Vietnam must get its logistics act together for growth, says new report


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A new report by the World Bank says that it is imperative that Vietnam sorts out its logistics and supply chain problems if the country’s growth is to continue. In particular, cumbersome and inconsistent government regulations, lack of automated customs clearance and the frequency of ‘facilitation payments’, together with a lack of infrastructure are driving up costs, according to ‘Efficient Logistics: A Key to Vietnam’s Competitiveness’. These problems are could make


Vietnam expensive compared with regional competitors like Thailand, Malaysia and China, says


the Bank, particularly as


businesses are forced to carry more inventory in their supply chains than they would otherwise – to the tune of an estimated US$100 million a year. This could


increase to as much as US$180 million by 2020 the report adds. Getting rid of paperwork in


customs and other clearance procedures for imports and exports and more transparent and consistent application of regulations would go a long way towards solving Vietnam’s problems, the report concludes It would also encourage international players into the freight forwarding and third-party logistics market and encourage collaboration between foreign and domestic operators. The Vietnamese Government


is though keen to push through privatisation or semi-privatisation of


its transport and logistics


industry – a move it sees as essential if it is to find the cash for long-cherished projects such as the new airport for Ho Chi Minh,


Long Thanh. Expansion options at the existing Tan Son Nhat International Airport – currently the country’s busiest – are limited as it is hemmed in by urban development. A start could be made on its construction within the next 12 months or so. The Government also has plans


ambitious for its state


airline, Vietnam Airlines – for which privatisation is also on the agenda with an initial public offering scheduled for 2014. According to press reports, Prime Minister Nguyen Tan Dung is putting pressure on the carrier’s management, warning in the local media that they could be sacked if they fail to push through a privatisation plan. Already, though, a major fleet


expansion programme is under way, with the current 80-strong


fleet due to increase to 115 aircraſt by 2015 and 170 by 2020, with orders in place for new and modern aircraſt such as Airbus A350XWB and the Boeing 787-9. Vietnam Airlines already operates 777-200s and A330-200s and in fact has one of the youngest fleets in the region. It currently offers the only direct


flights from the UK to Vietnam, four times per week from Gatwick Airport - twice each to both Hanoi and Ho Chi Minh City - with onward connections to 23 destinations in Vietnam, Burma, Cambodia and Laos. There are no dedicated freighters in the fleet, but according to an airline spokesman, “the cargo market between the UK and Vietnam is pretty buoyant at the moment, with good momentum but also plenty of potential for further growth.”


High tech and money markets give Luſthansa wings


Our TV screens may be filled by dramatic events like earthquakes and floods, but the biggest single influence on trade with the Asia- Pacific region is probably the more prosaic matter of currency movements. Many of the major Asian currencies have devalued, which has made it harder for European exporters to sell there and this dampened the market, says Luſthansa Cargo’s head of sales, planning and marketing, Chris


Bannerman. There was


however quite a strong recovery in the last quarter of 2013, however. In south-east Asia, Luſthansa


demand, but there is also good cargo potential, says Bannerman. The passenger people were also


the instigators of Luſthansa’s entry into Saigon, Vietnam, but cargo business here is also good – so much so that serious consideration is being given into putting in a freighter. There has been quite a shiſt of electronics manufacturing out of China to Vietnam, Bannerman points out – Samsung has set up a plant there, for instance – driven by lower manufacturing costs. There’s also good intra-Asian business for Luſthansa – between Saigon and Kuala Lumpur for example, taking advantage of IATA ‘Sixth Freedom’ traffic rights. The Thai market is meanwhile


will be adding passenger flights to Jakarta, Indonesia in April, adding to a network that already includes Saigon, Singapore, Kuala Lumpur and Bangkok. The service to the Indonesian capital will in fact be combined with Saigon or Kuala Lumpur. The new service – which is in fact a revival of an earlier link operated by Luſthansa – has been driven primarily by passenger


doing quite well – like other carriers, Luſthansa has noted a good trade in car parts to South America and there is also the staple traffic of computer hard drives to Europe and worldwide. Singapore is a long-established


Luſthansa market, served not only by Luſthansa itself with its passenger and freighter aircraſt but those of its Aerologic joint venture with DHL which operate back to Europe via the Indian high-tech city of Bangalore, another major market for Far East-made electronic goods. There’s also a brisk business in live tropical fish out of Singapore on


Luſthansa’s LiveTD product. The airline in fact carries far more live fish (80 million) a year than it does


trade diminishing and its exporters grew 21% in 2013 compared with the previous year, says Bannerman.


