LOGISTICS IN VIETNAM RURAL AREA

AN POTENTIAL MARKET.

1. Why should we invest in Vietnam rural area logistics ?

a. Under the view point of investors:
After the liberalization of Vietnam economy, allowing foreign investment,
many multinational corporation started their business in Vietnam market. From
1996, more and more companies, both local and foreign, put their interest in
logistics industry; but a large amount of investments concentrated in the market
of large cities such as Ho Chi Minh city, Hai Phong, Hanoi, etc… And,
companies, especially small local businesses, must face to so much difficulties
due to a fierce competition.
In rural area, where more than 30% Vietnamese live in, the problem is quite
different ! There is a serious lake of complete and smooth logistics services
because almost all logistics services, warehouses, ports, … is centralized in
urban area. By the development of agriculture and aquaculture, the demand of
a complete logistics chain is increasing significantly. Farmers is now facing to
the fake chemical fertilizers, fake seeds, fake pesticides, etc … caused by
individual, unreliable distribution channel. These poor conditions prevent
farmer in rural area from reaching to modern technologies, machines, chemical
products, etc … Normally, they have to buy high-quality products in large
cities. Cost of production, by this way, remarkably increase. Moreover, post-
harvest and transportation are also the big problems for millions of farmers.
Farmers cannot control what, when, how they should cultivate, process and
handle. These problems create a large need of a convenient post-harvest,
processing services, a reliable of distribution, transportation and exportation.
This is really a huge unsatisfied demand …
Then, enterprises, who could penetrate this potential market and gradually
expand the market size will come to get the initiative and will surely able to get
an incredible returns.
b. Under the view point of society:
For whole society, logistics industry investment in rural will a great
opportunity to enhance the economic growth of rural sector, to strengthen the
urban-rural linkage. The development of logistics infra-structure such as
warehouse, road, port, etc ... and logistics services such as post-harvest,
processing, handling services, consolidation, multi-modal transportation, etc …
will a key step for the development of Vietnam exportation of agriculture
products. With a complete supply chain, a right technologies of cultivation,
pre- and post-harvest , farmers can produce products which meet the standards
of Global G.A.P, a mandatory conditions to penetrate Europe, American and
many other big markets. The implementation of logistics in agriculture will
improve the goods, capital and information flow in rural area. It makes the
chain of agricultural production, processing, transportation, sale and
consumption much less vulnerable. A good supply chain management, a
reasonable transportation system, a strong distribution channel will
significantly improve the productivity. Logistics implementation will eliminate
the geographical gap between urban and rural areas. It makes Vietnamese
agricultural products much more competitive. The farmer’s income will, then,
considerably increase. Rural residents will able to reach to a better education,
health care, credit, information … At the same times, residents in large cities
can consume agricultural products with a higher quality, lower prices, always-
available distribution. This is also a way to maintain the food security and
reduce the poverty in Vietnam.

2. What are the challenges ?

Despite such great benefit, the implementation and investment of logistics in
rural is now limited by some of these following challenges:
a. Intricate topography
Four quarters of Vietnam territory is made up of mountainous and hilly regions
such as the North-West zone , the Central area… In the south of Vietnam, there
are many rivers that separate some regions from the others. Futhermore, the
disasters such as typhoon, storm … regularly occur. Consolidating and
transporting goods in such area is not an easy task. It required a huge effort and
a high cost.

b. Poor infrastructure:
Infrastructure is always a problem for Vietnam economic growth. The
infrastructure for logistics industry such as warehouse, port, road, railroad, …
is not sufficient for the demand, even in large cities. The infrastructure in rural
area is in a worse status. The main roads is always overloaded. Some regions
do not have a stable traffic line and can not be accessed by truck, or large
vessels. Almost all large warehouse is centralized in large cites or industrial
center, not in rural area. Electricity and telecommunication system are not
always available in rural area. These condition will take a huge challenge to
business operation.
c. Lake of linkage:
d. Psychological barrier:
3. What should we do ?
a. For government:
b. For investor: