Logistics remains a very new sector in Vietnam and logistics companies themselves still lack professional knowledge, said Mr Bui Ngoc Loan, President of the Vietnam Freight Forwarders Association (VIFFAS).
Could you talk about the importance of logistics in creating competitive advantages for Vietnam?
The calculation of total logistics cost in relation to a country’s GDP reveals the degree of appropriateness and optimization of transport and storage of materials and commodities from pre-production stage to end-user consumption. For example, according to statistics, Vietnam’s total logistics cost currently accounts for 25 percent of GDP, while the rate in China and Thailand is over 19 percent, and in developed countries like the United States and Japan is only about 8-9 percent. If Vietnam can manage to reduce this rate even by just 1-2 percent, it will noticeably impact the competitive advantage of her exports.
Logistics is a powerful tool to support marketing and sales because its ultimate goal is to bring in added value - most importantly, delivering at the right time, right place, with the right quality and right price as customers expect. Hence, countries and businesses must use this advantage of logistics to create and strengthen their market position. In light of its importance, since 2005, ASEAN countries have placed logistics among their 12 priority integration fields.
What are the policies aimed to attract domestic and foreign investors?
Logistics service providers establishing themselves in Vietnam encounter minimal difficulties, with adequate equipment, technical safety and manpower available, except for the typical challenges of operating in road, sea, rail and air transportation. Vietnam has committed to gradually open up logistics services by 2014 for foreign merchants or investors, depending on the types of services they offer. Logistics service providers are protected by Vietnamese law.
But logistics is still a very new field in Vietnam and Vietnamese logistics enterprises themselves do not have sufficient knowledge and understanding about this industry; thus, they often lack proposals for development, while State policies are uncoordinated and unclear. As a result, this market has not developed. The limitation of buying on FOB and selling on CIF practices or outsourcing logistics also has put a brake on the development of this market.
For its role, VIFFAS recommends the Government adopt policies encouraging the development of the logistics services market in Vietnam (called outsourcing logistics or 3PL - third party logistics) to create a level playground and nourish logistics service providers in Vietnam. This is also a lever to reduce logistics costs to increase the competitive advantage of imported and exported goods and services of Vietnamese enterprises.
We need a proper regime for 3PL service providers. We should provide incentives while ensuring the capacity and professionalism to compete with foreign rivals.
In 2014, we should remove restrictions to allow foreign 3PL and 4PL service providers to set up joint ventures or wholly foreign-owned units to support local companies, as they have advantages in capital, skills and technology.
Could you describe the primary logistics strategies and programmes for the 2011-2020 period?
This is a difficult question! This question must be raised to the Government and relevant ministries. Vietnam has not had a national committee for logistics (this is also a recent recommendation of the Vietnam Freight Forwarders Association); thus, we do not have a specialised agency to map out a logistics planning strategy for the 2010-2020 period. In its capacity, VIFFAS has taken part in outlining some prioritised strategies and proposing important programmes for 2010-2020 as follows: Logistics cost reduction and human resource training; logistics restructuring; and logistics IT promotion and networking strategies.
Key logistics programmes (2011-2020) include developing logistics parks with proper scales and locations in the north and south to serve the demands for international container transportation via international seaports and airports, as well as cargo transhipment for industrial for export processing zones; developing logistics parks together with upgrading border gates (like Lao Cai to promote trade with China, followed by Lang Son, Moc Bai and Lao Bao border gates); and diversifying the development of distribution centres in big cities across the country to serve retail markets and logistics centres near industrial and processing export zones.
What are VIFFAS’ viewpoints and logistics development objectives until 2015 and in subsequent years?
In my opinion, VIFFAS needs to convey the following standpoints and objectives to Government authorities and companies, including logistics service providers: Logistics is a key driving force to promote socioeconomic development, particularly boosting domestic trade, import and export, and the supply and distribution of goods and services to meet consumer needs.
Connecting domestic and international logistics is a prerequisite for regional and international economic integration. Providing training in logistics management skills and supply chain management for all levels of authorities and enterprises has practical significance in the current economic restructuring. Reducing Vietnam’s logistics costs relative to GDP (currently about 25 percent) will significantly contribute to the successful implementation of social and economic objectives. Logistics is the chance to upgrade products and services to meet domestic consumption, improve national competitiveness and accelerate international economic integration. Full 3PL-oriented (integrated third party logistics service) logistics is a competitive strategy to develop the domestic logistics market to the regional and international levels, requiring guidance and support from the Government and concerned authorities. E-logistics development along with e-commerce and efficient supply chain management is also a key trend of our time.
