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Contents
I. Introduction
IV. Current Status of Logistics in
Vietnam
II. Literature Review
V. Conclusion
III. Methodology
Abstract
The purpose of this research is to present and analyse the current situation
regarding the capability of the national logistics system in Vietnam. A
national assessment framework for macro-logistics is utilised in combination
with semi-structured interviews of key Vietnamese stakeholders to reflect on
the current situation in the country. There are still numerous shortcomings in
the Vietnamese logistics system. These shortcomings are not purely
infrastructure based but also from a regulatory and commercial perspective.
The presented national logistics system assessment framework can be
replicated in other countries or regions when assessing national logistics
capability. The findings can help foreign investors, international logistics
providers wanting to provide their services in Vietnam to understand the
logistics context within the country. These findings are also helpful for
policy makers in Vietnam on how to improve their national logistics system.
This study proposes a template to assess national logistics systems and
provides an in-depth understanding of logistics in Vietnam, a country that
has not been much studied in the literature.
Copyright གྷ 2015, The Korean Association of Shipping and Logistics, Inc. Production and hosting by Elsevier B.V.
All rights Reserved. Peer review under responsibility of the Korean Association of Shipping and Logistics, Inc.
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Assessing the National Logistics System of Vietnam
I. Introduction
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Assessing the National Logistics System of Vietnam
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Assessing the National Logistics System of Vietnam
and sorting facilities. On the other hand, linear infrastructures are links that
connect nodes in the national logistics system. They typically consist of
pipelines, roads, waterways, and airways.
Although the provision of infrastructures is a key aspect of national
logistics systems, Banomyong (2008) suggested that the assessment of
national logistics systems should be holistic. The author proposed three
additional dimensions to evaluate the performance of national logistics
systems. They are shippers and consignees, service providers, and the
institutional framework. The introduction of these dimensions further
emphasized that a national logistics system should cater to and integrate
with its users, which in this case refer to service providers, shippers, and
consignees. In addition, institutional framework concerning imports and
exports, financial regulation, registration and licensing of service providers,
and customer procedures should be business-oriented and facilitates the
movement and storage of freight on the existing infrastructures.
Meanwhile, logistics plays a key role in the national economy of
Vietnam in two significant ways. First, logistics is one of the major
expenditures for businesses, thereby affecting and being affected by other
economic activities. Second, logistics supports the movement of many
economic transactions; it is an important aspect of facilitating the sale of
all goods and services (Grant et al, 2006). According to the World Bank’s
Trade and Transport Facilitation Assessment (World Bank, 2010), the
logistics expenditure in Vietnam is estimated at about 20% of GDP.
Logistics is not just confined to within Vietnam’s national border or
market, as Vietnamese export and import firms face logistics attributes
that differ from those experienced in their domestic market. International
logistics management requires an understanding of the relative
transportation efficiencies in different countries. It requires Vietnamese
traders and manufacturers to understand the transportation capabilities and
characteristics of the country’s primary trading countries. According to
Grainger (2007), there exist within international logistics a complex
cross-border environment in which government actors play a critical part.
Moreover, wasteful transaction costs arise in cross-border operations
between business actors and government executive agencies.
The role of logistics related authorities in Vietnam need to be clarified
as there is much confusion on national logistics development strategies
(ADB, 2010). This is echoed in World Bank (2014) which identified
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III. Methodology
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Assessing the National Logistics System of Vietnam
Logistics
Academia x Foreign Trade University 2
Education
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Inland
21.19% 18.93% 18.14% 19.4% 16.63% 18.08% 17.56%
waterway
Sea
10.23% 10.04% 8.44% 9.9% 7.58% 7.22% 6.41%
(Coastal)
Air 0.03% 0.03% 0.02% 0.02% 0.03% 0.02% 0.02%
Source: General Statistical Office of Vietnam (2014)
Despite a long railway across the country from the North to the South,
cargo volumes transported by rail are small and tend to decrease even
further over the years. This is due to the inflexibility and unreliability of
rail compared to other modes of transport such as road in Vietnam which
discourage shippers from using rail freight service. Another important
factor is that the investment in rail infrastructure has been slower than that
of other modes, reflected in the number of new investment projects in the
rail sector, which hinders the improvement in service quality of the sector.
