Improving the Logistics Index through "leverage"policy

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Assoc. Dr. Pham Tat Thang, senior researcher, Ministry of Industry and Trade

The report of the 2021 Emerging Market Logistics Index released by the world's leading logistics service provider Agility at the end of February 2021 shows that Vietnam has increased three positions compared to 2020, standing in 8th in the top 10 countries. How will the improvement of the Logistics Index impact Vietnam's import-export activities, sir?

In import-export activities, when many Free Trade Agreements (FTAs) have been signed, especially the new generation FTAs, the import-export tax will reach 0%. Thus, the costs for import-export activities mainly lie in the logistics and transportation stages. With the policy of the State, raising the Logistics Index will firstly create conditions for import-export enterprises to reduce costs, thereby improving the competitiveness of goods, especially creating a separate position for enterprises in the process of import-export business activities, making customersmore confident in Vietnam’s goods.

In your opinion, what are the shortcomings and problems in logistics activities in Vietnam that affect the ranking of the Logistics Index?

Vietnam has more than 3,000km of coastline and a dense network of rivers, but there is weak river and sea transport. Vietnam also needsthe development of railway transport, but the railway transport technology has not changed for many years. Currently, Vietnam mainly uses road transport. This is ashortcoming that needs change.

Recently, Vietnam has improved, but connectivity between modes of transport is poor. Conditions to ensure logistics activities such as collectors, sorting places, and packaging places are also quite weak, leading to a decrease in Vietnam's Logistics Index.

Import and export activities atHai Phong port area. Photo: T. Binh

Can you tell usmore about the radical solutions to gradually improve the Logistics Index of Vietnam in the future?

Logistics activities are the sum of all the factors serving goods circulation, including import-export and domestic market. Whenlogistics is improving, the Index will create many good effects, but this is influenced by many factors.

The first is the business environment of the logistics market. The State must create a favorable environment for the development of the domestic logistics market and the process of import and export activities.

The second is the need to change the way of doing business amonglogistics service providers.

Third is the customer. Production and business enterprises in the domestic market as well as import-export need to know how to use logistics services, creating alarge market to develop logistics operations.

I still think that there should be a synchronous policy to develop the logistics market, which creates favorable conditions for enterprises to provide logistics services. Vietnam has more than 4,000 businesses but they are extremely small and not linked together. There are several thousand enterprises doing import and export activities but taking care of logistics activities themselves, outsourcing is very limited.

The most important point currently is the legal environment to develop the logistics market, including the development of supply, demand and conditions to operate in that market.

The State must create an environment to develop logistics services; create an environment for logistics service enterprises to have conditions for operation, facilities of operation, means of operation; creating an environmental requirement for customers to be manufacturers and traders using logistics services.

When these two factors meet, then we hope to have the development of the logistics market, thereby improving the Logistics Index.

From a business perspective in both the providing logistics services and using services, what are the things that need to be changed and improved to create better development for the logistics market in Vietnam, contributing to improving the Logistics Index, sir?

Improvement starts first from a business point of view and approach. Previously, small businesses in Vietnam often performed from A to Z, rarely using other services, including logistics services. If you continue to be self-sufficient in self-employment, it will go against the trend of market development.

Firstly, import-export and domestic businesses need to change this concept.

Enterprises providing logistics services must also change and shift to digital businesses. Logistics service enterprises must convert so that customers can track each step of the goods, connecting the goods suppliers with customers. All those stages, if not into digital conversion, do not solve the problem, and cannot meet the actual requirements.

Thank you Sir!