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Two trends and three challenges of Vietnam transport and logistics industry

According to the Ministry of Industry and Trade, in 2018, the logistics industry has increased by about 12-14% and the whole industry has about 3,000 businesses in operation.

According to a recent announcement by the World Bank, Vietnam is ranked 39th with LPI scores (Logistics Performance Index - national logistics capacity index) significantly improved in Logistics performance rankings 2018 .

Vietnam ranks third in ASEAN (after Singapore position 7 and Thailand position 32) and is considered to have better logistics service performance than comparable income markets.

Vietnam has many advantages to develop transport and logistics industry: Global trade exchange increases with international economic integration and successful signing of free trade agreements, geographic location Appropriate reason to build transshipment centers of Southeast Asia, infrastructure: warehouses, highways, seaports and airports are improved.

The Ministry of Industry and Trade assessed that in 2018 the logistics industry will increase by about 12-14%. The current number of transport and logistics enterprises is 3,000 enterprises, including roads, railways, seaways, inland waterways and airways ... The development of the transport and logistics industry is fast. Vietnam hopes to become a new production center in the region that can compete with China.

Industry players also expressed their confidence in growth, when more than 73% of enterprises surveyed by Vietnam Report said that the entire transport and logistics industry will achieve growth rates on two numbers and nearly 27% the rest is expected to reach below 10% in 2019.

Two main trends of Vietnam transport and logistics industry

Regarding the trend of logistics development in e-commerce - retail, most of the experts asked by Vietnam Report think that 2018 - 2019 will witness the explosion of transportation and logistics in Vietnam's e-commerce.

The increase in cargo traffic through online channels has increased the demand for transportation and logistics, especially fast delivery services. E-commerce market size in 2017 reached 6.2 billion USD, growing 24%, the number of orders through fast delivery companies increased by an average of 45% in the period of 2015-2020 and could reach 530 million applications. goods in 2020.

Many retail businesses such as Vincommerce, Mobile World, FPT, Lotte, Aeon ... are developing e-commerce, or the big e-commerce businesses such as Alibaba, Amazon ... join Vietnam. has made the logistics market more vibrant, accompanied by the need for technology investment and thoroughness in transport and logistics services.

Regarding the M&A trend of logistics industry, Vietnam has a policy to mobilize capital from the private sector to invest in infrastructure through the method of transferring the rights to exploit some infrastructure (logistics, airports, seaports ...). , attracting large investors with deals that are expected to be billions of dollars.

2017 - 2018 witnessed large M&A cases such as Gemadept transferring capital to CJ Logistics, Samsung SDS cooperating with Minh Phuong Logistics ... With the characteristic of many small and medium enterprises, mainly providing 1PL services and 2PL, the participation of foreign big names is expected to "patch the gap" in capital, personnel, technology ... for domestic enterprises.

Three growth challenges of transport and logistics businesses

As the service sector has many growth opportunities, the challenges of the industry are not small either. According to a survey by Vietnam Report, the three biggest challenges of Vietnam's transport and logistics industry now include: Infrastructure such as variable port system, warehousing, connectivity ... is limited and inadequate; Limited in terms of capital size, management level, professional qualifications are not high; Taxes, tolls and high surcharges.

According to the evaluation of enterprises in the industry, although the infrastructure has improved compared to the past, there are still many shortcomings. The South-North transport axis is still heavily dependent on the road, much more in need of the railway sector. The disproportionate development of the port system in Vietnam when more than 92% of the southern container traffic is concentrated in Cat Lai Port, leading to overload and congestion ... causing great waste.

Capital and human resources are the main reasons that domestic enterprises find it difficult to compete with foreign businesses. The majority of over 70% of active transport and logistics enterprises currently have small and medium capital scale, 7% have capital of over VND 1,000 billion, of which large capital groups are multinational enterprises.

Regarding logistics costs, transportation costs in Vietnam are currently high (3 times higher than regional and world countries) and uneven in regions, mainly due to types taxes, tolls and surcharges are currently quite high, indirectly reducing competitiveness compared to other countries.

Improve legal corridors, infrastructure and IT applications

Surveying enterprises of Vietnam Report transport and logistics industry shows that they expect that legal corridors, infrastructure and IT applications will be prioritized to improve enterprises to improve transportation services. download and logistics in Vietnam in 2019 here.

Along with the development trend of e-commerce, the entry into Vietnam market of big foreign retailers increases the risk of acquiring local logistics channels, causing domestic enterprises to face many disadvantages.

Currently, logistics costs are accounting for a very large proportion of enterprise costs, which in general become the biggest barrier to the competitiveness of enterprises. In order to reduce logistics costs, most experts and businesses in the industry said that it is necessary to synchronize transport infrastructure and connections between modes of transport, and at the same time develop a transport floor to connect well. most shippers and enterprises providing logistics services, creating a basis for Vietnamese logistics enterprises to participate more in the supply chain, avoiding one-way transportation.

Vietnam logistics and transport industry still has plenty of room for development. For businesses, in addition to focusing on investment in improving service quality, it is also important to build brand reputation.

For foreign manufacturing enterprises, when setting foot in Vietnam, seeking and cooperating with reputable logistics enterprises is an intermediary connecting connecting safe transport of goods to partners and customers, contributing to completing Chain of production - distribution, adversely impact Vietnamese transport and logistics enterprises to participate more deeply and better positioning on global logistics maps.

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