This is quite alarming for the future of rail freight operations as the ratio
for 2012 continues to decline.
In 2009, even though a number of Vietnamese shipping companies
reacted to the global crisis by transferring tonnage to the domestic coastal
market (North-South transportation); it was observed that the share of
Vietnamese coastal transport only increased to 9.9% of total cargo volume
compared to 8.4% in 2008. Nonetheless, the share of coastal transport
lowered down again to 7.58% in 2010, 7.22% in 2011 and 6.41% in 2012,
which represented a significant drop in its modal share. It is also
interesting to note that the share of inland waterway suffered a strong
decrease in 2010 compared with the relative increase in 2009, from 19.4%
to 16.63%. This reduction in the share of river and coastal is partly
because of the reduction in trade cargo volume and also due to the
improved road infrastructure that offered shippers another solution to
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transport their cargo from the source of supply to the ports for export, and
vice versa.
The Vietnamese government has approved a general transport
development plan until 2020 and a vision for 2030. Each transport mode
has even formulated its own strategic development plan:
In May 2010, Maersk Line began direct service to Cai Mep on the
eastbound leg of its trans-Pacific 6 (TP6) service. In late April 2010, the
Grand Alliance added a call at Cai Mep, Vietnam's first deep-water
container port, to its trans-Pacific SCX service. Alliance carriers
Hapag-Lloyd, NYK Line and OOCL also call at Cai Mep as part of the
Asia East Coast Express service, which transits the Suez Canal. "K" Line
and MOL also operate between Cai Mep and the U.S. East Coast via the
Suez Canal. The SVE (South China-Vietnam-East Coast) service operated
jointly by “K” Line and MOL, replaces an existing service operated by
"K" Line. The New World and CKYH alliances also offer direct
connections through Cai Mep. Cai Mep port has become a key deep sea
port that will further support economic development and trade growth in
Vietnam.
Other seaports such as Haiphong, Cai Lan, Saigon New Port, Vietnam
International Container Terminal (VICT), and Danang are relatively well
equipped and have the capability to handle modern vessels and containers
but not the large vessels. Modern equipment and operating systems aimed
at improving handling efficiency such as full truck scanners, automated
gate entry, commercial information and communication technology
systems, etc., are not yet widely available in Vietnamese seaports. The
terminals at Saigon New Port and VICT are leading in that respect.
Ports in Vietnam are grouped based on geographic regions – north,
central and south. Each region has designated major ports, small
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Assessing the National Logistics System of Vietnam
There are more than 200 foreign shipping lines operating liner and
container services to Vietnam both directly and indirectly through feeder
networks with feeder containers vessels that link Vietnam to nearby
hub-ports such as Singapore, Hong Kong or Kaohsiung, where containers
are trans-shipped to worldwide destinations by mother vessels. In this
connection, ports play an increasingly important role in the supply of
integrated transport and logistics services. The development of ocean and
river ports, inland clearance depots and logistic parks can be seen as an
indispensable step for Vietnam to enable the promotion of domestic and
international logistics services (JICA, 2010). While port development
generally entails important infrastructure work, it is equally important that
a framework be created for corresponding services to be provided of a
quality required by Vietnam’s business community.
Maritime connectivity, which includes the improvement of maritime
service quality (Thai, 2008), can also be expected to play an increasingly
important role in the further integration between the Association of South
East Asian Nations (ASEAN) countries, a process which has, up to now,
very much been land transport oriented. Vietnam based on its central
location within ASEAN and its heavy reliance on trade with China and,
albeit to a lesser extent, with Thailand has the potential to gradually
develop into a maritime hub for intra-ASEAN and wider regional trade.
For this to happen, however, it is essential that the above mentioned port
related shortcomings be adequately addressed and the maritime sector be
fully integrated into a broader logistics system.
2) Inland Waterway
transport during the transport process that occurs before the main sea
transport leg. Trade with Phnom Penh, Cambodia is largely carried by this
mode of transport using barges.
