Vietnam’s potentials and shortcomings for freight transport
Thanks to its location and geographical characteristics, Vietnam has huge advantages for both international and domestic freight transport. Nevertheless, the development of infrastructure is unbalanced and not taking full advantages of the country’s potentials.
Vietnam and international freight transport
On June 21st, Port of Lazaro Cardenas (LCT), the largest Mexican container port, launched a new waterway connection to Chile and Vietnam, through an alliance between TradeLink Pacifico and Kansas City Southern de Mexico rail companies. This waterway route is at least 18 days faster than the traditional route through Long Beach or Panama Canal. The launch of a waterway route from Chile to Vietnam proves that Vietnam is becoming a maritime transshipment hub in Southeast Asia.
The fact that Vietnam can become the region’s maritime and aviation transshipment hub has been long predicted by experts. According to economic specialist Bui Kien Thanh, “If we place a compass in Chu Lai airport (Central Vietnam) and draw a circle with a 2-hour flight radius, then the circle will contain Japan, Korea, China, Malaysia, Thailand, Indonesia, Myanmar, Singapore and India”. That means Vietnam is in the center of a region accounting for 2/3 of world’s population and half of the world’s GDP.
Vietnam and domestic freight transport
In order to transform Vietnam into an international transshipment hub, considerable attention has been paid to develop airports and seaports. On the other hand, domestic land transport is still possessing many shortcomings due to bad management practices and lack of right attention.
According to the global supply chain model, railway must be connected to seaports in order to ensure operational flow of goods and ease the burden on road transport. Additionally, railway transport possesses several benefits over road transport including: cheaper costs, higher speed, and better safety. In fact, with a land surface stretching from North to South, Vietnam has the perfect geographical characteristic to utilize railway for freight transport.
However, the usage of railway for freight transport is currently very small, accounting for only 10% of freight volume. This is owing to a number of reasons. First, warehouse system lacks professional planning, organization and handling. Second, Vietnam Railways Company (VNR) does not have sufficient financial capital to renovate and construct new stations and warehouses. Finally, the payback period for such capital investment can take more than 10 years, therefore making it not very attractive to potential investors.
Fortunately, last year saw some positive prospects for Vietnam’s railway system. On July 2015, multidisciplinary conglomerate Vingroup became VNR’s strategic partner in the expansion and renovation of railway infrastructures, with a number of other companies showing interests investing in railway development projects. Hence, we can be optimistic about the capability of Vietnam’s transport system to facilitate both domestic and international supply chain in the years to come.
Sources: 1, 2, 3