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Sales of logistics businesses to halve due to Covid-19

Sales of logistics businesses to halve due to Covid-19

Thursday 19, 03 2020
According to the Vietnam Logistics Business Association (VLA), all land, sea and air freights are heavily affected by the pandemic.

Reduction in cargo volume

To assess the impact of COVID-19 on the business performance of logistics enterprises, Vietnam Logistics Business Association (VLA) has conducted a survey of businesses operating in this field.

Accordingly, about 15% of surveyed businesses estimated that their revenue would decrease by 50% compared to 2019; more than 50% of businesses estimated that the sales of logistics services (domestic and international) would decrease from 10% - 30% compared to 2019.

The reason is that many factories have had to stop operating, so the amount of goods that needs transporting is also less. In addition, import and export revenue from countries with outbreaks such as China, Korea, Japan, Singapore, etc. have also decreased significantly.

According to VLA, freight operations will be affected by the decline in freight transport due to the suspension of many factories in China. Since the outbreak of the coronavirus, manufacturing activity in China has been stagnant, leading to low volume of exports, causing many international shipping lines to abandon flights at several ports of China due to low volume.

Some items that Vietnam imported from China such as fabrics, fibers, iron and steel suffering double effects from the above-mentioned factors have witnessed a sharp decline in value in the first two months of 2020. The reduction in cargo volume leads to a 30% reduction in road transport demand.

As for shipping, shipping lines such as ONE and HMM have reduced their vessels connecting all main routes from China, Korea and Japan. Imports on routes to Vietnam plummeted. Port operation is also forecasted to be severely affected in the short term. Vietnam's fleet mainly operates on short routes in Southeast Asia and Northeast Asia, in which the volume and revenue related to the Chinese market account for a significant proportion.

Shipping enterprises' revenue is likely to decline in the first quarter when transport volume is expected to decline sharply. Similar to sea transport, many Vietnamese ports also have a relatively high degree of dependence on cargo sources from the Chinese and Hong Kong markets, because this is the largest hub port area in the world.

Viet Dragon Securities Company (VDSC) estimated that the number of ships coming from China and Hong Kong to / from ports in Hai Phong accounts for 40-45% of the total number of international ships. With the operation of ports and factories in China stagnant due to the lack of workers, along with longer loading and unloading time due to strict inspection of China authorities, many major shipping lines in the world have had to cut production by eliminating Chinese ports in their journeys, leading to a reduction in loading and unloading capacity in Vietnamese ports. VDSC estimated that container throughput in Hai Phong ports could be reduced by 10-15% in the first 2 months of this year.

Sales of logistics businesses to halve due to Covid-19

Regarding air freight, all airlines have canceled flights to China, Korea, Hong Kong, etc. and minimized flights from the epidemic area. Freight rates thus are higher than normal. According to statistics of the General Department of Customs, Vietnam's import value from China has decreased by 7% in the first two months of 2020.

In addition, because most of these are raw materials imported for processing for export, if the epidemic is prolonged, Vietnam's export turnover to other markets will be affected, which indirectly affects logistics needs. 

Solutions

To solve the immediate problem, VLA has made a number of proposals to support logistics businesses. Accordingly, VLA proposed a 50% reduction of income tax in 2020, postponement and reduction of social insurance, unemployment insurance and health insurance contributions for affected businesses.

VLA also proposed that the State Bank should consider reducing the base interest rate. Moreover, commercial banks should freeze, reschedule, reduce interest rates, expand loan limits, and restructure loans for businesses heavily affected by COVID-19. Businesses providing cold storage services should be given incentives on the price of electricity (currently the price is 25% -30% higher than electricity for production).

​Tax incentives (such as tax reductions, no late payment penalties) should be granted for restaurants, hotels, and food supply chains. In the event of a prolonged epidemic, VLA recommends that the Government reconsider all taxes and transportation costs such as BOT discounts, tolls, yards, etc.

​>> Which businesses are eligible for an extended tax payment due to Covid-19?

Source: theleader

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Business

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