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Logistics service involves a series of business activities covering all stages of inputs supply, product distribution, packaging, marketing, monitoring of goods movement, etc… Logistics service is considered to have originated in the demand to improve the service quality of the conventional transportation system for both life and business.
The most crucial difference between logistics and normal transportation service is the existence of a solution provider for transportation, based on the planning, implementation and strict management of goods flows and the application of information technology to ensure customers’ satisfaction.
The development of logistics services in ASEAN
Today, logistics service has been expeditiously developed and deeply specialized, becoming one of the backbone sectors in international trade. The competitiveness through the improvement of delivery speed and streamline of the goods flows becomes important to every enterprise and economy. Estimation shows that the value of global logistics service is over US$ 1,200 billion per year, accounting for about 16% of global GDP. A 10% reduction of transportation cost may increase trade volume by 20% or halving of transportation costs may increase each country’s GDP by 0.5%.
The Association of South-East Asian Nations (ASEAN) has attached great importance to the regional integration of logistics service. This sector, on one hand, is considered a crucial building block and an “adhesive” to connect all stages of production and transportation among ASEAN countries in a common production base. On the other hand, it confirms ASEAN’s geopolitical and geo-economical position as a gateway of the continents and economic powers in the world. ASEAN economies are developing at a fast and dynamic growth rate. The market size is growing continuously at the rate of 5-6% per year. ASEAN trade value reached nearly US$ 1,500 billion. The deeper ASEAN economic integration is made, the greater trade activities among ASEAN countries grow. The facilitation of logistics activities plays an important role in reducing cost and improving business efficiency.
In 2007, the Protocol for the Integration of Logistics Services and Protocol to Amend Article 3 of the ASEAN Framework (Amendment) Agreement for the Integration of Priority Sectors were signed, marking the completion of the Roadmap negotiation and the commencement of implementation process. Viet Nam was assigned to be the coordinating country for the implementation of this Roadmap in ASEAN.
Status of Implementation of Roadmap for Integration of Logistics Services in ASEAN
As of August 2010, the Roadmap for Integration of Logistics Services has been implemented for two years. Despite being a new sector, logistics has drawn a special attention of ASEAN. In 2010, the Master Plan on ASEAN Connectivity asserted the importance of strengthening the close cooperation in logistics sector, contributing to the successful establishment of ASEAN Economic Community.
The Roadmap for Integration Logistics Services was divided into 4 groups of measures: Firstly, (1) Trade liberalization, involving the elimination of tariff and non-tariff barriers, is the precondition for the free flow of goods; Secondly, (2) Trade and investment liberalization in logistics services creates investment opportunities for logistics enterprises; Thirdly, (3) Enhancement of managing capacity in logistics sector and Forthly, (4) Development of ASEAN human resources to meet the increasing demand on logistics service’s quality.
Some of ASEAN’s remarkable progresses in the development of the Roadmap on Integration of Logistics Services are as follows:
On trade liberalization, in 2010, ASEAN Free Trade Area has been completed with 99.1% of tariff lines at 0% for ASEAN-6 and 97% of tariff lines to reach 0-5% for Cambodia, Laos and Myanmar. As scheduled, by 2015, most of intra-ASEAN tariff lines will reach 0%.
Regarding trade and investment liberalization, according to the committed schedules, most ASEAN countries allow ASEAN enterprises to freely invest in freight transporation services. The trade and investment liberalization roadmap will basically be completed in 2013. Specifically, in air transportation services, the signing of ASEAN Multilateral Agreement on the Full Liberalization of Air Freight Services has set the basis for the establishment of a single ASEAN aviation market by 2015. In maritime transport, ASEAN adopted the "Roadmap towards an integrated and competitive maritime transport in ASEAN" to build a facilitating environment for transportation and encouraging investments in maritime transport among ASEAN Member States.
With respect to the enhancement of managing capacity in logistics sector, customs cooperation is the most prominent content. ASEAN is urgently implementing the Strategic Plan of Customs Development and the ASEAN Single Window to strongly harmonize trade governing rules and customs procedures among countries. Under the plan, the ASEAN-6 and Viet Nam will complete the establishment of ASEAN Single Window in 2010 and 2012 respectively.
ASEAN is also carrying out the review and systematization of the infrastructure planning development, improvement of legal environment and harmonization of standards in transportation sector. The implementation of two important road and railway projects, which are ASEAN Road Network and Singapore - Kumming Rail Link is being prioritized. These two projects will expand connection among ASEAN countries and extend ASEAN’s linkages with partners in the region.
The recent achievements demonstrate ASEAN’s determination in the strengthening of “institutional” connection and removing barriers of national rules and laws. However, the development of logistics service requires a tremendous support through the corresponding upgrade of the “physical” part or the infrastructure development related to regional transportation systems. The difference in standards, technology, professional capacity and even development gap in ASEAN will still remain as a big challenge that ASEAN must handle in the coming period.
Viet Nam and the development targets for ASEAN logistics services
Viet Nam is the one of the leading countries in ASEAN to build the “institutional” system for the development of logistics sector. This is a necessary condition but not the sufficient one. In Viet Nam, logistics service accounts for 15-20% of GDP, equivalent to around US$ 12 billion. This is a huge amount of money linking to all stages of circulation and distribution of the economy. Transportation itself, which is the most important phase in logistics and accounts for 40-60% of total logistics cost, can constitute a huge market. Viet Nam has over 800 logistics enterprises with different scales. The potential for logistics service development is even greater when our trade volume is growing at the fastest rate of 18-20% in the region and the turnover reaches nearly US$ 130 billion.
However, like other developing countries in the region, most Vietnamese logistics enterprises are small and medium ones. Therefore, the business organization is mainly fragmentary and unprofessional. Human resources are also limited. Small enterprises often can not meet the customers’ demand and consequently, market share is shrunk. Besides, there is also negative competition, which causes damages to businesses in the industry.
Logistics sector not only brings about much benefit for business but also acts as an essential service to efficient economic growth, ensuring macro-stability of any country. Improvement of services efficiency, accompanied with the active and effective participation of logistics enterprises will be the key to the success of economic development strategies. ASEAN logistics integration strategy should be reflected in each ASEAN countries’ individual logistics strategy, including Viet Nam.
Source: MOIT
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