Logistics costs have been a headache to the Vietnamese agricultural sector as they account for a lion share in the price of agricultural products.

Logistics cost eroding profit

According to processing and exporting businesses, transport costs make up 60% of the total logistics cost, as compared to some 30% recorded in other countries.

Chairman of the Vina T&T Import Export Trading Service Co.,Ltd Nguyen Dinh Tung said that logistics costs are equivalent to 30% of his enterprise’s revenue, not mentioning fruit irradiation.

Many fruit exporters prefer air transport to keep their exports fresh for a longer time. However, their pocketbooks may be hit if foreign airlines adjust transport costs, he elaborated.

The freight rates, which have increased and shown no signs of reverse, have posed formidable challenges to agricultural processing and exporting enterprises. Although Vietnamese enterprises have meticulously studied to compete in the global market, they could do nothing with the transport costs.

Communications Director at the Vietnam Association of Seafood Exporters and Producers (VASEP) Le Hang said amidst escalating tensions at the Red Sea, foreign liners have been the dominants who decide to increase the cost of shipping and other related services.

Within less than a month, sea freight prices to Canada, the US, and the EU rose 80% and event 300% because geographical tensions forced liners to divert their routes, subsequently leading to longer delivery and higher expenses.

Meanwhile, Chairman of Sao Ta Foods Joint Stock Company Ho Quoc Luc said that logistics costs have fluctuated greatly over the past four years, adding shipping a container to the US now costs 13,000-14,000 USD as compared to 3,000 USD before the COVID-19 pandemic.

He added that expensive logistics costs could force exporters to sell their products in near-by markets such as China, the Republic of Korea, and Japan.

Measures sought for development

Logistics experts said Vietnam holds strengths in exports as well as potential to broaden logistics services to serve transportation of goods.

Managing Director of Zim Intergrated Shipping Services Company Elias Abraham said that 15 years ago, there were no services to bring goods to the EU and the US. However, more than 200 shipping routes have been established, which means Vietnam is a star in the logistics industry.

Insiders also said that Vietnam should develop logistics centres in different localities, while applying advanced technologies to reduce costs.

Chief Operating Officer at SLP Vietnam Edwin Chee said thanks to automation and modern machines in use at SLP, only three to five workers are enough to operate a 8,000-square-metre logistics facility.

According to Deputy Minister of Planning and Investment Tran Huy Dong, to improve the competitive edge of the logistics sector amidst deep international integration and the Fourth Industrial Revolution, it is necessary to complete policies and legal frameworks regarding logistics services.

Along with logistics infrastructure, the country should review its masterplans to ensure the harmony between the transport system and the logistics industry development goals.

VNA