VietnamCredit About Us Cafe€redit Contact Us
Go to cart
Logistics cost in Vietnam remains high – why?

Logistics cost in Vietnam remains high – why?

Friday 18, 12 2020
The average logistics cost accounts for nearly 17% of the total revenue of Vietnamese enterprises. Though it has decreased, this cost is still very high compared to that in many other countries.

Vietnam Logistics Report 2020 released by the Ministry of Industry and Trade indicates that logistics costs in production and business enterprises in 2020 have decreased significantly. In particular, 70.8% of enterprises surveyed said that the proportion of logistics costs in total revenue was only less than 10%; and 20.1% of enterprises said that logistics cost accounts for 11-20% of their revenue. This result is much lower than 2019 when the average proportion of logistics costs in total revenue was 21.9%.
Vietnam Logistics
According to Vietnam Logistics Association (VLA), Vietnam’s logistics cost in 2017 was equivalent to 14.5% -19.2% of GDP. Estimated logistics cost by GDP was about 16.8%, equivalent to about 42 billion USD.

In 2018, Vietnam's LPI was 39/160, which is a remarkable improvement compared to 2010 (53/160), ranking third among ASEAN countries, behind only Singapore and Thailand. This shows that Vietnam's logistics costs have been much improved.

The ratio of logistics costs to GDP represents the level of development and the role of logistics in the economy. China’s logistics cost is 14.5%, while that of developed countries like the United States and Singapore is about 7.5-8.5%.
2018's Logistics cost to GDP
In conclusion, the average logistics cost on the total revenue of Vietnamese enterprises is currently nearly 17%. Although this ratio is lower than before, experts say it is still very high.

Why is logistics cost high?

The report by the Ministry of Industry and Trade also points out that among the factors that increase logistics cost in Vietnam, transport cost accounts for the highest proportion.

In particular, informal cost still makes up for a high proportion in the total road transport cost compared to other countries. In addition, the transport infrastructure system is not synchronous, while the connection between sea, railway and road transport is still limited. Moreover, there is not enough national and international logistics centers in key economic areas to act as a hub for goods distribution.
Why is logistics cost high?
Multimodal transport has not yet been well-developed in Vietnam, either. Connection between modes of transport continues to be a huge problem, which is responsible for the high logistics cost.

According to data from enterprises, gasoline accounts for about 30-35% in road transport costs, average tolls (BOT) account for about 10-15%, while off-channel fees account for approximately 5%.

How to cut logistics costs?

Regarding how to cut logistics costs, Mr. Nguyen Tuong - Deputy Secretary General of Vietnam Logistics Business Association said that cutting logistics costs is not only Vietnam’s but also other countries’ goal.

To cut logistics costs, there are many solutions such as applying digital technology or improving the skills of logistics service providers. However, one of the basic factors that cause high logistics costs are taxes and fees.

"For example, Hai Phong port collects 1,700 billion VND of seaport fee annually, and Ho Chi Minh City collects more than 3,500 billion VND. How can logistics costs be reduced when taxes and fees are still high?" Mr. Tuong asked.

Commenting on this issue, Mr. Bui Ba Nghiem, Representative of Import-Export Department, Ministry of Industry and Trade, said that the word "cut" should not be used because many costs constituted in logistics cannot be cut any more. "Instead, enterprises should optimize operations to improve efficiency", Mr. Nghiem emphasized.
Mr. Bui Ba Nghiem, Representative of Import-Export Department, Ministry of Industry and Trade
According to Mr. Nghiem, logistics cost normally consists of 3 components: Transportation, storage and operating costs. In each component group, there are many constituent costs and each country has many different calculation methods. Therefore, it cannot be confirmed whether Vietnam's logistics costs are high compared to the world or not.

According to Mr. Nguyen Hoang Long, Deputy General Director of Viettel Post, the lack of support policies for logistics businesses and the shortage of large logistics centers are what make these costs high.

In some countries like Germany, there are many large-scale logistics centers where businesses are supported with taxes, fees, and land, so logistics costs can be reduced. When successful in the domestic market, these businesses penetrate the global market.

According to Mr. Long, another problem in Vietnam's logistics industry is that businesses are not closely connected with each other. Vietnamese enterprises’ awareness of logistics costs and logistics outsourcing is low, and the capacity of Vietnamese logistics service providers is limited.

Many Vietnamese businesses have not fully utilized the advantages brought by logistics. Some businesses even have not been aware of the very important role of logistics in reducing production costs.

VLA statistics show that only more than 40% of businesses have applied technology solutions for their core activities, most of which are single solutions such as international forwarding management, warehouse management, and transport management. Not many enterprises have applied highly integrated solutions.

Souce: cafef

You may also like

Monday 02, 12 2019


When setting up a new company, there are many questions relating to head...
Tuesday 15, 10 2019


In the future, 5G technology development can absolutely draw a new world,...
+84 981861066