An Analysis of Vietnam's Transportation Sector: Costs and Solutions

This essay examines the significant challenges faced by Vietnam's transportation sector, primarily focusing on the high costs associated with transport expenses. It identifies contributing factors such as underdeveloped road and maritime infrastructures, the rising number of vehicles, and inefficient shipping times, which collectively impact the country's logistics industry and economic prosperity. The essay delves into these issues, highlighting the need for technological advancements like RFID for faster inspections and policy changes, such as custom bonds for imported goods. While acknowledging the recommendations, the essay also points out that infrastructure development challenges persist due to Vietnam's financial constraints. The essay underscores the importance of addressing these issues to enhance Vietnam's competitiveness in the global market and attract foreign investment, which could significantly boost the nation's economic wealth and technological advancement.

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I. ABSTRACT
The essay reviews the foremost concern that Vietnam’s transportation sector has been enduring -
transport expenses. The issue involves factors that contributed to the high expenses such as
underdevelopment road and maritime infrastructures, the risen number of vehicles, the
unnecessary shipping time, etc. It is important to discuss these factors as they affect the country’s
logistics industry and economic wealth directly. Recommendations for these difficulties involve
the implementation of technology (e.g. RFID for fast inspecting) and the change in national’s
policies (e.g. custom bonds for imported goods). Even though there are recommendations yet
problems regarding infrastructure development have not been solved completely and it is
expected due to Vietnam’s financial situation.
II. INTRODUCTION
Vietnam is said to have the 5th biggest port in ASEAN (Das 2018). He reported that the country’s
external trade practices and the expansion of maritime freight traffic have increased significantly
and is still growing. Nhandan Online (NDO 2019) also acknowledged that Vietnam’s export
revenue in the first quarter of 2019 is approximately 59 billion USD and there are over 128
million tonnes of goods arriving through Vietnam’s seaports. Therefore, maritime transportation
can be seen as a potential sector that contributes to the economy’s wealth
However, as the chairman of the HCM City Goods Transportation Association claimed
(Vietnamnews 2018), the port systems are unable to operate to the fullest as obsolete facilities
create too much unnecessary loading time, which leads to cargo congestion. Furthermore,
Mackey (2009) pointed out that the lack of connectivity between port and surrounding roads is
another drawback for maritime transporting method due to the time-consuming delivering
processes. Compare to some neighboring countries, Vietnam’s port infrastructure ranking 82 out
of 137 countries as the least attractive
Vietnam Thailand Singapore Malaysia
82 63 2 20
Figure 1: Quality of port infrastructure ranking 2017-2018
Source: The Global Competitiveness Report 2017–2018 - World Economic Forum

III. CHALLENGES
According to Massmann (2015), even though the number of seaports spread from Northern to
Southern region is more than 400, the majority of them is small scaled and still operating with
obsolete systems while the number of cargos and vessels keep rising 16% each year (Vietnam
Seaports Association 2017). Consequently, some ports were overwhelmed by the excessive
numbers of vessel and could not avoid congestion situations. The lack of efficiency of port
services affected Vietnam’s logistics industry substantially with a cost of 2 billion USD (Das
2018). Massmann (2015) believed that due to the utilization of multipurpose equipment, tools
and machinery instead of specialized ones (e.g. gantry cranes) that restrained port operation to
from satisfying internal and external demands of the marine market.
With the weak port infrastructures, enterprises have to use road carrying method instead
(Vietnamnews 2018). According to Anh (2018), about 77% of cargos are carried using roadway
while only 5% are carried using the waterway. However, analysts pointed out that it is the road
transport costs that undermine Vietnam’s transporting and logistics industry the most. It is
reported that a regular cost for delivering a container from Hanoi to Ho Chi Minh City is nearly
10 times higher than using waterway and accounted for 10% of total transport expenses (Anh
2018). Additionally, lengthy turnaround times in handling containers and delivering cargos in
ports has also added up to the expenses (Anh 2018).
The situation becomes worst when the development momentum of the vehicle population and
road infrastructures is uneven. As the Voice of Vietnam (VOV 2015) stated, the growth of
individual vehicles especially motorcycles, has escalated drastically. It is estimated that 1,000
motorcycles and 100 cars are added to the city per day, yet the traffic infrastructure development
has proceeded very slowly and has failed to serve the risen population.

