to invest in equipment, warehouse systems, means of transport, including investment in IT for better service quality and business efficiency. However, how to approach capital sources is indeed a matter. This is also the reason Vietnam logistics providers are mainly in charge of domestic transportation- from port exploitation, road transport, and customs brokerage to warehouse services. The field of investment attraction in form of PPP has been mentioned in the article 4 of the Decree no.63/2018/ND-CP without anything related to logistics infrastructure.

Besides ineffective combination between e-trade and logistics has weakening e-trade efficiency, making logistics enterprises lose their abilities. Ineffective human resource in logistics activities has also been a problem affecting competition abilities of Vietnam logistics providers in the past period.

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