Vietnam is in course to emerge as a major transport and logistics hub in ASEAN—Association of Southeast Asian Nations. The rise in Foreign Direct Investment (FDI) and growth in country’s export bound manufacturing is pushing the demand for robust transportation and logistics sector in the country.
It (Vietnam) attracted commendable FDI of over US $30 billion last year whereas manufacturing sector witnessed significant growth at over 20% in 2017. Driven by surging FDI and swelling manufacturing, logistics is expected to increase by double digit standing in between 10% to 12% each year till 2020.
Moreover, Vietnam’s Free Trade Agreement with the EU, Trans-Pacific Partnership (TPP) and economic integration with Asian nations will provide further boost to nation’s logistics sector.
According to media reports, the TPP is likely to enhance country’s export by 28% over a decade witnessing significant yield in trade volumes.
This will ultimately benefit nation’s logistics infrastructure because it (infrastructure) needs significant expansion and robust upgrade to manage and facilitate the increasing flow of goods.
In order to upgrade its logistics, the government of Vietnam recently permitted foreign investors to set up completely foreign-owned logistics services providing companies in the country under the decree number 163/ND-CP. The decree will come into force on February 20, 2018.
The newly promulgated decree is predicted to attract foreign investors and encourage them to invest in logistics sector as it is one of the most promising and lucrative industries of Vietnam with tremendous opportunities.
However, logistics highly depends on the transportation infrastructure—port network, road and rail connectivity. And to take the maximum benefits of country’s trade agreements particularly from TPP and decree 163, Vietnam has been upgrading its transportation sector, too. This will not only propel country’s export-based trade but will also help in luring foreign investors in logistics space. It is because upgraded transportation of international standard gives competitive advantage to country’s logistics service providers in comparison to other nations.
The involvement of foreign investors in logistics sector will streamline the processing procedures for both—imports and export bound freight—with higher efficiency. It will enhance online services resulting decrease in goods clearance times.
According to General Department of Customs, the country aims to reduce imports and exports clearance time by 80 and 60 hours, respectively by the end of 2020.
At present, imports take 138 hours whereas export require 108 hours for the clearance.
The projected improvement of this Southeast Asian nation’s logistics and transportation will bring Vietnam on the same platform as those of other countries of the region. This will boost country’s competitiveness and reduce logistics costs significantly which is as high as 25% of GDP at present, quite above Malaysia—13% and China—18%.
Hence, the streamlining of Vietnam’s logistics and the development of transportation infrastructure will not just help the nation in taking optimal benefit of TPP but also make the nation a key transport and logistics hub of the region—ASEAN.
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Subarna Poudel is a researcher with Frost & Sullivan. He can be reached at firstname.lastname@example.org
Sapan Agarwal drives content and marketing for Frost & Sullivan. Sapan is based out of Kuala Lumpur Malaysia and can be reached at email@example.com | +603 6204 5830