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Wednesday, August 4, 2021

Logistics costs account for up to 25% of farm produce value

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HCMC – High logistics costs have eroded the competitiveness of domestic produce, said Truong Gia Binh, chairman of the Vietnam Digital Agriculture Association (VIDA), at a conference on how to cut logistics costs for Vietnamese farm produce on July 9.

Logistics costs normally account for up to 25% of the value of Vietnamese farm produce.

Stressing that Vietnam is integrating deeply into the global economy, Binh told the conference jointly held by VIDA and the Vietnam Logistics Business Association (VLA) that bilateral and multilateral trade agreements have helped Vietnamese products including farm produce penetrate more foreign markets.

Besides advantages such as abundant natural resources and a diversity of farm produce, small-scale production, low quality and especially high logistics costs have made Vietnamese farm produce less competitive.

According to VLA general secretary Nguyen Duy Minh, logistics costs accounted for 16.8% of Vietnam’s gross domestic product in 2017. Factors that lead to the high costs included high transport costs, underdeveloped logistics infrastructure, highly specialized inspection costs and informal fees.

Minh cited a report as indicating that logistics costs make up 21% of Vietnam’s fruit and vegetable supply chain. Among the logistics costs, transport costs account for 61%, while loading, storage and packaging costs account for 20%, 14% and 5%, respectively.

Vo Quan Huy, general director of Huy Long An Company, said that the company exported 14,000 tons of bananas to Malaysia, Singapore and South Korea last year, with logistics costs accounting for 30% of post-harvest costs. In the first half of 2019, logistics costs shot up by 45% due to the impact of the Covid-19 pandemic.

Le Van Quang, board chairman of Minh Phu Corporation, said it costs VND41 million to transport a container of shrimp from Vietnam to the United States and VND16 million to Japan. However, transporting the container from HCMC to the Mekong Delta province of Ca Mau costs VND10 million, while it costs VND80 million to be transported to Hanoi.

Quang pointed out that there are too many toll stations in Vietnam, leading road transport costs to soar. Sea and waterway transport is much cheaper but the port system is underdeveloped. Therefore, he suggested the Government invest more in developing the sea and waterway port system to help enterprises reduce logistics costs.

Nguyen Quoc Toan, director of the Department of Farm Produce Processing and Market Development under the Ministry of Agriculture and Rural Development, said there should be regional logistics plans to promote a connection between localities and develop modern logistics centers.

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