Are there any solutions to curb logistics prices?

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Mr. Dao Trong Khoa, Standing Vice Chairman of Vietnam Logistics Association (VLA), General Director of T&M Forwarding Co., Ltd.

In particular, logistics costs are a factor that affects many businesses and economies. Customs News spoke to Mr. Dao Trong Khoa, Standing Vice President of Vietnam Logistics Service Association (VLA), General Director of T&M Forwarding Co., Ltd., about solutions to reduce costs in this area.

Could you tell us how the increase in costs has affected the operation of logistics enterprises today?

The Covid-19 pandemic has been leading to great difficulties, increasing the operating costs of businesses, especially transport and logistics businesses. Service output of logistics enterprises decreased significantly because the business situation of customers was almost paralyzed, customers reduced the warehouse rental area, even offered to reduce service prices because they could not sell goods.

Meanwhile, the cost of pandemic prevention and control increased freight rates and a series of surcharges from shipping lines became a financial burden on logistics costs, creating pressure on logistics service businesses.

In particular, in the peak months at the end of the year, the domestic gasoline price increased to the highest level in the past seven years, which will certainly be reflected in domestic and international transportation costs through freight surcharges of petroleum, thereby affecting the operation of logistics enterprises, causing costs to increase, and affecting the import and export activities of enterprises in general.

The end of the year is always the peak for businesses to complete international orders, but sea freight is still at a high level. In your opinion, what solutions do we need to curb these price increases?

Sea freight rates have increased; some routes have increased 10 times compared to before, leading to an increase in the revenue of many logistics enterprises, especially international transport enterprises. Up to now, the revenue has exceeded VND200 billion. But this does not mean that the profit of the business increases, on the contrary, the pressure on the cash flow of the business is much greater.

Therefore, the management agencies should take measures to control the fact that foreign shipping lines increase freight rates continuously, affecting production, import and export. Specifically, the Ministry of Transport, the Ministry of Industry and Trade and the Ministry of Finance have effective guidance in the implementation of legal documents such as Decree 146/2016/ND-CP of the Government on price listing and surcharges for shipping by container, limiting the current uncontrolled increase in freight rates. At the same time, it is not allowed to increase and take measures to reduce or eliminate some of the 12 current high sea surcharges.

In the long term, the Government should make a decision to develop Vietnamese-branded shipping, develop large container ships for long-distance transport, partly meeting the requirements of importing and exporting goods of Vietnam, helping to cut a huge amount of transportation costs for domestic import and export enterprises.

In addition to the above problem, to reduce costs for businesses, what other solutions should management agencies issue, sir?

Supporting cost reduction for businesses has many solutions and has been repeatedly recommended by the business community to the authorities and the Government. In my opinion, the management agencies do not apply policies that increase logistics costs in general, such as transportation costs, fuel prices, BOT prices, fees and other related fees, and reduce toll rates of the seaport of Hai Phong City and Ho Chi Minh City. These localities should consider adjusting or delaying the application time to reduce the burden on businesses.

In addition, the efforts, companionship and understanding of the management agency can also help businesses reduce procedures and costs. For example, in the field of customs, in the face of congestion at some ports in the southern region, the Customs authority has adjusted the customs supervision procedures in the direction of trade facilitation, allowing businesses to make general customs declarations by province, city or larger area and bring goods to customs clearance locations in the area under the supervision of Customs. This process has immediately reduced congestion and overloading at gateway ports, helping to cut costs for businesses.

Along with that, the issue of digital transformation is becoming more and more urgent, but the capacity of Vietnamese enterprises, including logistics enterprises, has not yet met the general requirements of the industry and world trends.

Therefore, the management agency should have a program to support logistics service providers and manufacturing and import-export enterprises in digital transformation for business activities, especially commercial development and cross-border electronics. But to improve logistics capacity helps reduce costs, the beneficiaries are manufacturing, import-export enterprises and the economy in general.