Issue 2 2014 Freight Business Journal


///FAR EAST


Car makers drive Thai air exports


The launch of a new car model in, say, South America, can have


airlines scrabbling for


export airfreight business in Thailand, says Air France- KLM Cargo. The country has become a large specialist in automotive production with a strong export activity for spare parts. However, the traffic is by nature


its short-lived and


the airfreight market soon settles down again to its regular staples. High tech goods account for around half the airfreight export total including computer hard discs – the three main producers are Western Digital, Seagate and Hitachi. Thailand is in fact the world’s first producer of hard disks, with around 60% of world’s output – as some computer firms found to their costs during the floods of a couple of years ago when the supply suddenly halted. Most hard disks are forwarded on to


computer assemblers Eastern Europe. in


Photo equipment is also important with many production units for such famous makes as: Nikon, Canon and Sony. The remainder of the air


export market is ,made up of fresh produce (20%) and textiles and handicrafts (10%). The market was down 5% in 2013 over 2012 in tonnage terms, “but the main problem really lies in the lack of stability in the main Asian markets.” If Chinese air exports are going through troubled times, “then a lot of major carriers come on the Thailand market to pillage it,” said a spokesman for the airline. Also, as Thailand is a major


passenger tourist market, all regular carriers are faced with competition from the charter carriers trying to fill their bellyholds – and, it has to be said, “those carriers have no structured tariff policy”, but a rather opportunistic approach to the business – which tends to disrupt the market.


China trade goes into reverse


With the volume of imports growing much faster than exports, Norbert Dentressangle’s forwarding in


freight place


passengers (4m). Hong Kong is another well-


established market with nine freighter flights a week and 14 passenger to and from either Munich or


Frankfurt - a total


weekly capacity of 750 tonnes. Outbound, it has always been a strong market for consolidated freight – forwarders dominate the market and block-book capacity – but import traffic is a lot weaker than, say, to the major Chinese cities. The island doesn’t have the huge populations of greater Shanghai or Beijing and also much of its needs can be satisfied from the mainland rather than more distant places. However, there’s no sign of the city’s historical role as a conduit for mainland Chinese


Later this year, Luſthansa will


make Shanghai its first foreign city to be served by a daily 777 freighter when it takes delivery of its third of the new planes. It will offer substantially more space than the MD-11F it replaces. China remains a good strong


market, and there has been good growth from inland destinations like


Chongqing and Canton.


“There has definitely been a move to secondary and even smaller hubs,” Bannerman agrees. “But it doesn’t mean that Shanghai or Beijing are any less important and they do have the advantage that they have more balanced traffic flows whereas the inland cities are more export- orientated.”


division has put specialist


import


teams. It is also diversifying its commercial activity to target major importers in mainland China says the general manager of the freight forwarding division in Asia, Pascal Praquin. Norbert Dentressangle’s


freight forwarding division has 14 offices in mainland China, one in Hong Kong and one in Vietnam, in the strategic and industrial areas. It handles import and export cargo by air and sea, which may be coupled with customs management. Praquin says: “Our abilities allow us to handle any operation with any Incoterm without any restriction. For air operations we have IATA certification, and the various IT applications we use put us in a


very competitive situation to comply with the requirements of our clients.”


Like others in the business,


Praquin has seen “a definite shift away from the coastal region of China, which provides an opportunity for our branches in places like Chengdu and Xi’An. We will continue to open branches wherever there is demand.”


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