The report notes that at the same time as Vietnam is seeking to come to terms with the global economic slowdown, weak infrastructure and high inventory levels are proving to be a significant drag on its economic development.
Logistics costs in the market are estimated to be 20-25 per cent of Vietnam’s GDP, a ratio far higher than that in developed economies such as the US and higher even than in other developing economies such as China. These high costs have hindered Vietnam’s efforts to take advantage of its cheap labour resource and develop the national export economy, the report said.
It goes on to say that this is the result of a combination of over-stretched and ageing transport infrastructure, including ports, airports, road and rail; inefficient bureaucracies (e.g. customs clearance delays); and the unwillingness of Vietnamese manufacturers to outsource to foreign 3PLs (third party logistics providers). The report additionally finds that a substantial proportion of Vietnam’s logistics costs can be attributed to high inventory holdings.
But on the bright side, the report also finds that this situation is gradually changing. The Vietnamese government has invested billions of dollars in the country’s infrastructure and this investment is slowly beginning to pay dividends.
In addition, the government is encouraging foreign direct investment in projects such as the new Long Thanh airport, near Ho Chi Minh City which will only be completed in 2015 and the Cai Mep Container Port near Ho Chi Minh City in the Mekong River delta.
One of the most obvious logistics-related benefits to Vietnam from increased investment in transport infrastructure has been enhanced road links with its neighbours. The Kunming-Hekou- Hanoi-Haiphong Corridor has allowed road freight operators such as TNT and Kerry Logistics to connect the country to their regional ground networks, bypassing ports and airports and hence reducing international freight costs by up to 30 per cent.
Although things are improving, the report also noted that the speed of infrastructure development in Vietnam is much slower than that in its neighbour and rival, China. “Large inventory holdings and slow moving supply chains will delay the Vietnamese economy’s recovery, post global recession,” the report concluded.