The major routes linking seaports with the hinterland include those of
Haiphong - Hanoi, Nam Dinh - Viet Tri in the North; Saigon - Rach Gia, Ha
Tien, Saigon - Can Tho - Ca Mau in the South. Some inland waterways ports
also have rail connectivity with services, however, are used to a limited extent
only. Some major inland clearance depot around Haiphong and Hongai has
distribution facilities or a Free Trade Zone located within or next to inland
waterways terminals. These facilities include customs bonded storage where
cargo can be stored for re-export or local distribution. Similar to maritime
transport, inland waterway transport’s carrying capacity is quite high and its
cost is relatively low in comparison with other transport modes.
Although inland waterway transport of goods has increased over the last
few years, Vietnam's river system, especially in the Northern area, has not
been exploited to its potential. The Mekong river system is comparatively
well developed. One reason is that only about 40% of the river system in
Vietnam is regularly dredged and consequently navigable all year round.
Difference in water level and permissible draft between the rainy season
and the dry season is also very high, especially in the South, which
adversely impacts cargo carriage during the year.
3) Roads
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Assessing the National Logistics System of Vietnam
Road traffic accounts for more than 70% in terms of domestic cargo transport
volume. In general, road quality needs to be improved in order to ensure
un-impeded vehicle movement. Traffic density in major urban areas has led to
general bans on trucks operating within the city limits, while limited capacity of
bridges and bad roads are affecting cargo transport, especially container haulage.
As an example, container movement by road is prohibited in many Mekong
Delta provinces due to bridge limitations and poor road conditions. Road access
to big seaports such as Hai Phong port, Da Nang port and Saigon ports needs to
be rapidly rehabilitated and some must be newly built to help local logistics
services providers expand their activities to neighboring countries for transit and
border trade with China, Cambodia and Lao PDR.
As far as equipment is concerned, there are both trucks and articulated
vehicles (8-14 wheel combination of tractor and semi-trailers). However, a
significant portion of the commercial trucking fleet (6 wheels and above)
is rather old (10 years or older). Despite capacity limitations and
infrastructure shortcomings, road transport is highly flexible and remains
by far the first choice of domestic consignors in Vietnam.
4) Rail
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Assessing the National Logistics System of Vietnam
The railway network is mainly used for passengers and for domestic
cargo movements. Carrying capacity of Vietnamese trains is still limited,
both with regard to single wagon capacity as well as to train length and
traction power. Tracking system particularly designed for freight
transportation is not available. A central train control system for
monitoring train movements with train identification and automatic route
setting or other types of advanced train control systems have not been used
but 24-hour freight train terminal operations are available in certain
locations. Frequent service interruptions due to weather conditions can be
observed especially in the central region of the country.
Container transport by rail is minimal, as Vietnamese shippers prefer road
transport given rail inefficiency combined with long and unpredictable transit
times. The Vietnamese railway has only 500 flat beds wagons designed for the
carriage of containers among a total of 5000. The numbers of stations with
container loading and unloading equipment are few. Container carriage by rail
transport mainly takes place on two routes: Haiphong - Yen Vien - Viet Tri -
Lao Cai and the North - South railway. There is now a greater demand for the
Haiphong - Yen Vien - Viet Tri - Lao Cai route and vice versa as this is a
difficult route for road transport. Specific statistics of container carriage
measured in TEU are still not available, but the total movement has been
estimated to some 8.4 million tons in 2008.
Vietnam’s railway system has been connected to China through the Lao
Cai border gate since 1996, after a service disruption in 1975. Since 1996,
cargo volume transported between the two countries has slowly increased
and trade with South China will require further rail support. There is the
prospect of running trains in transit on this route from Haiphong seaport to
Kunming (China) and vice versa, a connection which would eventually
become part of the Singapore to Kunming railway line (SKRL) project.
However, in December 2010, the Chinese authority stopped the usage of
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Assessing the National Logistics System of Vietnam
the metre gauge and focus solely on standard gauge for rail transport
between Hekou and Kunming. This wouldl severely impact the railway
connectivity between Lao Cai (Vietnam) and Hekou (China).
