Government takes bold actions to cut logistics costs
Prime Minister Nguyen Xuan Phuc tasked relevant ministries to rapidly improve the logistics industry as high logistics costs have become a major barrier for businesses and reduced the competitiveness of the national economy.
During a national conference in Hanoi on April 16 to seek ways to reduce logistic expenses and improve transport connectivity, Phuc said that the asynchronous investment and poor connectivity result in high logistics costs, which is a challenge of many provinces and cities, especially those in the Mekong Delta region.
The asynchronous investment and poor connectivity result in high logistics costs
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“We should find the best solutions to reducing logistic costs for businesses,” Phuc said, stressing the need to work out effective measures to improve transport connectivity among ports, railway stations and airports.
The PM required the Ministry of Transport and the Ministry of Industry and Trade to finalise legal policies on logistic services, improve infrastructure and competitive edge for logistic firms, develop markets for logistic services, and increase quality of logistic human resources.
He also instructed the Ministry of Transport to address matters relating to technology and international relations to develop deep seaports and inland container depots (ICDs) and improve transportation via railways and inland waterways.
Speaking at the conference, Deputy Prime Minister Trinh Dinh Dung addressed four current issues facing the logistics sector, as well as possible solutions to be enforced.
The first and foremost problem involves institutions and policy, as current legal regulations on logistics may need to be amended to keep up with present day industry demand. There is also indication that some localities with domestic ports have yet to properly locate warehouses and shipyards to store goods, thus pushing transport costs up.
The second issue that the Deputy PM mentioned was related to infrastructure development, chiefly with regard to connecting transport routes between logistics centers such as ports, railways, airports, and cargo transshipment ports.
Thirdly, he discussed inefficiency in linking different modes of transport, highlighting some difficult to explain issues such market favorability for high cost transport modes. Sea and railway transport account for 4.7 and 0.39 per cent of total transport respectively, while road transport accounts for nearly 80 per cent, yet road transport is favored over the cheaper alternatives.
Finally, he suggested that firms focus on the development of logistics enterprises and human resources.
Meanwhile, Deputy Minister of Transport Nguyen Van Cong said that the domestic aviation sector is accelerating air cargo services development and establishing its own freighter network, encouraging investors to finance regional cargo airports with the appropriate incentive mechanisms.
According to the Ministry of Transport, the shipping costs of a 40 feet container from Hanoi to Ho Chi Minh City (excluding loading and unloading costs) is estimated at VND40 million (US$1,762), 9.7 times higher than that of sea routes and 2.5 times higher than that of railways.
Cong said that the high cost is due to unfair competition, mainly through intermediaries, which has done little to optimize the national transport sector. Notable examples are high petrol prices and Build–Operate–Transfer (BOT) charges.
Railway, inland waterways and seaway transportation are lower in cost, but transport time is much longer, with higher loading and unloading fees and outdated carriers.
To reduce logistics costs, Cong suggested that the MoT should invest in the formation of a national high-speed road network, dedicated to ensuring efficient connections between industrial parks, key economic centers, and important traffic hubs, as well as between sea ports, railway stations and inland water ports.
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