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Home / Economy / Trade - Service
Vietnam to reduce logistics costs of US$46 billion
Ngoc Thuy 17:54, 2018/04/15
Vietnam is determined to reduce logistics costs, which is making up to nearly 21% of GDP, or US$46 billion in 2017, according to the government`s portal.
With such rate, Vietnam's logistics costs are nearly double the figure at developed countries, and higher than the global average rate of 14%, informed Ousmane Dione, the World Bank's Country Director. 
 
​Vietnam to reduce logistics costs of US$46 billion.
​Vietnam to reduce logistics costs of US$46 billion.
In 2016, Vietnam's Logistics Performance Index (LPI) was ranked at 64th out of 160 countries and territories, with the average growth rate of 14 - 16%, assessed the World Bank. 

However, according to the World Bank, logistics costs are quite high, which is equivalent to 20.9% of GDP, in which the transport costs accounted for 59%. 

Logistics reflect a country's economic growth level, said the Transport Vice Minister Nguyen Van Cong, for which the higher the economic growth level is, the lower the logistics costs are.

Most economic experts agreed that Vietnam has huge potential for logistics sector to develop, especially with the approaching Comprehensive and Progressive Agreement for Trans-Pacific  Partnership (CPTPP). However, the questions lie on whether local enterprises can take full advantage of the opportunities. 

In reality, domestic companies have advantages with the availability of storage yards in the logistics chain, as well as the understandings of customers' preferences and the market. 

Vietnam currently has large scale sea ports capable of taking ships up to 100,000 DWT and 70 international runways. The country is also in the phase of importing large amount of input materials and equipment, which is an opportunity for Vietnam logistics company to develop. 

Vietnam companies previously imported goods under the shipping agreements of cost, insurance and freight (CIF) as sellers decide on shippers, which has now been changed into free on board (FOB), as buyers now choose shipping method. 

There are some 3,000 logistics firms in Vietnam, of which 70% are located in Ho Chi Minh City. Logistics is the second most important industry in the nine key services of the city with a year-on-year increase of 10.84%  last year. 

By 2025, the country set the contribution rate target for logistics to be at 8 - 10%  of GDP, services growth rate from 15 - 20%, while the rate for logistics outsourcing to be 50-60%, said the Decision No.200 referring to an action plan to enhance the competitiveness and development of Vietnam's logistics sector through 2025.

Additionally, logistics costs will be reduced to 16 - 20% of GDP, and the LPI to be within the world's top 50. 
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