Vietnam should attach importance to efficient and reliable transport and logistics, which plays a critical role in supporting the country’s export-oriented economy, World Bank Country Director for Vietnam Ousmane Dione said at a workshop on sustainable development of inland waterways transport in Vietnam and strengthening Vietnam’s trucking sector in Hanoi on March 28.Ousmane Dione emphasized that Vietnam is one of the most open economies in the world, with its trade-to-GDP ratio at above 200%. As tariffs on international trade have been sharply reduced and manufacturing costs have increased, Vietnam’s export competitiveness is increasingly dependent on factors such as quality, productivity, efficient supply chains, and especially lower transport and logistics costs.
At the same time, Vietnam’s middle class is expanding, and their consumption is rising, especially in rapidly urbanizing areas, and will continue to demand ever increasing goods movement.
World Bank Country Director for Vietnam Ousmane Dione (center) at the workshop
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He mentioned three factors to ensure efficient and reliable transport and logistics, in support of its current and future economic growth model, including adequate backbone infrastructure, efficient and reliable transport and logistics services, and seamless multi-modal network for lower transport costs and sustainability.
Backbone infrastructure needs to be further improved for enhanced competitiveness
Ousmane Dione said that the Vietnamese government has made remarkable progress in transport infrastructure development over the past decades.
Vietnam’s road network now extends to nearly 400,000 km, with almost all commune centers connected by all-weather roads. Notwithstanding this impressive improvement in rural access, development in critical backbone, interurban connectivity has been relatively modest, the country director noted.
He took 2000-2016 for instance, the length of critical national transport infrastructure, national highways and national inland waterways, have grown at modest annual rates of 2.9% and 0.3%, respectively.
The density of the expressway network in Vietnam is at 3km per every 1,000km2, compared to 8km in India and 13km in China. The government is rightly putting priority on developing the North-South Expressway to address this gap.
After decades of development, the network length that can handle barges larger than 300-ton capacity remains less than 30% of the total 7,000 kilometers of national waterways, a very low proportion compared to most successful commercial waterways in the world, Ousmane Dione cited.
This points to a need for continued and significant investments in critical backbone infrastructures, which coincide with the key trade corridors. Such high-level of investment needs would have to be addressed through strategic allocation of scarce public resources as well as mobilization of private sector participation in financing and service delivery, he noted.
Illustrative photo. Source: Internet
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Ousmane Dione stressed that the supply of transport services has increased significantly over the past two decades as well. Vietnam is rapidly motorizing, and the number of registered trucks reached over 1.1 million. Liner Shipping Connectivity Index has grown from 12.9 in 2004 to 68.8 in 2018.
An average truck operator employs three people and has an annual turnover of less than half a million dollars; the current truck fleet is dominated by small, less than 5-ton vehicles. Such limitation to scale in the industry causes inefficiency, in terms of high shares of empty backhaul and high transport costs per ton-km.
Intermediary logistics service sector, such as truck brokerage, is underdeveloped in Vietnam. Inland waterway operators typically rely on small-sized vessel of about 100-300 tons, constrained by waterway capacity bottlenecks due to narrow channels and low clearance bridges as well as limited cargo handling capacity in river ports.
This suggests that, while much of development in transport and logistics services will be led by the private sector, let it be a truck operator or warehousing operator, the government needs to create an enabling environment for their development.
Such efforts could include providing access to financing for growth of well-performing operators, removing infrastructure bottlenecks to induce private sector investments in their fleets, and encouraging international service providers with new technologies to cooperate with local operators.
This will allow such critical services to increase and improve in standards, with lower logistics costs and emissions, Ousmane Dione said.
A seamless multimodal transport network should be created to lower transport costs and enhance sustainability
The WB director said that based on 2018 tonnage figures, inland waterways transport accounts for about 17 percent of the national freight transportation share, while trucking and coastal shipping account for about 77 percent and 5 percent respectively.
Besides a growing road network, Vietnam is fortunate to have 26,500 km of navigable waterways and a 3,000 km coastline, which should be leveraged further.
International experience has shown that waterways and coastal shipping can lead to lower logistics and environmental costs compared to individual trucking. Economies of scale from increased consolidation reduces logistics costs.
A 40-foot container’s cost can be about as low as 10 percent of road transport’s, if the consolidation brings about adequate economies of scale. Road transport emits 2-3 times the emissions of waterways, the country director cited.
He affirmed that the World Bank has and will work closely with the Vietnamese and Australian governments to address the above three issues.
