Vietnam Logistics Growth Through Inland, Coastal Investment
By: World Bank January 16, 2014
Two reports released by the World Bank provide new insights on Vietnam's freight logistics sector, including inland and coastal waterways, highlighting that it can be a new driver of growth for the country.
According to Victoria Kwakwa, the World Bank's country director for Vietnam, "many of the country's past sources of economic growth"”such as a shift in economic activity towards higher-productivity manufacturing and a rapidly growing labor force"”are quickly depleting and need to be replaced with new sources of productivity growth. Moreover, Vietnam's exposure to the risks caused by climate change"”such as sea level rise and increasingly unpredictable severe-weather events"”make it imperative for Vietnam to find less carbon-intense development trajectories. We believe that more efficient transport and freight logistics can play a critical role in meeting both these challenges."¯
One report, Efficient Logistics: A Key to Vietnam's Competitiveness, finds that logistics operations in Vietnam are costly relative to key regional peers like China, Malaysia, and Thailand. It is estimated that Vietnam's shippers spend approximately $100m annually in extra inventory carrying costs incurred due to import-export clearance delays; and this amount is projected to reach $180m by 2020. Various factors contribute to the high cost, such as cumbersome and inconsistently applied government regulations and major supply-demand imbalances in infrastructure provision, just to name a few.
However, these drawbacks can be reverted if the country adopts a number of actions, such as minimizing paper-based processes in the customs and technical clearance of imports and exports, and creating "multimodal logistics corridors"¯ where containerized flows on trucks or barges can move on adequate infrastructure and with minimal regulatory delays. Opening the logistics market and promoting a more sustainable supply-demand balance in the trucking industry can also help.