Figure 2
Some highway roads improved, however, the heavy cost for maintaining the facility is paid by
companies. A brief data report from Anh (2018) shows that with the distance of less than 200
kilometers from Ho Chi Minh City to Ba Ria – Vung Tau, drivers have to pass 8 toll stations
with a total fee for both departures and returns of 34 USD, which accounts for nearly a quarter of
transport expenses. According to Anh, each container truck has to bear the road maintenance fee
of nearly 750 USD annually.
As a result, this pushes up the price for road transporting and reduce the efficiency of the
country’s logistics industry. This difficulty affects not just Vietnam’s logistics industry but also

the economy when the cost occupies 21% of GDP in 2016 (Anh 2018) and increases gradually to
25% 2 years later (Nga 2018)
Underdeveloped infrastructure, in general, can damage the country’s economy and logistics
competitiveness. An expert at Portland State University asserted that inadequate logistic
infrastructure is the biggest obstacle for Vietnam to become a standardized business destination
for investors as well as to facilitate the country’s role in the global supply chain (Yen 2018).
Mackey (2009) expressed that the port’s facilities and capacity could stagnate the country’s
development. Massmann (2015) also agreed that the country’s underdeveloped maritime
transportation has become a true obstacle for Vietnam to expand its businesses and for foreign
investors to execute trading.
There are some suggested infrastructure development projects, yet the lengthy lead time creates a
negative impact on the logistics industry. Consequently, these challenges not just reduce
Vietnam’s logistic services competitiveness but also block the economy from potential business
activities with overseas partners. Multinational enterprises are likely to prefer other business
location than Vietnam due to the uneconomical method of transporting, and that could result in
an enormous loss as multinational enterprises operate in Vietnam not only could assist the nation
with modern technology application, but also contribute the economy’s wealth (Hung 2010)
IV. RECOMMENDATION
Enhancing infrastructure is an expensive practice, especially with the economic situation where
inflation and currency devaluation occurs (Mackey 2009). According to Lam (2017), Vietnam
has already used nearly 6% of its GDP to fund costly infrastructure projects and cannot afford to
keep paying the enormous price since the estimate fee is approximately 480 billion USD.
Therefore, apart from using the government’s budget, requesting for both private and
international investment is essential to upgrade both land and maritime transportation.
Firstly is to reduce traffic, the government could encourage firms to implement flexible working
hours policies. This application can be taken under forms such as self-scheduling, video meeting,
and conferences or work from home. The goal of this solution is not just to provide employees
with alternative work and travel choices but also to reduce traffic congestion by avoiding peak-

hour commute. It is also agreed by Dentlinger (2016) that implementing flex-hours working
methods contribute dramatically to the battle with traffic congestion. Moreover, with the
introduction of the metro subways in the future, it is essential that Vietnam propagandize the
usage of public transports, building a connective road system (e.g. overpasses, bridges) or charge
appropriate fees for public transports, and reduce private vehicles population. Reflect on the
Challenges section, the solution will help mitigate excessive shipping time, unnecessary
transport expenses, and increase the profit for logistics and transport companies
Secondly, an ethical and secure investment turnover. It is said that Vietnam’s Public-Private
Partnership (PPP) regulations do not have reliable investment terms which guarantee a safe
turnover required by multinational enterprises (British Business Group Vietnam 2018). Vietnam
must simplify its legal framework to decrease lengthy procedures. Anh (2018) reported that
another factor contributes to the expensive logistic cost and lower the industry competitiveness is
the time-consuming business conditions and management regulations that Vietnam oppose.
Import-export procedures are said to take up to total of 237 hours to complete.
In conclusion, the most suitable solution is to apply technology. Vietnamese government
authorities must have a transparent and secure system to review and exchange all relevant
documents and classify information of transactions. Furthermore, inspectors can use software or
specialized equipment (e.g. RFID) to check an input transaction’s data to save time. Custom
bond practices can also be conducted when inspecting imported merchandises. These
implications will alleviate ports congestion, reduce unnecessary procedures, overall improve the
efficiency of the logistics industry.

Figure 3
Vietnam’s further development of PPP laws will assist foreign and private firms in providing a
more beneficial and reliable business investment. Furthermore, with improved services and
materials, Vietnam will attract adequate investment capitals and its logistic industry will become
a potential sector for investors. It is Vietnam’s obligation to manage debt, policies effectively
and direct national capitals wisely to maintain the nation’s prestige with investors (Vietnam
Investment Review 2019)
V. CONCLUSION
Although Vietnam has a great prospect for logistic services, the transportation sector is still
suffering from serious congestions and heavy expenses. These difficulties reduce the country’s
capability of having a competitive logistic field when emerging to the globalization trend. Excel
reputation and high efficiency are crucial elements for any industries to function sustainably,
hence Vietnam must adopt innovating and practical strategies to build up the efficiency for the
logistic industry gradually rather than rely solely on the aid of foreign investment.

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