Monday 11 September, 2017

OPPORTUNITIES AND CHALLENGES Logistics was introduced to Vietnam around 20 years ago. Although revenue from logistics remains relatively low at around 2-4% of GDP per year (with the remainder largely in the hands of foreign multinational companies).

Logistics was introduced to Vietnam around 20 years ago. Although logistics revenue remains relatively low at around 2-4% of GDP per year (while approximately 80% of the market is held by foreign multinational companies), the sector has grown rapidly at 20-25% per year. Logistics plays an indispensable role in production, circulation and distribution worldwide. It is also a driving force for the harmonious and sustainable development of seaports and the marine economy, contributing to a country’s socioeconomic efficiency. Logistics activities account for approximately 10-15% of annual GDP in developed countries in Europe, North America and the Asia-Pacific region.

The logistics development trend in this century is globalization based on modern information technology and e-commerce, together with the widespread use of pull-based logistics management to gradually replace the traditional push method. The objective is to create added value, reduce transportation costs and expand the outsourcing of services to professional logistics companies. With the world economy facing a prolonged crisis and Vietnam’s macroeconomy under inflationary pressure, opportunities and challenges need to be carefully weighed before decisions are made regarding the development of this emerging economic sector. Opportunities and challenges are intertwined throughout the development process, but the fundamental favorable conditions remain significant.

Container traffic is expected to grow by 17% per year, while national export turnover is projected to reach USD 500 billion in the coming years. At the same time, sea freight costs are expected to move closer to global levels (transportation currently accounts for 40-60% of Vietnam’s total logistics costs), helping stabilize and develop logistics into an important industry contributing around 15% of national GDP annually. Challenges remain. Although Vietnam has around 1,000-1,200 logistics enterprises—more than Singapore and Thailand—about 80% have registered capital of only VND 1-1.5 billion. This modest capital base reflects the sector’s financial limitations and helps explain why Vietnamese companies hold only around 20-25% of the domestic logistics market.