In 2016, according to the World Bank data, Vietnam’s logistic costs amounted to almost 21% of total GDP – a higher percentage compared to countries such as China, Japan and Thailand. Vietnam’s Prime Minister (PM) Nguyen Xuan Phuc explained that such high costs are due to dominance of land transportation and inefficient delivery systems, compared to train or water transportation.
With such numbers, the PM raised his concern that high logistics costs are negatively affecting local businesses, and need to be lowered in order to allow companies to become more competitive.
When breaking down total logistics costs, transportation of goods accounts for almost 60% of the total cost. As an example, transporting a 40-foot container by land from Hanoi to Ho Chi Minh City would cost around $1,750, wich is almost 10 times more than transporting it by water, and 2.5 times than using trains.
In 2016, according to the data provided by the Vietnam’s Government, 77% of all goods were transported on land, 5% on water, and less than 0.5% on trains. According to different experts, the lack of proper infrastructure is the main reason for the above numbers, as the rail tracks are lacking connections to storage areas, and waterway transport being generally slow (3-5 times slower compared to land-transportation).
According to the PM, the government is targeting to lower the logistics costs to 16-20% of the country’s GDP by 2025.
Vietnam was ranked 64th out of 160 countries on the World Bank’s Logistics Performance Index in 2016. The index rates the countries’ logistics performance, such as efficiency of the clearance process, quality of infrastructure, customs and timeliness.