Despite the impacts of climate change and global political conflicts, Vietnam still has great potential to further improve logistics costs and develop the industry.
When FDI businesses come to Vietnam and choose a location to build a factory, in addition to the investment attraction policies of each locality, location is also a decisive factor in whether they will invest or not, because investors need to optimize costs and transportation time when our country's road transport system is still limited and logistics costs are quite high.
For example, Aboitiz Foods (part of the Aboitiz Group) recently invested in its sixth factory in Vietnam (two in the North and four in the South), but Aboitiz Foods has focused on building factories in the North and South, and has not yet invested in the Central region.
The 2nd Vietnam Logistics Conference 2024, themed “Transformation for Breakthrough,” organized by Investment Newspaper under the patronage of the Ministry of Planning and Investment, will take place on October 31, 2024, at the JW Marriott Saigon Hotel (82 Hai Ba Trung Street, District 1, Ho Chi Minh City).
With the participation of over 300 domestic and international guests, the conference will analyze and discuss in depth the most pressing issues in the industry, such as new challenges and trends, modernization of logistics infrastructure, enhancing supply chain efficiency, promoting digital transformation, and developing new logistics business models.
Information about the Forum will be streamed live on the online platforms of Investment Newspaper and published in mass media. Conference information is regularly updated at: https://logsummit.vir.com.vn.
Explaining the decision to invest only in two regions, Mr. Ha Van Minh, Director of Gold Coin Vietnam (owned by Aboitiz Foods), said: “The Central region is frequently affected by storms and floods, so during our 10-year development period, we focused on building factories only in the North and South. Furthermore, building our sixth factory in Long An is advantageous because it is close to Ho Chi Minh City, near Phu My port, and also located in a key livestock farming province in the Mekong Delta. This makes transportation to Tien Giang and Ben Tre provinces more convenient, significantly reducing logistics costs and increasing the company's competitive advantage.”
Aboitiz Foods is just one typical example among many FDI businesses that, when choosing to invest in building factories in Vietnam, often prioritize locations near rivers, facilitating convenient water transport rather than road transport. They also build factories at points connecting consumption areas and avoiding the impact of weather, thereby reducing logistics costs and prices, and increasing the competitiveness of their products when they reach the end consumer.
However, climate change has significantly altered the production conditions of businesses, as evidenced by Typhoon Yagi's recent landfall in northern Vietnam, which caused extensive damage to local areas.
As can be seen, climate change continues to be a major challenge for FDI businesses in general and the logistics industry in particular, as the scale of destruction caused by climate change is increasing, the affected areas are wider, and are beyond the predictions of businesses when investing and building factories.
Another factor significantly impacting logistics operations is the escalating conflict in the Middle East, the ongoing Russia-Ukraine war, and especially the rise of regional protectionism. All of these could drive up oil prices, as well as shipping freight rates.
Nevertheless, experts and investors believe that Vietnam still has significant potential for logistics development. In recent years, the government has accelerated infrastructure development, building continuous connecting routes between regions, and simultaneously launching a series of expressways. Upon completion, these are expected to significantly improve logistics costs compared to other countries in the region.
In 2023, according to the World Bank (WB), Vietnam's Logistics Performance Index (LPI) ranked 43rd out of 139 ranked economies, a significant improvement from its 53rd position in 2010. Within the region, Vietnam is in the top 5, tied with the Philippines, after Singapore, Malaysia, and Thailand.
According to calculations by the Vietnam Logistics Services Business Association, Vietnam's logistics costs average 16.8-17% of GDP, significantly higher than the global average of 10.6%. Therefore, to increase competitiveness and attract more investment capital to Vietnam, continuing to find solutions to reduce logistics costs will enhance the attractiveness of the Vietnamese economy.
Vietnam has signed and implemented 16 Free Trade Agreements (FTAs) and is currently negotiating 3 more, becoming one of the most open economies with free trade relations in the region with over 60 economies. Vietnam is also the only country to have signed FTAs with all major global economic partners, including the United States, Japan, China, the EU, the UK, and Russia. This is considered a fundamental advantage for the strong development of the logistics sector.
Source: https://baodautu.vn/tiep-tuc-tim-giai-phap-giam-chi-phi-logistics-d227916.html
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