Vietnam’s Logistics Industry: Growth, Challenges, and Future Opportunities

Vietnam’s logistics industry has emerged as a key player in the Southeast Asian landscape, exhibiting remarkable growth rates of 14-16 percent annually. According to figures from the Ministry of Industry and Trade (MoIT), the market size is projected to surpass $45 billion by 2024. The World Bank has recognized Vietnam’s progress, ranking it 43rd out of 155 countries in the Logistics Performance Index (LPI) and placing it among the top five in ASEAN, trailing only Singapore, Malaysia, and Thailand, and tied with the Philippines.

Path to Modernization

The transformation of Vietnam’s logistics sector is evident across multiple fronts. Dr. Bui Ba Nghiem, a Senior Expert at MoIT, highlights how logistics infrastructure has significantly improved, adapting to the industry’s growing needs. A surge in logistics service providers has resulted in increased business capacity and enhanced service quality, contributing to a vibrant marketplace. These developments have been further fueled by free trade agreements (FTAs), promoting Vietnam’s integration into the global economy.

Technological innovation has also played a crucial role in this evolution. Cutting-edge solutions are being integrated into logistics operations, increasing efficiency and service speed. Notably, a fortified legal framework has been established to regulate the sector. Simultaneously, the growth of educational programs in logistics has enriched the workforce, both in quantity and quality.

However, Dr. Nghiem notes that significant challenges persist. The legal framework remains underdeveloped, lacking cohesive nationwide policies to drive sustainable development. Additionally, obstacles in coordinating and implementing national logistics strategies have hindered progress.

Fragmented Infrastructure and High Costs

While Vietnam’s logistics infrastructure continues to improve, it remains fragmented, particularly in terms of connectivity between transport, trade, and information technology (IT). These disjointed elements contribute to logistics costs that currently account for 16-20 percent of the GDP—substantially higher than the global average. Such high costs adversely impact the competitiveness of Vietnamese logistics providers, translating to increased product pricing that hampers the import-export sector.

Small and medium-sized enterprises (SMEs) dominate the market, but many face hurdles such as limited capital, outdated technology, and a lack of skilled labour. The transition towards digital and green technologies is further constrained, as many businesses are unable to invest in necessary transformations. A shortage of guidance for various business models and unclear legal regulations also complicate growth efforts.

Workforce Challenges

The logistics workforce in Vietnam is grappling with two significant challenges: insufficient numbers and a lack of expertise required to meet the demands of a globalized industry. Dr. Nghiem emphasizes the need for a comprehensive strategy for national logistics development, noting that government and industry associations have had limited success in guiding the sector.

Particularly in the northern midlands, over-reliance on road transport—accounting for 70-75 percent of logistics activity—poses issues of cost and stability. Ms. Truong Thi Mui, Deputy General Director of the Bac Giang International Logistics Company, stresses that while rail and inland waterway transport hold significant potential, these alternatives are not being fully utilized. Industrial parks often lack modern warehousing solutions, which impedes operational efficiency and coordination within the supply chain.

Tapping into Potential

Vietnam’s logistics sector stands on the brink of extensive growth, with the potential to catalyze significant economic development. For long-term success, Dr. Nghiem advocates a unified strategy encompassing infrastructure investments, workforce development, technology integration, and legal reforms.

The MoIT is currently finalizing Vietnam’s Logistics Development Strategy for 2025-2035, aiming to minimize logistics costs while achieving an annual industry growth rate of 15-20 percent. This strategy will also align logistics with the National Green Growth Strategy, targeting a 30 percent shift to clean energy vehicles and 80 percent of businesses adopting digital transformation by 2045.

As the logistics industry evolves, Dr. Nghiem suggests that e-commerce and technological growth cannot thrive in isolation; logistics must advance in tandem. Companies are encouraged to shift from traditional roles, aspiring to build a modern logistics ecosystem that is harmoniously integrated with global supply chains. The focus on digital logistics and green logistics will be pivotal in optimizing costs, enhancing competitiveness, and broadening market access.

Embracing Technology and Innovation

From a business standpoint, Mr. Pham Nguyen Thanh Quang, Director of LEX Vietnam, highlights the transformation of logistics into a high-tech service industry amid Industry 4.0. LEX Vietnam leverages advanced technologies, such as AI, big data, and IoT, to automate processes and improve user experience. Quang notes that their AI system spans various functionalities, including order forecasting, route optimization, and consumer behavior analysis. This digital transformation not only cuts costs and accelerates processes but also extends service capabilities into remote areas.

Ms. Mui emphasizes the need to integrate multi-modal transport with smart warehouse systems. The northern midlands can leverage its connectivity across road, waterway, and railway networks, but these systems often develop in silos. Creating a multi-layered supply chain could lower logistics costs by 10-15 percent for key industries such as e-commerce, electronics, and textiles. It’s crucial to develop policies that entice investments in interconnected transport infrastructure while supporting businesses in implementing advanced technology systems for warehouse management.

Pioneering Green Logistics

On the green logistics front, Mr. Cap Trong Cuong, General Director of the Macstar Group, stresses that moving towards green practices is mandatory for Vietnam to remain competitive in global supply chains. Multinational corporations are increasingly setting stringent standards for emissions and environmental impacts. Macstar is pioneering inland waterway transport, using barges to connect Hai Phong with north-central provinces, achieving a remarkable 70 percent reduction in emissions compared to road transport. The company’s investment in renewable energy-powered smart warehouses and reforestation initiatives for carbon credits showcases their commitment to sustainability.

To stimulate investment in waterway transport and lower carbon emissions, Cuong suggests waiving 100 percent of port infrastructure fees for container shipments transported via inland waterways until 2030, or until the share of inland waterway transport reaches a targeted 25 percent.

Collaboration for Future Success

As Vietnam’s logistics sector navigates its challenges and opportunities, the importance of collaboration across all levels—government, industry, and educational institutions—cannot be overstated. A strategic and unified approach can bring about significant advancements, ensuring that the country continues to thrive in the rapidly changing global logistics landscape.