High logistics costs drag on Vietnam’s growth

High logistics costs are responsible for holding back the development of the Vietnamese economy, according to a new market research report from Transport Intelligence, titled ‘Vietnam Logistics 2009’. The report notes that at the same time as Vietnam is seeking to come to terms with the global economic slowdown, weak infrastructure and high inventory levels […]


High logistics costs are responsible for holding back the development of the Vietnamese economy, according to a new market research report from Transport Intelligence, titled ‘Vietnam Logistics 2009’.

The report notes that at the same time as Vietnam is seeking to come to terms with the global economic slowdown, weak infrastructure and high inventory levels are proving to be a significant drag on its economic development.

Logistics costs in the market are estimated to be 20-25 per cent of Vietnam’s GDP, a ratio far higher than that in developed economies such as the US and higher even than in other developing economies such as China. These high costs have hindered Vietnam’s efforts to take advantage of its cheap labour resource and develop the national export economy, the report said.

It goes on to say that this is the result of a combination of over-stretched and ageing transport infrastructure, including ports, airports, road and rail; inefficient bureaucracies (e.g. customs clearance delays); and the unwillingness of Vietnamese manufacturers to outsource to foreign 3PLs (third party logistics providers). The report additionally finds that a substantial proportion of Vietnam’s logistics costs can be attributed to high inventory holdings.

But on the bright side, the report also finds that this situation is gradually changing. The Vietnamese government has invested billions of dollars in the country’s infrastructure and this investment is slowly beginning to pay dividends.