Could you talk about the importance of logistics in creating competitive advantages for Vietnam?
The calculation of total logistics cost in relation to a country’s GDP reveals the degree of appropriateness and optimization of transport and storage of materials and commodities from pre-production stage to end-user consumption. For example, according to statistics, Vietnam’s total logistics cost currently accounts for 25 percent of GDP, while the rate in China and Thailand is over 19 percent, and in developed countries like the United States and Japan is only about 8-9 percent. If Vietnam can manage to reduce this rate even by just 1-2 percent, it will noticeably impact the competitive advantage of her exports.
Logistics is a powerful tool to support marketing and sales because its ultimate goal is to bring in added value - most importantly, delivering at the right time, right place, with the right quality and right price as customers expect. Hence, countries and businesses must use this advantage of logistics to create and strengthen their market position. In light of its importance, since 2005, ASEAN countries have placed logistics among their 12 priority integration fields.
What are the policies aimed to attract domestic and foreign investors?
Logistics service providers establishing themselves in Vietnam encounter minimal difficulties, with adequate equipment, technical safety and manpower available, except for the typical challenges of operating in road, sea, rail and air transportation. Vietnam has committed to gradually open up logistics services by 2014 for foreign merchants or investors, depending on the types of services they offer. Logistics service providers are protected by Vietnamese law.
But logistics is still a very new field in Vietnam and Vietnamese logistics enterprises themselves do not have sufficient knowledge and understanding about this industry; thus, they often lack proposals for development, while State policies are uncoordinated and unclear. As a result, this market has not developed. The limitation of buying on FOB and selling on CIF practices or outsourcing logistics also has put a brake on the development of this market.
For its role, VIFFAS recommends the Government adopt policies encouraging the development of the logistics services market in Vietnam (called outsourcing logistics or 3PL - third party logistics) to create a level playground and nourish logistics service providers in Vietnam. This is also a lever to reduce logistics costs to increase the competitive advantage of imported and exported goods and services of Vietnamese enterprises.
We need a proper regime for 3PL service providers. We should provide incentives while ensuring the capacity and professionalism to compete with foreign rivals.
In 2014, we should remove restrictions to allow foreign 3PL and 4PL service providers to set up joint ventures or wholly foreign-owned units to support local companies, as they have advantages in capital, skills and technology.
Could you describe the primary logistics strategies and programmes for the 2011-2020 period?
This is a difficult question! This question must be raised to the Government and relevant ministries. Vietnam has not had a national committee for logistics (this is also a recent recommendation of the Vietnam Freight Forwarders Association); thus, we do not have a specialised agency to map out a logistics planning strategy for the 2010-2020 period. In its capacity, VIFFAS has taken part in outlining some prioritised strategies and proposing important programmes for 2010-2020 as follows: Logistics cost reduction and human resource training; logistics restructuring; and logistics IT promotion and networking strategies.
Key logistics programmes (2011-2020) include developing logistics parks with proper scales and locations in the north and south to serve the demands for international container transportation via international seaports and airports, as well as cargo transhipment for industrial for export processing zones; developing logistics parks together with upgrading border gates (like Lao Cai to promote trade with China, followed by Lang Son, Moc Bai and Lao Bao border gates); and diversifying the development of distribution centres in big cities across the country to serve retail markets and logistics centres near industrial and processing export zones.
What are VIFFAS’ viewpoints and logistics development objectives until 2015 and in subsequent years?
In my opinion, VIFFAS needs to convey the following standpoints and objectives to Government authorities and companies, including logistics service providers: Logistics is a key driving force to promote socioeconomic development, particularly boosting domestic trade, import and export, and the supply and distribution of goods and services to meet consumer needs.
Connecting domestic and international logistics is a prerequisite for regional and international economic integration. Providing training in logistics management skills and supply chain management for all levels of authorities and enterprises has practical significance in the current economic restructuring. Reducing Vietnam’s logistics costs relative to GDP (currently about 25 percent) will significantly contribute to the successful implementation of social and economic objectives. Logistics is the chance to upgrade products and services to meet domestic consumption, improve national competitiveness and accelerate international economic integration. Full 3PL-oriented (integrated third party logistics service) logistics is a competitive strategy to develop the domestic logistics market to the regional and international levels, requiring guidance and support from the Government and concerned authorities. E-logistics development along with e-commerce and efficient supply chain management is also a key trend of our time.
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