Deputy Prime Minister: Comparing North-South shipping costs to the US is difficult to be accurate

Logistics costs are still quite high, but comparing North-South transportation to twice as expensive as to the US is difficult to be accurate, according to Deputy Prime Minister Le Minh Khai.

Sending questions to the Government, National Assembly delegate Dinh Ngoc Minh said that Vietnam's logistics costs are currently too high (accounting for about 60%). A container of goods from the North to the South costs about 2,000 USD, while shipping a container of goods from Vietnam to the US only costs 1,000 USD.

He asked what solutions the Government has to reduce logistics costs for businesses. Currently, the experience of developed countries is to build railways to transport goods and passengers to make a profit. Accordingly, he 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.

In response to 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 of 10.6%. However, this level is basically close to the Government's target of reducing logistics costs by 16-20% by 2025.

Deputy Prime Minister Le Minh Khai. Photo: VGP — Deputy Prime Minister Le Minh Khai. Photo: *VGP*

Regarding the cost issue raised by the delegate, the Deputy Prime Minister said that according to investigation data, the cost of transporting a 20-foot container from North to South is 2,000 USD, equivalent to the cost of transporting by road.

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

For example, the sea freight rate from Hai Phong to Ho Chi Minh City is fluctuating between VND9.2-9.5 million for a 20-foot container and about VND12 million for a 40-foot container. In the opposite direction, from Ho Chi Minh City to Hai Phong, the rate is about VND6-8 million for a 20-foot container and VND9-10 million for a 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 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 the same corresponding level," said the Deputy Prime Minister.

However, he affirmed that the Government will continue to find ways to reduce logistics costs. In particular, it will focus on developing transport infrastructure, logistics centers, and dry ports; adjusting policies related to prices and transportation fees; decentralizing and giving local authorities the right to invest in and exploit infrastructure.

Regarding the two railway lines connecting the sea, the Deputy Prime Minister said that the Bien Hoa - Vung Tau railway line is undergoing a pre-feasibility study report. This line is about 128 km long, double track, 1,435 mm gauge, with a total investment of about 6.2 billion USD.

The Lao Cai - Hanoi - Hai Phong route has basically completed detailed planning, with a length of about 380 km, double track, 1,435mm gauge, and a total investment of 10-11 billion USD.

Due to the relatively large total investment of the two railway lines, the Prime Minister has included them in the National List of projects calling for foreign investment in the 2021-2025 period to mobilize investment resources. It is expected that both projects will complete their pre-feasibility study reports before 2025.

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, the Deputy Prime Minister said, 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 and started construction soon before 2030.

Duc Minh

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