By Bui Danh Lien
With its agricultural products transported to more than 180 countries and regions, Vietnam is the second largest farm produce exporter in Southeast Asia and 15th in the world. The value of its agricultural exports totaled US$265 billion in the decade from 2008 to 2017 and reached US$40 billion in 2018. Cross-border trade cooperation between Vietnam and China has contributed greatly to the rapid growth of the Vietnam’s farming exports.
China’s Guangxi Zhuang Autonomous Region borders Vietnam to the south, giving it a unique geographical advantage for Sino- Vietnamese trade. The region also complements Vietnam in many sectors, making it an ideal site for the development of frontier and cross-border economic cooperation zones.
Stronger Policy Support
According to the U.S.-based Council of Supply Chain Management Professionals, one of the largest trade associations in the industry, logistics management is the section of supply chain management that plans, implements and controls the efficient flow and storage of goods, services and related information from the point of origin to the point of consumption.
Logistics management activities typically involve management of inbound and outbound transportation, management of fleets, warehousing, materials handling, purchase orders, logistics network design, inventory control and supply/demand planning and management of third-party logistics services providers. It also integrates logistics activities with other sectors like marketing, sales, manufacturing and information technology. The boom of Sino- Vietnamese border trade has boosted investment in transport infrastructure such as railways, highways and seaports.
Logistics activities in Vietnam are mostly carried out by producers of agricultural products including individuals, companies and cooperatives. To serve the freight forwarding industry and the export of farm produce, a logistics system supported by both Vietnamese and Chinese authorities should be established.
A resolution concerning agriculture, farmers and rural areas was passed at the Seventh Plenum of the 10th Communist Party of Vietnam (CPV) Central Committee in 2008 and has served as a major force driving development of the country’s rural economy and important poverty alleviation campaigns. A series of mechanisms and policies were formulated in the national program, and resources were allocated accordingly to build new rural areas inVietnam.
Logistics activities in Vietnam are primarily regulated by eight articles in the Commercial Law adopted in 2005 as well as other laws in related areas such as shipping, railroads, civil aviation and road transport. These regulations constitute a legal framework for the logistics industry in the country, but some provisions in these legal documents overlap and inadequately meet the demands of logistics services in cross-border trade.
Simplified customs procedures can create favorable conditions for trans-boundary flow of goods, while investment in transport infrastructure can help accelerate movement of goods and reduce storage time and costs.
To boost the logistics sector at the local level, Hanoi, capital of Vietnam, approved the “Hanoi Logistics Management and Development Proposal by 2025” on February 13, 2018, with the goal of building a modern nationwide logistics service system. The country’s logistics industry has made important progress in the past few years but remains amateur and unsustainable. Imperfect national administration failed to address goods delays at ports. Central and local governments of Vietnam have made great efforts to attract foreign investment from large companies through favorable policies. Yet foreign investors worry about securing reliable logistics service providers in the local market capable of meeting their demand for heavy truck fleets, efficient conveyance and complete warehousing facilities.
Farm produce traders in Vietnam need a reliable “middle man” to ensure their products are shipped economically, efficiently and fast. They also need stronger policy support at both national and local levels. In addition to resolutions and commitments made at conferences, relevant policies should be formulated and implemented according to the specific situations of different regions based on development level, development plans, soil properties, seasons and producers’ capabilities. A catalogue of high value-added products for export should be compiled by authorities based on domestic and international market needs. To access other Asian markets with huge potential, policy makers should consider constructing land transport routes connecting Vietnam with Laos, Cambodia, Thailand and Malaysia.
Strategies for Improvement
To meet the growing demand for cross-border trade of agricultural products, Vietnam’s freight forwarding industry must develop more professionally to play a greater role in international trade. It must also serve national interests, primarily the national campaign for building new-type rural areas, increasing farmers’ incomes and reducing hunger and poverty.
Some well-tested strategies could help alleviate the persisting problems in the logistics sector.
The first strategy is to make production plans for the export of farm produce. Medium and long-term export plans should be drawn up in accordance with dominant crops in different regions, and investment priority should vary according to the seasons. Laws and regulations should clearly define the responsibilities of each region and segment. Local governments should introduce measures to ensure smooth and fast flow of goods from ports to destinations in different regions.
The second strategy is to enhance personnel training. Local governments should allocate funds to organize training programs on cross-border trade, storage of goods, customs procedures and information technology. Logistics personnel should be trained to use logistics software and barcoding and radio frequency identification devices.
The third concept is to clarify the liability of freight service providers.Exporters want to employ competent couriers with good logistics management and conveyance capacity to guarantee different types of goods are safely transported from warehouse to port, including unpackaged, frozen, fragile or fresh foods. The websites of two organizations, Vietnam Freight Forwarders Association and International Federation of FreightForwarders Associations, are highly recommended for shippers to find information about available forwarding and logistics firms and their capabilities and records. To ensure logistics service quality, a legally binding transportation contract should be signed outlining liability for loss or damage.
On November 12, 2017, Chinese President Xi Jinping and Nguyen Phu Trong, general secretary of the CPV Central Committee, attended the signing of a memorandum of understanding on accelerating the negotiation process for a framework agreement on construction of a China-Vietnam cross-border economic cooperation zone. The agreement was signed in Hanoi between the Chinese Ministry of Commerce and Vietnam’s Ministry of Industry and Trade to create more favorable conditions for enhancing Sino-Vietnamese logistics cooperation.
For the long term, improving infrastructure is the top priority for the development of Vietnam’s logistics sector. Asian countries should invest in building transportation networks connecting to their neighbors. Railways now linking Lao Cai, Hai Phong, Lang Son and other cities could be extended to connect to the international rail network and deep-water ports developed through concerted efforts by both Vietnamese and Chinese governments. Vietnam also needs to begin construction of a north-south expressway as soon as possible to reduce the necessary time to move agricultural products from southern growers to northern provinces.