How will Vietnam’s logistics industry develop in the future?

VCN- A large number of people, a small market share and mostly working as subcontractors or agents for foreign companies is what the research results show on Vietnam’s transport and logistics market by Vietnam Assessment Report Joint Stock Company (Vietnam Report).

Currently, there are over 4,000 transport and logistics companies in Vietnam.

Large in quantity but weak in quality

According to the research results of Vietnam Report, there are more than 4,000 transport and logistics companies in Vietnam, providing diverse and comprehensive services from transporting goods to paying taxes or making payments, of which 88 percent are domestic enterprises, 10 percent are joint-venture enterprises and 2 percent are foreign enterprises, mainly concentrated in the two big cities of Hanoi and Ho Chi Minh City.

However, the competitiveness of Vietnamese transportation and logistics enterprises is still low compared to FDI enterprises. The number of FDI enterprises is smaller, but accounts for 70-80 percent of market share. The main services that Vietnamese logistics businesses provide to customers are basic services, or provide single services.Price competition is key, with little added value, often playing a role as subcontractors or agents for foreign companies such as warehousing services, freight transport, freight forwarding, loading and unloading, sorting services, packaging, and storage. Other services in the logistics service chain are mainly undertaken by FDI enterprises.

Top 8 factors that need to be improved by businesses to increase the quality of the transportation and logistics sector.

There are many reasons, including internal and external factors. They areweak infrastructure, shortage of labor force trained in transport and logistics, inadequate institutions and policies, complicated administrative procedures and high logistics costs. However, the factor with the greatest impact on the operation of enterprises is the low quality of human resources and the ability of corporate governance, leading toincreases in service costs forVietnamese transport and logistics enterprises, and the quality of some services and professionalism are not equal.

Large space for development

According to the 2018 announcement of the World Bank (WB), Vietnam is ranked 39 of 160 countries, an improvement of 25 ranks compared to 2016, with the LPI (logistics performance index) scoreimproved significantly in all indicators, especially the capacity and service quality group, from 2.88 points to 3.4 points. This result is due to efforts in simplifying customs procedures, applying information technology and upgrading infrastructure systems.

In addition, the Government has many policies to facilitate the development of transport and logistics; many trade agreements were signed; the e-commerce market and automation industry is developingstrongly, and infrastructureis improved. That is an important factorfor the development of transport and logistics.

In addition, the transport and logistics industry also has many opportunities due to the US-China trade war, when many Chinese companies moved factories to Vietnam and Southeast Asia. Nearly 91 percent of enterprises in the Vietnam Report survey said that the industry growth in 2020 would increase by 10 percent, many experts said the growth rate would be14-16 percent.

Logistics enterprises need to improve service quality

The research of Vietnam Report also shows that Vietnam’s transport and logistics industry with great development potential can fully participate in the world’s transportation transaction centers. However, in order to participate, 72.73 percent of businesses said that priority should be given to improving the quality of logistics services, enhancing the application of information technology in business activities, and developing competitive price policy because the current trend of developed countries is gradually implementing e-logistics, green logistics, e-documents and applying cloud computing technology, blockchain technology, using artificial intelligence or robots in some services, such as container loading or unloading, loading and unloading goods in warehouses and yards.

Four main development trends of transport and logistics industry.

In addition, businesses need to improve reliability (63.63 percent), deadlines (45.45 percent), responsiveness (45.45 percent), customer policies (36.36 percent) and the quality of human resources (18.18 percent).

In addition, the trend of online shopping is bringing great opportunities for Vietnamese transport and logistics enterprises. The sharp increase in the number of e-commerce businesses – reaching $8 billion in 2018, an increase of 30 percent compared to 2017, and is expected to continue to grow in the coming years, reaching $10 billion by 2020.

At the same time, with increasing online shopping demand, it is creating a development space for delivery service companies with a large volume of delivery and service coverage throughout the provinces, and at the same time, increasing the demand for space to store, classify goods and complete orders. Many businesses have grasped the trend, built and invested in the system of warehouses and logistics centers with the function of providing transport services, completing orders and distribution in a professional manner towards a modern direction with high quality. By early 2019, there are six major logistics centers started construction and put into operation.

In summary, as Vietnam’s economy integrates more deeply with the global economy, the scale of the logistics service market has also expanded, bringing many development opportunities as well as significant challenges for the development of Vietnamese logistics businesses. Enterprises need to have solutions to modernize their modes of operation, upgrade service quality, human resources and financial capacity, so they can better identify their direction.

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