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Logistics costs ‘far too high'
Inadequate transport infrastructure has kept logistics prices far too high compared to other countries in the region, a conference orgainised by the Viet Nam Supply Chain Community on Wednesday heard.
"Due to the current relatively poor infrastructure, mainly the highway system, lead time is one of the key challenges for every manufacturer to get their raw materials and finished goods delivered on time in full," Mike Gildea, CEO of global logistics company Agility in Southeast Asia region told the conference in HCM City.
Gildea said the problem was becoming increasingly apparent as political stability, low inflation rate and cheap labour costs attracted more foreign investors to the country.
In early 2000, high tech manufacturers including Canon, Fujitsu, LG, Intel and Nokia started to invest in Viet Nam and market access and regulatory conditions had continued to improve after accession to the WTO in January 2007, he said.
However, in the 2008 World Economic Forum's Enabling Global Trade report, out of 118 countries Viet Nam ranked 112th for market access, 75th for transport and communication infrastructure and 62nd for business environment.
Despite these lackluster scores, it remains one of the most attractive destinations for foreign investment.
Of the country's 114 ports, only 14 met international standards that would attract large freight forwarding companies to invest in, Gildea said.
"Overall the Vietnamese logistics market has a long way to go but most logistics services, including transportation, warehousing and yard storage of goods and cargo are done by foreign companies," he said.
With the small and limited ability of local companies, including out-of-date technology, the companies can only offer basic services.
In addition, congestion at most of Viet Nam's major ports had impeded the smooth flow of traffic while the increase in hinterland investment had made the situation acute in recent years, Agility's CEO said.
"With 70 per cent of Viet Nam's inbound and outbound cargo processed at ports in HCM City, backlogs are becoming acute," he added.
Jim Winkler, director of USAID's Viet Nam Competitiveness Initiative project, called on the country to develop public-private partnerships with central and provincial authorities to improve service delivery at the critical points in logistics infrastructure and supply chain including cold storage, airport and port cargo handling and repair and maintenance services.
Barry Akbar, managing partner of APL Viet Nam, said besides construction of terminals, the nation should develop road and bridge infrastructure in conjunction with terminal.
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