1. Geographical advantage in Vietnam
Vietnam has a long coastline and many deep-water ports; North – South railway system connecting 21 provinces and cities, Hanoi – Hai Phong, Hanoi – Lao Cai, Hanoi – Dong Dang (Lang Son) railways. Besides that, there is National Highway 1A and Ho Chi Minh Road running from North to South.
With a large population, Vietnam is one of the 20 economies with the largest foreign trade activities in the world. Since the Covid-19 pandemic, e-commerce has developed strongly, so Logistics has become even more attractive.
2. The Logistics market in Vietnam is still under the control of foreign enterprises
The number of Logistic businesses, although only accounting for 1% of the participating scale, accounts for the majority of revenue. The reason is because 89% of domestic logistics businesses are small and medium sized.
Over 90% of Vietnam’s goods are exported by sea, but Vietnamese enterprises only hold 12% of the volume of goods transported by sea. Import and export activities in Vietnam are mostly exported FOB and imported CIF. That is, import and export of goods are all at Vietnamese ports, so the revenue from transportation, insurance, etc., foreign companies are entitled to.
3. High value of goods due to high logistics costs
Logistic costs in Vietnam currently account for about 17-18% of the value of goods. This rate is much higher than the cost in the world (only 10.6%). This cost is so high that transporting goods from industrial parks and export processing zones to seaports is even greater than from Vietnamese seaports to importing country seaports.
Because of high logistics costs, to attract FDI, Vietnam always uses tax incentives. But this solution will no longer work when the Global Minimum Tax is applied. Therefore, experts suggest reducing Logistic costs to respond to “Pillar 2”.
4. Proposal to reduce logistics costs
With geographical advantages, Vietnam can exploit effectively with reasonable logistics costs. In particular, Vietnam’s railway shows many advantages such as fast, safe, large volume, transporting all kinds of goods but has not been used really effectively. Domestic goods can be easily exported by rail through Lao Cai, Dong Dang to the Chinese market, or transiting China to Europe.
Besides, Vietnam needs a true Logistics center. Due to the lack of Logistic system and the absence of a large enough Logistic center, the cost is high, affecting the competitiveness of the product.
(Refer to Investment Newspaper on April 28, 2023)
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