High transport costs weigh down businesses

The total expenses for logistics services in Vietnam are estimated at 21 percent of GDP, much higher than 9-14 percent in developed countries.


High transport costs weigh down businesses




In mid-March, a group of young people from HCMC visited the Mang Den national ecotourism site in Kon Tum province to learn about the possibility of developing hi-tech agriculture there. 
Most of the group’s members said the climate and soil conditions were good, as well as the local policies.
However, they still have to think carefully about whether to invest in Mang Den as they anticipate that the transport costs would be very high. Mang Den is far from large consumption areas. 
Meanwhile, there is one toll collection station every 100 kilometers of road.
The total expenses for logistics services in Vietnam are estimated at 21 percent of GDP, much higher than 9-14 percent in developed countries.


The World Bank’s most updated report on the farm produce supply chain showed that Vietnam had 48.4 of 100 score in farm produce trade, lower than the Philippines, Cambodia and Laos. The weakness in transportation was one of the reasons.
At a workshop held in early 2017, a senior official of the Ministry of Industry and Trade (MOIT) said the cost to carry shrimp from Mekong Delta in the south to the northern border area is even higher than the cost from Ecuador to Vietnam.
The total expenses for logistics services in Vietnam are estimated at 21 percent of GDP, while the figures are 9-14 percent in developed countries.
Nguyen Tuong, deputy secretary general of the Vietnam Logistics Association (VLA), said transportation costs account for 60 percent of total expenses on logistics services, while inventory costs are 36 percent and management 4 percent. 
According to the Ministry of Transport, land transport undertakes 70 percent of the workload in the North-South transport market. Of the land transport cost, fuel accounts for 30-35 percent, while tolls are 10 percent. As for short-distance transport, the expenses for fuel are even lower than the tolls.
Under-the-table fees on land transport are relatively high, at no less than 5 percent.
The report released at the conference on developing trade cross-border through the east-west corridor held in Da Nang in late 2016 showed that the road fee has increased from VND60,000-80,000 to VND200,000 for one vehicle. 
In the past, goods owners had to pay VND1 million for one vehicle from the Highway No 14 to HCMC, but now, the fee is VND3 million. This does not include the border gate fee.
The Ministry of Transport is considering restructuring the transport industry in 2016-2020 by reducing land transport, while increasing the railway, maritime, domestic waterways and air transport.
Land transport would account for 54.4 percent of the market share by 2020, while railway is 4.3 percent, domestic waterways 32.4 percent, maritime 8.85 percent and airways 0.04 percent.


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