Digital transformation, green development focuses of Vietnam logistics: official

Vietnam's logistics businesses should focus on digital transformation and green development to improve their capacity and competitiveness, said Tran Thanh Hai, deputy director of the Import and Export Department under the Ministry of Industry and Trade.

How would you evaluate the potential of Vietnam's logistics industry?

Logistics is a service industry that supports the entire process of production, circulation, and distribution of goods. It can be divided into three main segments: warehousing, transportation, and delivery. It includes sea, road, rail, and air transport services, warehouse rental and goods storage services, loading and unloading services, customs clearance services, and delivery services.

Related services include receiving and storing goods, managing information related to the transportation and storage process, dealing with problems such as defective, damaged, expired, and returned goods, inventory, appraisal, technical testing, and insurance services.

Regarding advantages, Vietnam has a favorable geopolitical location in Southeast Asia and the Asia-Pacific region. Since it opened its doors to investment, Vietnam has become a major commodity production center, creating a large source of input goods for the logistics industry.

Vietnam lies in a location where a huge flow of goods passes through, especially the maritime route crossing the South China Sea (referred to as the East Sea in Vietnamese), the gateway on the Asia-Europe regional exchange route, and the gateway to mainland Southeast Asia and southwestern China.

In addition, human resources are abundant. Although workers' qualifications do not immediately meet requirements, they are young and tech-savvy.

An action plan to improve the competitiveness of logistics services by 2025 and the inclusion of logistics services in the Resolution of the 13th Party Congress are important, as well as the socio-economic development master plans of each locality.

What are the results of the action plan to improve competitiveness and develop Vietnam's logistics services?

The Ministry of Industry and Trade has coordinated with ministries, agencies and localities to carry out the assigned tasks in the action plan and its amendments; and devise policies to connect logistics businesses with import-export enterprises.

On the other hand, the Ministry of Industry and Trade is implementing the prime minister's Decision No. 200 dated February 14, 2027 on approving tasks and funding for implementing the action plan, thereby contributing to the rapid development of the logistics industry and supporting businesses. The implementation of Decision 200 has helped Vietnam's logistics industry achieve some notable results.

In 2023, Vietnam’s logistics performance index (LPI) reached 3.3 points, ranking 43rd in the world. It was among the top five countries in ASEAN in this field with a high service revenue growth rate of 14-16% and a scale of about $40-42 billion per year.

It is said that one of the biggest limitations to logistics is infrastructure and human resources. What do you think about this and what solutions are needed to change it?

Logistics infrastructure includes three main groups: transportation infrastructure, logistics center infrastructure and technology infrastructure. Transportation infrastructure consists of roads, railways, waterways and airways along with roads, stations, airports and seaports.

Logistics center infrastructure comprises logistics centers and inland container depots (ICDs), and technology infrastructure includes software systems and electronic equipment for management of processes, transportation, storage and inventory.

In recent times, Vietnam's logistics infrastructure has been increasingly improved, with development investment attention from the government, ministries, sectors and businesses. In particular, newly built and expanded expressways, airports, ports and logistics centers have contributed to improving cargo handling capacity and promoting quick and convenient circulation of goods.

Since 2022, the logistics infrastructure system as well as transportation infrastructure has been developed rapidly and showed high efficiency. Many large, modern projects have been put into operation.

Focused investment in developing transport infrastructure has contributed to the reasonable restructuring of the transport sector, ensuring harmonious connection of transport modes and promoting the strengths of each mode, reducing shipping costs, improving efficiency and quality of transport services, thereby enhancing the competitiveness of the economy.

Statistics show that the country currently has a total road length of about 595,201 kilometers, including 25,560 kilometers of national roads (national highways and expressways), an increase of 7.3% from 2017. In parallel with improved infrastructure quality, road transport quality is improved, significantly shortening travel time.

As many as 23 expressway sections or 1,239 kilometers have been put into use, while 14 others, equivalent to 840 kilometers, are under construction.

