High logistics cost in Vietnam erodes the profits of exporters

“The increase of up to 10 times is believed to be unbearable for businesses while logistics costs account for 20-25 per cent, so, it erodes the profits of exporters," Johnathan Hanh Nguyen, chairman of Imex Pan Pacific Group (IPPG) said at a seminar of "Finding solutions to reduce import-export costs for businesses" held on April 6.

He also said that logistics cost in Vietnam is much higher than the world’s average logistics cost.

The increase of logistics cost has made the cost of goods from Vietnam increasing, thereby, losing its competitive advantage compared to other countries in the Asian region, he said.

Therefore, seeking solutions to reduce the logistics cost is an urgent requirement to improve the competitiveness of Vietnamese goods, he said.

Vietnam's air freight market has a growth rate of 15.3 per cent per year, however, airlines still only carry goods on passenger flights so far. There is no an airline that carried goods by specialized aircrafts.

According to statistics of the Vietnam Maritime Administration, there are nine foreign airlines currently transporting goods from 16 countries to Vietnam.

The pandemic has caused a sharp decrease in the number of flights, carrying both passengers and goods.

In the meantime, the demand for goods transportation has increased, thus, international freight rates have skyrocketed three or four times, even five or six times higher than before the pandemic.

Johnathan Hanh Nguyen said that Bellazio Logistics Joint Stock Company had just been granted a business registration certificate on April 5.

The company will be operated mainly in the field of express delivery; domestic and international transportation of goods by air and by sea; investing and transporting warehouses with a charter capital of VND100 billion (USD4.37 million).

The company has six shareholders. IPPG accounts for 51 per cent of the charter capital, SASCO accounts for 10 per cent, Viettel Post 10 accounts for 10 per cent, Vietnam Post accounts for 10 per cent, Bellazio Trading Online accounts for 10 per cent and IPP Air Cargo accounts for 9 per cent.

This is the premise and platform for IPP Air Cargo to participate in the aviation market more conveniently, creating a breakthrough in logistics by bringing goods from abroad into Vietnam as well as bring the goods to all around the country, helping e-commerce to present across Vietnam.

“All airlines in the world have the commercial rights to carry goods, but under the aviation agreement, IPP Air Cargo will be able to fly the same number of flights with other airlines,” he said.

Thus, the number of flights of IPP Air Cargo will be doubled, helping businesses to not suffer from goods congestions, he added.

IPP Air Cargo is expected to play a position to create a balance between foreign and Vietnamese airlines, he said.

According to Jonathan Hanh Nguyen, the shortcoming in air freight transport now is that 22 international and domestic airports in Vietnam still suffer from a serious shortage of warehouses.

Therefore, he proposed the Government and the Ministry of Transport to upgrade warehouses to meet an increasing demand, he said.

"Bellazio Logistics Joint Stock Company is ready to invest and synchronise to easily connect with customs at major domestic and international terminals,” he said.

“We look forward to smooth and consistent freight operations with upcoming trends", he said.

Previously, the transport ministry submitted on March 29 to Prime Minister Pham Minh Chinh for considering and granting a business license of air cargo transportation for IPP Air Cargo, he said.

If approved early, there will be the first cargo shipment after three months obtaining the license, contributing to reducing import and export costs for domestic enterprises, he said.

 "At first, we will operate five cargo planes in the first year and prioritise domestic cargo flights, then we will carry goods in Asia,” he said.

IPPG is the pioneer of Vietnam's Luxury Retail. It continuously develops over the years and achieve the market role as one of the leading retailers in Vietnam, occupying 70 per cent of Vietnam's Luxury market. The group has seized 17 subsidiaries and 18 joint-ventures after its establishment since 1985.