In recent years, distribution and retailing sectors make an annual contribution of more than US$ 20 billion of added value, making up 14% of Vietnam’s GDP and more than 5 million jobs. Logistics is scored by the World Bank at 3,5/5 in its Logistic Performance Index (LPI), ranked 48th out of 166 economies, and 5th among ASEAN, with the growth rate of 20% per annum. Vietnam is currently at a pre-industrial stage, moving toward a large scale production. Opening up the economy and increasing foreign direct investment (FDI) have put domestic enterprises under pressure of being acquired and dominated by FDI enterprises across the entire process from production to distribution, retail, especially since January 2015 when the sector was fully open to 100% FDI businesses.
Weaknesses of the sector as a whole include limited management capacity, insufficient human resources, backwardness, spontaneous development, segregated, with land transportation as the key mean of transportation leading to high cost, low efficiency, and inadequate international linkage. As for logistics, due to poor infrastructure and management capacity, the cost is high, up to 25% of GDP (which is 10-13% in other countries). As domestic enterprises range from small to very small sized, they are only acting as the 2nd or 3rd level agents in domestic market. Soft infrastructure (information, IT applications) is poor, lacks qualified human resources, while logistic cost accounts for 30-40% of the total transportation cost as compared to 15% internationally. The whole sector is able to meet only 25% of domestic needs.
Under integration pressure, it is necessary to further enhance quality, added value, and increase intelligence and technology content, otherwise the whole sector will seriously lag behind. To transform challenges into opportunities for value chain development, businesses in this sector should be well aware of their problems and be proactive and determined in addressing those weaknesses, adapt themselves to market changes and participate in linkage clusters and chains, build up their capacity. Through the Association and Forum as the focal points, enterprises would like to consult and have a dialogue with authorities on policy implementation, cooperate and network to have a synergy from domestic and international organizations.
In the coming time, to address the needs of the fast developments in the domestic market, as well as to effectively participate in the global distribution system, by 2020, the sector is aiming to become an efficient tool to boost exports directly to big distribution systems in the regions and markets with an FTA with Vietnam.
Logistics development should be done concurrently with the development of marine resources at of sea and seaports, especially low cost transport sector including water transport and rail transport; the government and enterprises should aim, by 2018, to increase the LPI to rank among top 35 from the 48th place in 2015. In order to achieve this goal, businesses should improve their capability to adapt themselves to increasingly diversified modes of retail; to be updated with new trends in linkage chains, merging, retailing segregation by product categories and market regions, and gradually establishing centralized trading areas. On the other hand, it is expected by businesses that Vietnam will develop more international container transshipment ports, and enhance IT applications, and apply supply chain administration and radio identification technologies.
As for public authorities, in order to achieve successfully set targets, it is necessary to develop a national strategy and an overall plan for development of the retail and distribution sector, which should include a technological development strategies, appropriate structure by sector, by region and international linkages; to improve state administration of retail distribution; focus on developing some leading retail distribution corporations, modernize retail distribution infrastructure, develop commercial infrastructure system; strategy on sustainable development of transport system, restructure logistics sector towards a multimodal and high quality transport system, 3PL-4PL-5PL; develop integrated planning and infrastructure, using ports system to transform distribution areas and adjacent logistics into the focal point to connect with the development of international container transshipment ports, deliver services to link various means of transport; establish distribution and logistics centers at targeted regions, develop systematic distribution network; reduce the share of logistics cost in GDP, especially focusing on development of sea transport, water transport and rail transport; apply logistics technologies and information, EDI, e-logistics. It is necessary to strengthen capacity building, governance, foreign languages; timely promulgate laws on retail distribution and logistics including Law on retailing, Law on Product Quality; develop supporting mechanism to boost exportation, investment in countries who signed FTA with Vietnam; encourage investment in upgrading commercial infrastructure and ports and warehouses; develop adequate financing and crediting mechanism, investment and land related policies, moving toward to the significant reduction of interest for middle and long term loans, new loans for production and supplying chain, finance leasing, credit guarantee via bank; develop and expand unsecured loans, loans provided for business or production projects; reduce the interest rate applied for enterprises to the common rate in the region; equitize state owned enterprises toward “succeeding and promoting”. It is necessary to engage private enterprises which have good management capacity but limited capital; create an equal business environment among enterprises, prevent private businesses from establishing interest groups; remove preferences and discriminations in terms of access to land, resources, credit, opportunities for public procurement,… Whenever possible, pilot allocation of some resources (capital, land, state owned enterprises…) to private enterprises. Facilitate multi owner private economic corporations; have in place a mechanism to encourage linkage and collaboration between FDI enterprises and domestic enterprises; consider funding big private enterprises to mitigate risks of collapse; enable private enterprises to become core seeds for replication.
As for international organizations, private enterprises expect to strengthen cooperation and access to resources to implement the Logistics Development Strategy, and through which support networking, information dissemination, experience exchange with international goods distribution associations, organizations and systems; access to new technologies; cooperation and getting assistance in training on projection, market, technology and management information.
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