Logistics costs for goods from the Mekong Delta are too high.

While logistics costs nationwide are around 16.5%, this figure can be double that in the Mekong Delta, ranging from 30-40%.

Accounting for 12% of the national GDP, the Mekong Delta is a major agricultural and aquatic product hub and contributes significantly to agricultural exports, but its products are facing a considerable decline in competitiveness due to high logistics costs.

"The reality in the region is that logistics costs are currently very high, accounting for up to 30% of the total cost," said Mr. Le Quang Trung, Chairman of Can Tho Port and Vice Chairman of the Vietnam Logistics Business Association (VLA), at the "Vietnam Logistics Forum 2023" organized by the Ministry of Industry and Trade and the People's Committee of Can Tho City on December 2nd.

According to VLA's compiled data, the loss rate of agricultural and aquatic products in the region during transportation is 10%, during storage is 2%, and during processing is 2%. In total, post-harvest losses can range from 20-40% due to poor logistics infrastructure.

Mr. Le Quang Trung, Vice President of VLA, speaks at the Forum on the morning of December 2nd. Photo: Organizing Committee

Mr. Tran Viet Truong, Chairman of the People's Committee of Can Tho City, also confirmed that transportation costs account for 30-40% of the product price in the region. "This affects the competitiveness of services and goods in Can Tho in particular and the Mekong Delta in general," he commented.

According to the Provincial Logistics Competitiveness Index (LCI), only a few localities ranked highly, such as Long An and Can Tho (tied for 9th place), while others performed well, including Kien Giang (16th place), Tien Giang (19th place), and An Giang (20th place). Annual LCI results are an important basis for businesses to orient their operations and investments.

According to experts, a number of factors contribute to the currently high logistics costs in the Mekong Delta . "The challenges include high costs, limited road infrastructure, long-distance empty truck runs, and limited cost optimization for refrigerated goods," summarized Jonathan R. Goldner, CEO of APM Terminals Asia and the Middle East.

The Mekong Delta region transports nearly 140 million tons of goods annually, 80% by road, but the entire region only has 171 km of expressways. With a dense network of rivers, theoretically up to 22,000 km out of a total length of 28,000 km could be exploited for waterway transport, but the current situation is very limited.

The region has 12 seaports and 32 terminal areas, but they mainly handle bulk cargo. Only 6 terminal areas are capable of handling containerized cargo, with 3 of them in Can Tho. "Cai Cui Port (Can Tho) has the most potential, while the rest (85%) are small and fragmented. Inland cargo collection ports are almost entirely still in the planning stage," said Dr. Pham Hoai Chung, Deputy Director of the Institute of Transport Strategy and Development, Ministry of Transport.

In Can Tho, Mr. Tran Viet Truong stated that the container shipping channel into the Hau River is not deep enough to accommodate large vessels of 10,000-20,000 tons. The general situation in the region is that the river channels are shallow, and bridge clearances are low, so the tonnage of barges that can travel is only between 1,500 and 3,500 tons. The Mekong Delta also lacks a regional maritime logistics center.

Ho Chi Minh City - Trung Luong Expressway in August 2022. Photo: Hoang Nam

Dilapidated roads and limited waterway capacity mean that 90% of goods from the Mekong Delta have to be transported to the Southeast region for export. "Only 10% of goods are exported locally, and this is the bottleneck," Mr. Chung pointed out.

This bottleneck partly explains the high transportation costs. Mr. Pham Hai Anh, Deputy General Director of Sowatco, a member of Sotrans Group under ITL Group, cited the example of transporting a container from Can Tho to Cai Mep - Thi Vai port, which costs approximately 8.5-9 million VND by road, double the cost of 4-5.5 million VND by waterway. "We must utilize waterways as much as possible," Mr. Hai Anh stated.

However, Sowatco representatives pointed out that the total import and export turnover of the 13 provinces in the Mekong Delta increased by about 22% from 2019 to 2022, but waterway transport volume decreased by about 20% during the same period. Besides road transport, the region lacks a railway. Another challenge is that goods from the Mekong Delta are mainly agricultural products, but only Long An, Hau Giang, and Can Tho have cold storage facilities. VLA predicts that the shortage of cold storage will become even more serious.

According to experts , solving the logistics problem in the Mekong Delta region is not difficult due to a lack of policy frameworks, but rather the challenge lies in practical implementation. As the leading city in the Mekong Delta, Mr. Tran Viet Truong stated that Can Tho plans to submit its city planning document to the Government by the end of 2023, with a plan to establish at least three logistics development zones to serve the entire region.

In addition, Can Tho Airport will be upgraded to a capacity of 7 million passengers and 250,000 tons of cargo per year. Investment will continue in three expressways passing through the locality, while 15 waterway routes will be regularly dredged. The capital of the Mekong Delta will also build a comprehensive inland waterway port to consolidate goods for transport to Ho Chi Minh City.

Regarding waterways, Dr. Le Quang Trung suggested that more routes connecting with Cambodia and the Cai Mep - Thi Vai area should be opened to greatly facilitate the export of seafood and agricultural products to Europe and the United States.

Mr. Pham Hai Anh, Deputy General Director of Sowatco, proposed a solution at the Forum on the afternoon of November 2nd. Photo: ITL

According to Mr. Pham Hai Anh of Sowatco, investing in large-scale logistics centers requires significant capital. Therefore, a feasible solution for the Mekong Delta is to utilize barge transportation and invest in inland container depots (ICDs) with river berths for barge handling, covering an area of ​​approximately 10 hectares and with a capacity of 200,000 TEUs per year.

These ICDs will concentrate the most essential basic systems, including specialized cold storage, X-ray machines, and depots for empty containers. According to Mr. Hai Anh, the region is characterized by a large volume of seafood products, almost 90% of which must be imported in empty refrigerated containers, so the ICDs need electrical outlets and specialized PTI systems for refrigerated containers.

"Some locations in Can Tho and Hau Giang could be suitable for investment," he recommended. If implemented, he believes this model could reduce transportation costs for goods in the Mekong Delta by up to 50%.

Furthermore, experts are calling for improvements in capital, human resources, standards, and the application of information technology and green logistics. Mr. Bui Le Hai Nguyen, Director of Information Technology at Dongtam Group, believes that digital transformation will help improve efficiency, save costs, enhance service quality, increase competitiveness, and increase transparency in transportation.

Jonathan from APM Terminals recommended raising operational standards in the logistics industry as soon as possible. "Vietnam has many opportunities, and we look forward to cooperating with Vietnamese businesses to develop greener logistics," he stated.

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