TRANSPORT SECTOR FACES MIXED OUTLOOK FOR 2024

With a mixed outlook for 2024, transportation businesses are bracing for potential cost increases, while others are expecting stability.

According to the World Bank, Vietnam's Logistics Performance Index (LPI) ranking decreased by four places to 43rd in 2023. Despite this drop, Vietnam's LPI score increased to 3.3 points from 3.27 points in 2018, indicating gradual improvements, particularly in customs efficiency and infrastructure quality.

This ranking reflects the impact of the pandemic on the logistics sector, with disruptions in the supply chain and transportation. In Vietnam, trucking plays a vital role in the national economy, responsible for 77 per cent of the country's freight movement amounting to a volume of over 1.5 billion MT.

However, it confronts challenges like high logistics costs (21 per cent of GDP) and environmental impacts due to older, smaller trucks contributing to greenhouse gas emissions and traffic congestion.

In mid-December, CEL Consulting released a survey of 143 trucking businesses in Vietnam highlighting critical operational issues like route optimisation inefficiencies, high vehicle maintenance costs, and driver shortages coupled with wage increases.

Rising fuel prices, driver shortages with associated wage hikes, and inefficiencies in route optimisation are primary challenges impacting operational costs. Additionally, vehicle maintenance, and regulatory compliance costs add to the financial strain.

These challenges underscore the dynamic nature of the logistics sector, influenced by economic shifts and market trends. Companies are focusing on innovative strategies and efficient planning to navigate these complexities and capitalise on growth opportunities in the evolving industry landscape.

To address these challenges, policy recommendations include fleet modernisation, enhanced driver training, and infrastructure improvements for diverse transport modes. The integration of digital technology, such as automated toll collection, is seen as key to enhancing operational efficiency and cost-effectiveness, according to CEL Consulting.

Despite the challenges, Vietnam's freight and logistics market is expected to reach $45.19 billion in 2023 and grow at a compound annual growth rate (CAGR) of 6.34 per cent to reach $65.34 billion by 2029. Vietnam's trucking sector experienced significant growth in early 2023, with a 16 per cent increase in freight transport volume and a near 22 per cent increase in turnover, on-year.

Looking forward, the sector is aiming to diversify transportation methods, reducing reliance on road transport and exploring water, air, and sea alternatives. This shift is mirrored in the broader Asia-Pacific logistics market, known for its diverse range of services.

Source: VIR