Pro-competitive policies in logistics sector can help Viet Nam recover from the pandemic
Pro-competitive policies in logistics sector can help Viet Nam recover from the pandemic
Pro-competitive policies can help Viet Nam continue its progress in logistics sector and help the country recover quickly from the impacts of the pandemic, the Organisation of Economic Co-operation and Development said in its two latest reports.
‘Competition Assessment Reviews: Logistics Sector in Viet Nam’ assesses the impacts of regulations on competition in the sector, covering the five main subsectors of the logistics market: freight transportation, including transport by road, inland waterways and maritime; freight forwarding; warehousing; small-package delivery services; and value-added services.
The second report, 'Competitive Neutrality Reviews: Small-Package Delivery Services in Viet Nam’, identifies regulatory obstacles in the small-package delivery sector to which changes could be made to foster competition by levelling the playing field between public and private operators. This is especially important for Viet Nam, where the e-commerce sector is expected to grow at a double-digit rate for the next couple of years.
The country is emerging as a key logistics hub in the region, with the transportation and storage sector now accounting for around 2.7 per cent of GDP and 3.5 per cent of workers.
Before COVID, Viet Nam’s logistics sector was one of the top performers in ASEAN and 39th worldwide after rising 25 places in just two years in the World Bank’s latest Global Logistics Performance Index survey in 2018.
Like other ASEAN member states, though it has managed to maintain positive GDP growth, Viet Nam is suffering from the socio-economic impacts of the outbreak.
In an interview with Viet Nam News via email, Ruben Maximiano, senior competition expert at the OECD, said: “Together the reports contain more than 60 recommendations, regarding, for instance provisions imposing excessively restrictive requirements for market entry, price regulations, limitations on FDI, and the need to ensure that State-owned enterprises such as Vietnam Post receive adequate compensation for non-commercial activities for government agencies and other public authorities.”
He provided some specific examples.
For road freight transport, the OECD found that to provide transport by container or use certain other vehicles beyond a 300-kilometre distance, operators need to own a minimum number of vehicles.
“This may result in unnecessary and burdensome costs for companies.
“The inability to maintain the minimum fleet size may even result in exit of otherwise healthy competitors, or keep away entry of new efficient and innovative firms.
“The OECD recommends removing certain provisions that impose excessively strict and burdensome market entry requirements. It finds that the legitimate policy objective of reducing market fragmentation could be achieved through other less competition-restrictive means.
“Regarding ports, the OECD recommends that the Vietnamese policymakers consider the removal of the minimum price floor and keeping only maximum prices for port charges. Such maximum prices should be at a level that would enable operators to recover their costs, including a reasonable rate of return. Such maximum prices should be regularly revised to ensure they are in line with market dynamics and provide the necessary incentives for innovation and investment.
“The OECD also recommends undertaking a holistic review of the national strategy on ports and the existing network of ports. Among other factors, such a review could consider the benefits of inter-port competition while recognising the risks created by excess port capacity.”
For competitive neutrality in the small package delivery services in Viet Nam, the organisation recommends that SOEs such as Vietnam Post be adequately compensated for their “public-service obligations,” thus avoiding under-compensation or over-compensation, he said.
The recommendations could help develop pro-competitive regulations, reducing the cost of doing business, allowing market entry and encouraging both international and domestic investment, driving productivity, and lowering prices for producers, distributors and, ultimately, consumers, OECD said.
Given the centrality of logistics services, these recommendations could have a knock-on, economy-wide effect and benefit Vietnamese consumers, it said.
Maximiano added, “These independent OECD reports are not about eliminating regulations, but about making better regulations – regulations that are fit for purpose whilst at the same time promoting well-functioning competitive markets.”
The two reports support the continued efforts of the Viet Nam Competition and Consumer Authority advocating for competition principles to be taken into account for policy-making, both vital to making the economy more flexible and resilient amid and following the COVID-19 crisis.
They are part of the OECD’s Fostering Competition in ASEAN project, a partnership between the organisation and ASEAN.
The project has reviewed regulatory constraints on competition in all 10 ASEAN member countries to identify regulations that hinder the efficient functioning of markets, and create a level playing field for businesses.