5) Air
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Assessing the National Logistics System of Vietnam
In the North of the country, there are currently eight ICDs that were
established to serve 50 main industrial zones that are spread along major
trunk roads connecting between Hanoi and Haiphong port. This transport
route is sometime referred to as the Northern Gateway Corridor or the
Hanoi - Haiphong industrial belt.
In the South of the country, there are nine ICDs established to serve
around 70 Industrial Zones spread geographically over Ho Chi Minh City,
Dong Nai, Binh Duong, and the Ba Ria – Vung Tau area. Most of the
established in the South have been developed and located around Saigon
port. However, as the container traffic concentration point will drastically
shift from near the city centre to Cai Mep area in coming years and down
south to Vung Tau in the future, the strategic location suitable for logistics
operations or location of ICD should be studied carefully for its capacity
expansion to meet with increased demand of services in new locations.
The majority of ICDs in Vietnam were established between 2003 to
2008 and two relatively large scale ICDs were just commissioned in 2010
in the North (ICD Hai Duong and ICD My Dinh). The ICDs that were
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Assessing the National Logistics System of Vietnam
ˍ In a case where a client does not provide prior notice of the value of
the goods, the maximum liability shall be 500 (five hundred) million
dong applicable to each claim for compensation.
ˍ In the case where a client provided prior notice of the value of the
goods and this was verified by the logistics service provider, then the
limitation on liability shall be the entire value of such goods.
ˍ In the case where a logistics service provider organises a number of
work stages which stipulate different limitations on liability, the
limitation on liability of a work stage shall be the highest limitation of
any one work stage.
On the other hand, Decree 125 sets the liability limitation for MTO
which is 666.67 Special Drawing Right (SDR) per package or two SDR/kg
which is based on the Hague-Visby 1979 protocol maritime liability rules.
Therefore, it is necessary to revise the contents of these regulations in
detail in order to assure the unity of the legal and institutional framework
for logistics activities in Vietnam in the future.
International agreements such as the ASEAN Framework Agreement on
the Facilitation of Goods in Transit, ASEAN Framework Agreement on
Multimodal Transport, the ASEAN Framework Agreement on the
Facilitation of Inter-State Traffic and the GMS Cross Border Transport
Agreement (CBTA), to which Vietnam is a party and which aim at
reducing or eliminating trade obstacles, have impacted on logistics
activities in Vietnam. Bilateral agreements as well as annexes and
protocols to the CBTA, grant traffic rights to foreign vehicles and permit
trucks and containers to cross the border to deliver/collect exports/imports
without requiring transshipment at the border.
In ASEAN, Vietnam has taken the lead in terms of its commitments
related to logistics service market access in comparison to other ASEAN
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<Table 8> Comparative compliance to ASEAN logistics sector roadmap
Lao
Sector Brunei Cambodia Indonesia Malaysia Myanmar Philippines Singapore Thailand Vietnam
PDR
Maritime cargo 9 9 9 9 9 9 9
handling services
Maritime International 9 9 9 9 9 9 9 9 9 9
freight transportation
International rail 9 9 9 9
freight transport
services
International road
freight transport 9 9 9 9 9 9 9
services
Source: Author (2015)
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V. Conclusion
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growth of those LSPs; hence, they may consider establishing joint venture
with local education and training providers to develop the workforce.
For policy makers, the current status as analysed and highlighted in this
research can lead to actions needed to enable a future state that could
reflect an improved overall Vietnamese logistics system. For instance, to
overcome the flaws in the current institutional framework, the Government
may consider establishing a national research institute which acts as a
government’s think-tank and works closely with relevant government
agencies and national logistics and shippers associations so as to devise a
roadmap for national logistics development – the future state. This future
state will also need to be aligned with global and regional logistics related
development. Specifically, reference will need to be made to ASEAN and
GMS logistics development policies and directions as both impacts
directly on Vietnam’s logistics future development. There are obviously
many improvements to be done in Vietnam in preparation for the country
as part of the ASEAN Common Economic Community. Therefore, future
research on developing measures to enhance the national logistics system
in Vietnam is recommended.*
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