Transportation costs among region's highest

Small-scale operations, improper infrastructure and a lack of co-operation among transport enterprises has inflated Viet Nam's transportation costs above that of neighbouring countries, according to a seminar held yesterday.

Speaking at the seminar titled "Transportation costs in Viet Nam" held by the Transport Ministry, deputy minister Le Dinh Tho said transport costs in the country were the highest in Southeast Asia, but few studies had been conducted to clarify the state of the status quo.


Typically, transportation costs account for less than 10 per cent of gross domestic production in developed countries, with the percentage in developing countries around 14-15 per cent.

He said that lower transportation costs were vital for the country's development and competitiveness, especially given the increasingly tough regional and global environment.

Nguyen Xuan Thuy, deputy head of Transportation Department under Viet Nam Road Administration, said Viet Nam had around 11,000 transport enterprises, including 8,000 freight enterprises and 3,000 passenger-vehicle companies.

However, most of the enterprises were operating on a small-scale with less than 10 vehicles, he said.

"The small enterprises usually don't have a business network or channel to contact clients, which resulted in inefficient operations," he said.

For example, according to the Transport Development and Strategy Institute, around 70 per cent of trucks carried goods one way and were empty on return journeys. This increased the cost of transporting goods on the roads by 30 per cent.

The costs were also pushed up because providers were using old coaches or trucks that were not fuel efficient and required a frequent maintenance – which raised the risk of traffic accidents, he said.

Moreover, the need to develop a depot system to gather and distribute goods on long-distance routes had fallen by the wayside, he said, explaining that ferrying huge amounts of small trucks on long routes would be more costly. Small, scattered depots required more time to collect, load and unload goods, he said.

According to the Viet Nam Automobile Transportation Association, in the last 15 years, the price of passenger transportation had risen sevenfold in Viet Nam, not accounting for inflated prices during peak holiday periods.

The higher prices were blamed on the increasing cost of operating cars, buying fuel, employing labour and paying road fees.

According to a World Bank report, logistical costs in Viet Nam were estimated to account for around 20 per cent of gross domestic production. By contrast, the proportion in the US was 9.2 per cent, while being 12 per cent in Europe and 13.5 per cent in Mexico. The global average is around 13.8 per cent.

The report shows that logistics operations in Viet Nam are relatively high when compared with regional peers like China, Malaysia, and Thailand. It is estimated that Viet Nam's shippers spend approximately US$100 million annually on extra inventory carrying costs incurred due to import-export clearance delays. This amount is projected to reach $180 million by 2020. Several factors were found to be fuelling high costs, including cumbersome and inconsistently applied government regulations and major supply-demand imbalances in infrastructure provision.

These drawbacks can be reverted if the country adopts a number of actions, such as minimizing paper-based processes in the customs and technical clearance of imports and exports, the report said. It also advocated for Viet Nam to create "multimodal logistics corridors" where containerized flows on trucks or barges would be able to move on adequate infrastructure and with minimal regulatory delays. Opening the logistics market and promoting a more sustainable supply-demand balance in the trucking industry would also help.