This essay analyzes the impact of transport issues and regulations in Vietnam on logistics

activities of businesses in Vietnam. More clearly, it points to the obstacles that logistics industry
faces due to traffic jams, poor infrastructure and unreasonable regulations in Vietnam.
Moreover, it offers recommendations to improve and remedy this situation.

Traffic in Vietnam has many problems which are traffic congestion and poor
infrastructure. Therefore, the warehouses and distributors in Vietnam operate difficultly.
According to Hong Kong Means Business, in Vietnam, the warehouses and container freight
stations are mostly stand-alone and miles from ports or industrial facilities. Congestion is a big
concern, causing delays in distribution, which increase the transport costs. The rapid growth in
industrial park numbers has outstripped infrastructural development. Many of the highways
connecting the ports with industrial parks or city centers, as well as the port terminals, are
particularly congested. The problem in the northern provinces is the most serious, where the
infrastructure is less developed compared to the south. Congestion in traffic and port also leads
to delays in transporting freight from factories to ocean carriers and may hinder the delivery of
imported parts and components, resulting in higher inventory costs for manufacturers (Hong
Kong Means Business, 2015). Traffic congestion in the inner city is one of the causes of the
prolonged transport time, causing logistic costs in trade in Vietnam. The transport system is
often overloaded, leading to traffic jams, causing Vietnam's logistics industry to face many
obstacles. Moreover, it causes financial losses for companies due to the loss of time and cost of
transporting goods from manufacturers to warehouses and distributors. Domestic road
transport costs are quite high mainly due to the length of time the journey takes compared to
other countries in the region and around the world. This is due to the overall transport system
of the whole country, especially the participation in inner city transportation in big cities.
Accordingly, congestion and delays often occur, directly affecting the price. The second reason
is the many types of charges and surcharges that transportation is incurring.

The national infrastructure and transport network is substantially below international

norms and only accounts for a limited share of the logistics industry as a whole. Improving
these would significantly enhance the ability of the country to improve its internal and external
logistical cooperation. Official Development Assistance (ODA) loans have played an important
role in the growth of the transportation system in Vietnam in recent years. In addition to the
continued inflow of foreign direct investment (FDI), the construction of transport infrastructure
is funded by ODA from the country of origin of the FDI, such as Japan or Korea. For example,
apart from being Vietnam's largest source of cumulative FDI, Japan has also been its largest
source of ODA since 1995, providing ODA worth US$ 20 billion (as of end-2013) for a variety of
infrastructure projects including highways, ports, and power plants (Hong Kong Means
Business, 2015). Japan has provided Vietnam with a large sum of money to help build highways,
overhead rail systems and subways. This makes transportation in Vietnam more convenient and
airy. And this helps to transport goods from the manufacturer to the warehouse quickly and
costly, saving businesses money.

Vietnam's other logistics shortcoming is the high cost. Mr. Le Dang Doan said "normally
logistics fees only account for 12-14% of GDP, but in Vietnam these fees constitute 21-23% of
GDP. The logistics fees for Vietnam are twice as high as the average fees for the nation, where
the fees for shipping, storage, port and other charges are also high. This raises business
expenses, raises Vietnamese commodity prices and reduces Vietnamese commodity
competitiveness. According to Mr. Le Duy Hiep, chairman of the Vietnam Association of
Logistics (VLA), the shortcomings of Vietnamese logistics companies are that the service rates
are uncompetitive, and the quality of certain services is not appreciated. It is primarily due to
the constraint of size, manpower, expertise, management training, application of IT as well as
training of human resources (Customs News, 2018).

The diverse legal and regulatory climate is a major presence for private and
international investors alike. It is an important reason why private investors should be less
active in crucial sectors such as heavy industry and infrastructure growth. It would be important
for greater consistency in policy decisions and, in practical terms, for greater focus on economic
considerations. The expertise and legal framework for designing and operating logistics systems
has been strengthened over the past decade. The Prime Minister approved "Action Plan to
boost the competitiveness and growth of the logistics sector by 2025" from mid-February 2017.
It is the first time the logistics sector has a robust national logistics sector action plan to take
the import and export industry to fresh and innovative advances. In which, according to many
experts, the outstanding point in State guidance and management is the assignment to all
relevant levels and units of 60 task groups related to perfecting the legal basis, legislation,
infrastructure and improving enterprise efficiency, service quality and expanding the logistics
sector (Customs News, 2018). The Vietnamese government has planned a long-term and
sustainable development of the logistics industry. Logistics enterprises will be created favorable
conditions to operate well and smoothly. This helps businesses reduce taxes and thus have
more resources to maintain stable operation. Many logistics companies have formed close
relations with local agencies to ensure a reliable service, specializing in various aspects of the
logistics process, such as customs brokering, documentation and warehousing. This is
frequently cited as a key factor in the smooth running of Vietnam's transport operations by
leading logistics firms (Hong Kong Means Business, 2015). Logistics businesses have proactively
created close relationships with local agencies to have reliable and smooth freight services.

In conclusion, despite the difficulties of logistics enterprises, the Vietnamese

government has tried to resolve to improve the quality of the logistics industry.
References:

Customs News, 2018. Logistics Vietnam: Great Opportunities But Difficult To Develop.
[online] Customs News. Available at: <https://customsnews.vn/logistics-vietnam-great-
opportunities-but-difficult-to-develop-6244.html> [Accessed 26 March 2020].

Hong Kong Means Business, 2015. Vietnam’s Logistics Market: Overcoming The
Challenges | Hong Kong Means Business. [online] Available at:
<https://hkmb.hktdc.com/en/1X0A12CI/hktdc-research/Vietnam%E2%80%99s-Logistics-
Market-Overcoming-the-Challenges> [Accessed 26 March 2020].