North shipping costs

Deputy Prime Minister Le Minh Khai signed document No. 724/TTg-DMDN on August 4 to answer questions from National Assembly delegate Dinh Ngoc Minh regarding logistics issues.

Chi phí vận chuyển Bắc - Nam 2.000 USD/container, trong khi sang Mỹ chỉ 1.000 USD - Ảnh 1. — Vietnam's logistics costs are much higher than many countries in the region.

Delegate Minh proposed that the Government have solutions to reduce logistics costs for businesses, including reducing transportation costs, administrative procedure costs, and reducing informal costs.

According to Mr. Minh, Vietnam's current costs are too high (large transportation costs - accounting for about 60%) double the average of the world , EU and US. The cost of transporting a container of goods from North to South is about 2,000 USD, while transporting a container of goods from Vietnam to the US only costs 1,000 USD.

Experience of developed countries in building railways for freight and passenger transport to make profit (carrying goods is profitable, carrying passengers is a loss). To reduce logistics costs for businesses, combine passenger transport and build important infrastructure, Mr. Minh suggested that the Government report to the National Assembly to soon deploy 2 railway sections (Lach Huyen - Yen Vien - Lao Cai and Vung Tau - Dong Nai) in the form of public investment.

Regarding this proposal, Deputy Prime Minister Le Minh Khai said that Vietnam's logistics costs are currently equivalent to 16.8 - 17% of GDP, still quite high compared to the world average (currently about 10.6%).

This cost has basically approached the target set by the Government in Decision No. 200/QD-TTg in 2017 of the Prime Minister on approving the Action Plan to enhance competitiveness and develop Vietnam's logistics services by 2025 with the goal of reducing logistics costs equivalent to 16 - 20% of GDP.

The Deputy Prime Minister also said that in the coming time, the Government will continue to direct the Ministry of Transport to coordinate with the Ministry of Industry and Trade and other ministries, sectors and localities to focus on developing modern and synchronous transport infrastructure, investing in developing logistics centers and dry ports to promote multimodal transport.

Regarding the information that "the cost of transporting a container of goods from the North to the South is about 2,000 USD, while to the US it is only 1,000 USD", according to current investigation and survey data, the cost of transporting a 20-foot container from the North to the South (2,000 USD) corresponds to the method of transport by road.

However, depending on the goods being transported, the shipper's needs regarding time and transportation conditions, businesses can choose other modes of transportation such as rail and sea with costs equivalent to only 50 - 70% of road transport (depending on loading and unloading conditions).

For example, the current sea freight rate from Hai Phong - Ho Chi Minh City is around 9.2 - 9.5 million VND/20-foot container and around 12 million VND/40-foot container. In the opposite direction, from Ho Chi Minh City - Hai Phong, the rate is around 6 - 8 million VND/20-foot container and 9 - 10 million VND/40-foot container.

For international shipping, freight rates depend on the season and shipping conditions. Currently, the freight rate for a 40-foot container to the US is around 2,000 - 2,500 USD. During the Covid-19 pandemic, this rate can be up to 20,000 USD. It is very difficult to accurately compare transportation costs between different routes and modes of transportation to convert them to the same level.

Construction of 2 railway lines to begin before 2030

Currently, the Bien Hoa - Vung Tau railway is implementing a pre-feasibility study report for the project, with a length of about 128 km, double track, 1,435 mm gauge, passenger and cargo transport, and a total investment of about 6.2 billion USD.

The Lao Cai - Hanoi - Hai Phong railway has basically completed the detailed planning, about 380 km long, double track, 1,435 mm gauge, passenger and cargo transport, total investment of about 10 - 11 billion USD. It is expected that both projects will complete the pre-feasibility study report before 2025.

Deputy Prime Minister Le Minh Khai agreed with the opinion of delegate Dinh Ngoc Minh on the need to soon implement these two railway projects. Due to the relatively large total investment of the two railway lines, the Prime Minister has issued a national list of projects calling for foreign investment in the 2021-2025 period to mobilize investment resources.

In addition, the two seaports of Lach Huyen and Cai Mep - Thi Vai have been invested in and connected by road (highway, national highway) and inland waterway. The volume of goods passing through Cai Mep - Thi Vai port has reached over 80%, meeting the transportation needs of the two seaports at reasonable costs.

In the long term, according to the Deputy Prime Minister, reducing the market share of road transport connecting to seaports is one of the important solutions contributing to reducing logistics costs, in which the two railway lines connecting seaports, Lao Cai - Hanoi - Hai Phong (connecting Lach Huyen port area) and Bien Hoa - Vung Tau (connecting Cai Mep - Thi Vai port area) need to be invested in soon and strive to start construction before 2030.

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