EVFTA expected to create great pressure on domestic logistics firms

The expected execution of the EU-Vietnam Free Trade Agreement in 2020 will create great pressure on Vietnamese logistics businesses (Photo: VNA)

Hanoi (VNA) – The expected execution of the EU-Vietnam Free Trade Agreement in 2020 will create great pressure on Vietnamese logistics businesses, insiders said.

When the deal comes into effect, it would open the door wide to EU logistics service providers to enter Vietnam, and provide protection for them.

Meanwhile, the domestic logistics firms have limited competitive capacity.

However, economists said increasing competition will force the domestic firms to reform and enhance their capacity.

Greater competition in the logistic sector would also allow the manufacturing and processing industries to access better logistics services at more reasonable costs, thus cutting production costs and increasing price competitiveness of made-in-Vietnam goods, especially those destined for exports, said Nguyen Thi Thu Trang, director of the Vietnam Chamber of Commerce and Industry (VCCI)’s World Trade Organisation Integration Centre.

Under the EVFTA, Vietnam will open the market for EU investors in terms of aviation, land, railway, sea, inland waterway transport and some supporting services of transport.

The country also commits to providing equal treatment to EU investors and service providers.

Logistics costs in Vietnam at present account for 20-25 percent of the country’s annual GDP, specifically 12 percent of the cost of aquatic products, 23 percent for wooden furniture, 29 percent for vegetables, and 30 percent for rice, much higher than that in Thailand, Malaysia and Singapore.

Trang said to take advantage of the opportunities and cope with the challenges from the EVFTA, businesses need to understand clearly the commitments under the deal so as to identify threats, thus building plans to improve their service quality and professionalism.

Besides applying the latest technologies to increase information connection, logistics firms should improve human resources training and make use of cooperation opportunities with European investors.

Businesses should also find appropriate channels to expand their linkages with other logistics service providers such as shipping lines, commercial and insurance agents, while actively joining the formulation of the State's policies on management of logistics activities and related ones such as customs, industry and trade.

Vietnam ranked 39th out of 160 countries in the World Bank’s 2018 Logistics Performance Index, a big jump from two years earlier when it was 64th. The Ministry of Industry and Trade is aiming to raise Vietnam’s ranking by five to 10 places by 2025./.