VLA says the logistics costs are 16-17 percent of GDP

Nguyen Tuong, senior advisor to VLA, said on the sidelines of the VLA annual conference on November 17 that logistics costs are one of the most important issues mentioned in the VLA 2018 White Book, the publication launched as the official voice on logistics-related activities.

Many agencies and organizations cited the World Bank 2014 report as proving that logistics costs are too high in Vietnam, 20.9 percent of GDP. The report was made by an ALG consultancy firm.

However, the in-depth interview conducted by VLA in August 2018 found that logistics costs are very small in industries that make valuable products such as cars, electronic parts and steel, just below 5 percent of total production costs.

The Vietnam Logistics Association (VLA) says that logistics costs in Vietnam are 16-17 percent of GDP, not 20.9 percent as reported before by several institutions.

The proportion is higher, 10-20 percent, in consumer goods, e-commerce, retail, garment and farm produce. Of logistics costs, the expense for transport services accounts for the highest proportion, 60-80 percent, followed by handling and customs services.

As such, VLA, which also used the calculation method of ALG, has found that the logistics costs in Vietnam in 2017 were 14.5-19.2 percent of GDP, and the average figure 16-17 percent.

“So, you can see that the logistics costs in Vietnam are not too high compared with other regional countries such as Singapore (8.5 percent), Indonesia (24 percent) and Thailand (15 percent),” Tuong said.

VLA pointed out that the figure released by the World Bank was calculated based on 2010 data.

Thoi Bao Kinh Te Sai Gon some months ago quoted Ha Ngoc Son, head of the Import/Export Division of the HCMC Industry and Trade Department, as saying that logistics costs in HCMC calculated by the division had never exceeded 19 percent of the city’s GRDP (Gross Regional Domestic Product).

The department’s plan on developing logistics services by 2025 says that the logistics industry made up 8.5 percent of the city’s GRDP in 2016 and 8.6 percent in 2017,  higher than the 5.4 percent in 2011.

Meanwhile, economists remain cautious about the figures released by different institutions. They say VLA is trying to calm businesses down by affirming that the logistics costs are not as high as reported before.

The reported high logistics costs of over 20 percent, plus the news that 80 percent of the logistics market share is in the hands of foreign firms, have caused big worries to goods owners.