Expressways have been built on the backbone traffic axes of the regions, with inter-regional connections, to meet the socio-economic development needs of each region and the whole country, creating favorable conditions for connecting goods sources between localities and developing multimodal transport.

In the railway sector, many efforts have been made to maintain infrastructure conditions to improve safety and shorten running times. Railway density is about 9.5 kilometers per 1,000 square kilometers, on par with the average level in ASEAN and the world.

Regarding inland waterways, infrastructure capacity has been improved thanks to focusing on upgrading and renovating a number of routes in the Northern Delta and Mekong Delta regions. In addition, many estuaries and canals; large, modern deep-sea ports; container ports and ICDs in the southern and northern regions have been put into operation.

Vietnam's seaport system currently has 286 ports, divided into five groups, with a total wharf length of more than 96 kilometers. The volume of goods through seaports in 2022 reached over 733 million tons, an increase of 4% compared to 2021.

Vietnam has established 32 shipping routes, including 25 international and seven domestic ones. In addition to intra-Asia routes, the northern region has operated two routes to North America while in the South, there are 16 routes to North America and Europe, surpassing other Southeast Asian countries (only behind Malaysia and Singapore).

Most ports are associated with the nation’s major economic hubs and regions, and many of them drive international trade as well as development of the entire region.

The country now has 22 airports – nine international and 13 domestic – in operation with a total area of about 11,859 hectares. The northern and central regions have seven each while the south has eight airports.

The large proportion of road transport (up to 60%) is one of the biggest reasons pushing Vietnam's logistics costs. According to experts, road transport remains advantageous within 300 kilometers. It is no longer optimal for longer distances and other means of transport such as railways and waterways have to be used.

However, the majority of goods moving from the north to th south of the country are transported by road, while the transport capacity of the long railway system is not fully tapped.

With respect to human resources, the past 6-7 years can be considered a boom period in university-level logistics personnel training. The number of schools opening logistics majors skyrocketed to 59 by the end of July 2023, enrolling about 5,600 students per year.

Last year, the logistics labor market welcomed about 2,500-3,000 workers trained in the right majors. However, this number cannot meet current and future needs, especially highly qualified personnel.

While drafting a prime ministerial decision approving the Vietnam Logistics Services Development Strategy for the 2025-2035 period (with vision until 2045), the Ministry of Industry and Trade highlighted the need to perform several urgent tasks, including perfecting legal institutions, improving infrastructure to enhancing business competitiveness, developing markets, applying technology and training human resources.

How has this draft progressed?

The Ministry of Industry and Trade is collecting opinions and revising it before submitting it to the Prime Minister.

The latest version sets out a number of breakthrough development goals for the logistics industry. By 2035, the contribution of logistics services to GDP will reach 6-8%, with logistics services seeing an average annual growth rate of 15-20%. Logistics costs will drop to 12-15% of GDP (instead of 16-18%) and Vietnam will rank 35th or higher in the Logistics Performance Index (LPI) in the world.

Notably, the draft adds a number of targets for 2035, including 80% of logistics businesses using digital transformation solutions; 30% of their vehicles switching to using green energy; and 70% of workers receiving professional training, with 30% holding university degrees or higher.

In the period to 2045, the contribution of logistics services to GDP, the average annual growth rate of logistics services, and the logistics services outsourcing rate are expected to reach 12-15%, 10-12%, and 80-90%, respectively. Logistics costs will decrease to 10-12% of GDP and 100% of vehicles will have switched to using green energy.

What advice would you give Vietnamese logistics businesses at this point?

Vietnam currently has about 34,000 logistics businesses, but their operations have not achieved optimal efficiency at some stages.

If they remain content with operations within Vietnam, their competitiveness will weaken, because they will not be able compete with outside competitors and approach international business practices. Therefore, we need businesses pioneer the practice of entering the international market. They must proactively seize opportunities to invest in the international potential of the logistics market.