EVFTA offers opportunities for logistics business29/06/2020The EU-Vietnam Free Trade Agreement (EVFTA) will boost foreign trade and therefore directly benefit the logistics industry.
Reduced logistics costs
According to the Ministry of Industry and Trade’s Agency of Trade Promotion, the EVFTA will expand foreign trade and therefore greatly increase the demand for logistics services.
Logistics businesses will have opportunities to expand their market share
Vietnam’s export value to the EU is expected to increase 20 percent in 2020, 42.7 percent by 2025 and 44.37 percent by 2030, while the country’s imports from the EU are also expected to grow rapidly after the EVFTA takes effect.
Under the agreement, Vietnam has committed to eliminating import tariffs on means of transport, machinery and equipment serving logistics activities, imported from the EU. This provides an opportunity for domestic logistics enterprises to purchase such goods at reasonable prices and thus lower production costs, improve technology, and reduce leased services.
As soon as the EVFTA takes effect, Vietnamese logistics businesses will have opportunities to attract investment from the EU, take advantage of EU partners’ experience, management skills, capital and business networks, and access the logistics market of EU member countries.
Agency of Trade Promotion Deputy Director Tran Thanh Hai said the EU has a highly developed logistics industry with powerful multinational companies that run large modern fleets. Logistics businesses from Germany, the Netherlands, Sweden, and Belgium reached 14 of the top-20 places in the World Bank’s 2018 Logistics Performance Index (LPI).
By country, Germany ranked first, and EU countries gained four of the five highest places in the rankings. Many strong EU logistics enterprises are operating in Vietnam and their competitiveness will be stronger after the EVFTA comes into effect. Competition is forecast to increase significantly in newly opened logistics service segments, but grow just slightly in logistics segments opened under the World Trade Organization (WTO) agreement, Hai said.
According to the EVFTA, the EU will open its logistics market to Vietnamese enterprises. However, economists say Vietnamese logistics enterprises will not easily access this market, as EU logistics businesses are strong and EU clients are demanding and have high requirements in terms of service quality and adherence to the law. Meanwhile, Vietnamese logistics businesses lack a long-term vision, capital, consistent technology and international standard service quality. Service quality, reliability and stable and controllable supply chains are more important than good prices for logistics service providers to attract customers.
Hai said that it is necessary to further improve the logistics legal framework in accordance with Vietnam’s actual development demand in order to improve competitiveness and enable the industry to make the most of the opportunities offered by the EVFTA. Further promoting administrative simplification, application of the National Single Window (NSW), ASEAN Single Window (ASW), electronic customs and commerce are also important to help foreign trade and logistics enterprises minimize costs. It is necessary to promote state management of logistics by the national committee on ASEAN Single Window and National Single Window, and Trade Facilitation (Steering Committee 1899), develop and implement logistics development strategies and policies, and consistently improve logistics infrastructure. The Vietnam Logistics Business Association should strengthen connectivity between businesses in the industry, helping them reduce costs and improve competitiveness.
The EU has become the second largest importer of Vietnamese goods. Each year, EU ports handled about four billion tonnes of cargo. Major seaports and ocean shipping account for 46 percent of the EU logistics market’s value, while warehousing represents 11 percent and other logistics services 43 percent.
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