vietnamese-logistics-market

The Vietnamese logistics market is in danger of falling into foreign businesses

Currently, 80% of the market share of logistics is in the hands of foreign enterprises. If Vietnamese companies do not apply digital transformation soon, the risk of losing the rest will be lost.

Challenges of the Logistics Industry in Vietnam. Image: VIR

This warning shot was given at the conference on developing the logistics market for Vietnamese businesses, on April 20.

According to Agility’s report on the 2021 Emerging Market Logistics Index, Vietnam ranked 8th in the global logistics industry growth ranking. Based on the expectation of the Covid-19 vaccine, the demand for goods to increase again, Agility predicts, Vietnam will be in the top countries with the highest logistic growth.

However, according to experts, the logistics market in Vietnam is facing many bottlenecks. Mr. Dao Trong Khoa – Vice President of Vietnam Association of Logistics Services (VLA) said that Vietnam’s logistics costs are still high, accounting for more than 20% of GDP, while the world average is 11% of GDP.

Mr. Khoa cited, transport costs currently account for about 59% of logistics costs in Vietnam. This cost is accounting for 30-40% of the product price structure, while it is 15% in countries. This has reduced the competitiveness of Vietnamese businesses. Moreover, the rate of unsuccessful delivery is quite high, about 10%, pushing the cost of logistics businesses to increase due to costs of storage, tallying …

Fragmentation and lack of linkages between enterprises in the logistics sector are also a significant weakness in the fierce competition in the Vietnamese service delivery market and 80% of which is in the hands of foreign enterprises. The traditional transport and logistic service models have become “old”. In freight transportation, domestic logistics enterprises are hired by customers to transport to domestic ports; After the port is decided by the foreign company for the carrier.

Fierce competition in both the buying and selling direction forces domestic logistics enterprises to transform technology, link up, and form large-scale networks capable of leading the market to overcome the challenges of competing with other international logistics “giants”.

Difficulties and obstacles

Most of the members of VLA are small and medium enterprises, so they lack investment capital. They also have difficulty in choosing the right technology, most of them using single solutions. About 40% of the technology applications being used in logistics enterprises are basic applications, such as international forwarding management, warehouse management, transportation, electronic data exchange, and customs declaration, while logistics services usually operate in chains.

Experts recommend that the Government should have policies to encourage digital transformation, support loans, and preferential interest rates for digital transformation businesses and digital technology startups. On that basis, logistics enterprises can buy or rent solutions from software providers when they cannot afford them.

In addition to technology, the 3-way linkages including transport companies, warehouses/ports and the authorities, regulators also need to be strengthened, forming a chain of goods transportation on the existing infrastructure. On the basis of people, infrastructure and technology, fragmentation in the logistics sector will be overcome.

ASL LAW is the top-tier Vietnam law firm for doing business in Vietnam. If you need any advice, please contact us for further information or collaboration.

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