Logistics - the weakness of Vietnamese agricultural products

Despite many development advantages, Vietnam's agricultural exports are gradually losing competitiveness with other countries due to many weaknesses in the logistics industry.

Logistics costs are among the most expensive in the world.

Agricultural products are one of the important export sectors of Vietnam, contributing positively to the overall export turnover of the country. In the period 2011-2016, the value of Vietnamese agricultural products exported had an average growth rate of 12.7%/year. If in 2011, Vietnam had 19 export markets reaching over 1 billion USD, by 2016 it had increased to more than 30 markets.

High logistics costs reduce the competitive advantage of Vietnamese agricultural products. PHOTO: DIEP DUC MINH

According to statistics from the Ministry of Agriculture and Rural Development, by the end of November 2017, the export value of agricultural products had reached 33.14 billion USD, an increase of 13.8% compared to the same period in 2016. In 2017, Vietnam's agricultural, forestry and fishery exports could reach 36 billion USD, with 10 export product groups reaching over 1 billion USD. These are record and encouraging numbers for Vietnam's agricultural sector.

Agricultural products considered to be Vietnam's strengths and main exports are seafood, rice, coffee, vegetables, cashew nuts, tea, rubber, pepper, etc., of which vegetables and fruits are constantly growing in export value.

Despite such great potential, agricultural exports, especially vegetables and fruits, still face many obstacles. One of the reasons why Vietnamese agricultural products are less competitive compared to other countries comes from the “deadly weakness” of logistics. According to statistics, Vietnam is one of the countries with the highest logistics costs in the world and this is what causes Vietnamese agricultural products to lose many opportunities to penetrate the markets of many countries.

Although Vietnam has made significant progress in improving logistics infrastructure and services, there is still much to be done to improve logistics efficiency. The evidence is that according to the World Bank (WB) ranking in 2016, Vietnam ranked 64th out of 160 countries (ranked 48th in 2014) in terms of logistics development and ranked 4th in ASEAN after Singapore, Malaysia, and Thailand. There are 4 points that caused Vietnam's logistics capacity index (LPI) to drop in rank, which are logistics capacity, infrastructure, technology application, and specialized inspection of import and export goods.

A survey by the World Bank also shows that logistics costs account for a large part of the cost of many industries in Vietnam. For example, for the seafood industry, this cost accounts for more than 12%, for wooden products accounts for 23%, for vegetables and fruits 29.5% and for the rice industry accounts for nearly 30% of the cost. Logistics costs in Vietnam are 6% higher than in Thailand, 12% higher than in Malaysia, and three times higher than in Singapore. The high logistics costs have indirectly reduced the competitiveness of Vietnamese goods in the international market. Notably, transportation costs account for a large part of logistics costs, up to nearly 60%.

The Mekong Delta needs a logistics center to be able to export directly to the world. PHOTO: DINH TUYEN

How to solve logistics problems?

Dr. Bui Quoc Nghia, Director of the Vietnam Logistics Institute, said that there are currently more than 3,000 enterprises in Vietnam registered to provide logistics services with about 300,000 customer enterprises using the services. However, all of them are small and medium-sized logistics enterprises, and only have enough capacity to participate in supplying a part of the logistics chain. These enterprises not only do not link with each other but also compete with each other in the direction of reducing prices. Meanwhile, there are currently more than 80 foreign enterprises providing logistics services in Vietnam, including all 20 leading logistics companies in the world such as APL, MitSui, Maert Logistics, NYK Logistics, Logitem, Mol Vietnam... holding 70 - 80% of the market share and arbitrarily setting different types of fees.

According to Mr. Nghia, the main reason why domestic logistics has not developed is due to the lack of synchronous policies and orientations for infrastructure development. Up to now, because the national gateway port system has not been determined, Vietnam's transport infrastructure is still patchy and outdated. It is clear to see the imbalance between railways, roads, waterways and aviation in Vietnam's specific conditions. Typically, road transport has developed the most strongly but is patchy, lacking long-term orientation; railways have hardly developed for many years, still being 1m gauge; waterways in the south, considered a paradise with much potential, are being neglected and encroached upon...

The Government has identified Cai Mep international container port cluster as the national gateway, but has not organized the logistics rear in a reasonable manner, and the flow of goods at ports in the system is still seriously unbalanced.

Improving logistics will give wings to Vietnamese agricultural products. PHOTO: CONG HAN

For the development of the logistics industry, Dr. Nguyen Tuan Hoa, Chairman of the Scientific Council of the Vietnam Logistics Institute, recommends that the state soon develop a national logistics development strategy, on that basis, build appropriate development policies, planning and plans. To do this, the state first needs to soon build a logistics industry database and develop quantitative indicators. Quickly develop 3 national gateway ports in the 3 regions of North - Central - South with modern spatial and functional organization as the foundation for an effective logistics system; build a smart logistics system in agriculture; build a logistics infrastructure suitable for the Mekong Delta river region.

Regarding the Mekong Delta, Mr. Nghia said that in the past, waterways accounted for 80% of the transportation in this region. However, up to now, we have not exploited waterways here to promote efficiency. According to Mr. Nghia, everyone considers waterways in the Mekong Delta important, but only from the perspective of transportation and there are not enough tools or plans to exploit their full potential.

According to thanhnien.vn