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Cost of logistics in VN hurting textile players

Cost of logistics in VN hurting textile players

Vietnam News/ANN: Vietnamese garment and textile enterprises are losing their competitiveness due to high costs of logistics services for exports, experts have said.

According to statistics from the Viet Nam Textile and Apparel Association (Vitas), textile and garment export value last year reached US$31 billion, an increase of 19.2 per cent compared to 2016.

Of the $31 billion in export value, the industry spent nearly $18 billion to import raw materials, including cloth, fibre and cotton, among others.

However, the cost of logistics activities for textile and garment enterprises accounted for 9.1 per cent of total export turnover, around $2.79 billion.

According to Vitas, the cost of logistics services in Vietnam is much higher than that of neighbouring countries and the region.

In particular, logistics costs in the country are 6 per cent higher than in Thailand, 7 per cent more than in China, 12 per cent higher than in Malaysia and three times more than in Singapore.

Despite reasonable labour costs, competitiveness has been affected by transport costs, surcharges at seaports, and limited seaport infrastructure.

Pham Thi Thuy Van, deputy director of marketing at the Sai Gon Newport Corporation, Viet Nam’s leading container port operator, attributed high logistics costs to a number of reasons.

“The current regulations on fees and charges for logistics services are high, making transport costs also relatively high, accounting for between 30 and 40 per cent of the cost of the products, compared to some 15 per cent in other countries,” she said.

For example, BOT charges on the Ha Noi-Hai Phong expressway for businesses from Ha Noi and Bac Ninh are about $75 per trip, accounting for 40 to 42 per cent of the total trucking fee, while in Malaysia, the BOT fees account for only 6 per cent of trucking costs.

In addition, the surcharges of shipping lines also contribute to the cost of logistics operations in the country.

Experts said the expanded costs for logistics have significantly affected the garment and textile industry, which employs a large number of labourers and is hugely dependent on input importation, which results in low added value.

Nguyen Xuan Duong, chairman of the board of directors for the Hung Yen Garment and Textile JSC, said it was difficult for enterprises to be highly competitive because of the high cost of logistics.

“The company has to spend around $5 million on logistics services for exports every year,” he said.

In the first eight months of the year, exports of the garment and textile sector reached nearly $20 billion.

This year, the garment and textile industry has set a target of $34-35 billion worth of exports. If achieved, the costs for logistics services would reach up to $3 billion, reducing competitiveness of businesses.

To address the challenges, many firms have applied technology to better manage warehousing as well as optimise supply chains.

One of the most commonly used technologies includes backing up bills and contracts, and automatically transferring documents between firms.

Experts said that logistics enterprises should work to improve their competitiveness, and consider cooperating in transport services to reduce costs for other enterprises.

They also suggested that the Government outline a roadmap to improve the quality of logistics services to meet the demand of many sectors, especially the garment and textile industry.

According to the Viet Nam Logistics Business Association, Viet Nam’s logistics costs in 2016 totalled $41.26 billion, equivalent to 20.8 per cent of the country’s GDP.

Despite high logistics costs, the logistics sector has contributed a mere 3 per cent to GDP, according to the association.

According to the World Bank, in 2016, the country’s logistics sector ranked 64 out of 160 countries, and fourth in the Asean region after Singapore, Thailand and Malaysia.

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