Even as Vietnam’s exports reached US$114.6 in 2012, a key factor in the country’s economic growth, high logistics costs are limiting the profits and development of the industry.
According to Thanh Nien, economists and experts such as Pham Minh Duc of the World Bank say that while the country has seen strong growth in exports over the past 20 years, they are “reaching their limit.” In other words, Vietnam must tackle inefficient logistics to continue this rate of growth.
Due to poor planning by state-owned companies, logistics costs account for a quarter of Vietnam’s GDP compared to 19% in China and 8-9% in Japan according to World Bank official, Paul Vallely. There have been numerous reports of large, modern ports being built but with no infrastructure connecting them to the national transportation grid. Others have been stalled due to lack of investment.
These oversights are costing Vietnam:
“Last year the bank ranked Vietnam 53rd out of 155 countries in terms of logistics performance, trailing behind almost all of its neighbors. To put things in perspective, in Vietnam it usually takes firms 21-22 days to complete customs procedures, four times the time it takes in Singapore.”
While exports rose 34 percent in 2011, 18 percent in 2012, and nearly 20 percent in the first quarter this year, diversification of exports and climbing up the global supply chain have remained elusive.
Vietnam has time to address these issues and has the potential to be a major player in global logistics. But if it cannot address glaring inefficiencies, it risks losing its limited market share to neighboring countries.
