Efficient Logistics

Book excerpt: Vietnam has attained a strong record of economic growth and poverty reduction since the adoption of market-based economic reforms and pro-poor policies starting in the mid-1980s. Much of this achievement was driven by an untapped, rapidly-growing labor force and the enablement of greater labor participation in higher-productivity sectors of the economy. Yet, as Vietnam has restructured its economic activity towards manufacturing, more mechanized primary sector production and, increasingly, services, and as the labor force is projected to expand at a markedly lower rate than before, finding new sources of productivity improvements has become the key to sustaining economic growth going forward. Improvements in freight logistics can unlock productivity gains across the Vietnamese economy for years to come. The shippers and carriers that operate the supply chains that connect Vietnam to the global economy generally perceive that logistics costs in Vietnam—those incurred when moving, storing and inspecting goods—are more onerous than in peer economies like China, Malaysia and Thailand, even as they are also perceived to be more competitive than those in other developing Asian countries. While many factors may contribute to costly logistics, the main source of underperformance in Vietnam’s logistics sector appears to be the inventory-carrying implications of unreliable freight itineraries, unpredictable inspection and clearance procedures, and an uncertain planning, legal and regulatory framework. By making commerce more predictable, particularly for regional and inter-continental trade, more efficient logistics can lower the cost of doing business, boost competitiveness, attract investment and generate employment. In short, efficient logistics can become a driver of lasting growth. Directed at industry practitioners and policy makers alike, this report highlights five key initiatives to improve the reliability and cost-effectiveness of transportation and logistics in Vietnam’s domestic and international supply chains. These include: (i) modernizing the customs system more broadly to enable goods clearance in a consistently timely manner; (ii) enhancing regulatory transparency to minimize discretion in the regulation of commerce; (iii) promoting multimodal transport corridor planning; (iv) enhancing competition and professionalism in the trucking industry; and (v) deploying capacity more strategically at major gateways, particularly at Cai Map-Thi Vai.