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Vietnam RMG losing its ‘edge’ to mounting logistics cost: VITAS

While the war is on in the garment manufacturing industry, world’s second-biggest garment exporting destination Vietnam is dealing with the soaring logistics cost to remain competitive. This has reportedly been underlined by Vietnam Textile and Apparel Association (VITAS).

As per the data released by VITAS, the cost of logistics services paid by the textile and garment manufacturing companies in the country accounted for over 9 per cent of the overall export turnover last year, to around US $ 2.80 billion. Notably, Vietnam’s textile and garment exports stood at US $ 31 billion in 2017, up by 19.2 per cent against 2016.

The association feels that the outlay of logistics is much higher in Vietnam. When compared to Thailand, Vietnamese manufacturers pay 6 percent more on logistics services and 7 per cent more than in China, its top competitor.

While labour cost remains the top criteria to get an edge in the manufacturing market, these logistics charges also impact the businesses’ operational costs in a big way. The charges may include transport costs, surcharges at seaports, etc.

“The current regulations on fees and charges for logistics services are high, making transport costs also relatively high, accounting for between 30 and 40 per cent of the cost of the products, compared to some 15 per cent in other countries,” said Phạm Thị Thúy Vân, Deputy Director of Marketing at Sài Gòn Newport Corporation, a logistics service provider.

Industry experts believe that logistics companies must consider reducing the price of the services offered by them. This will help the garment companies operate in a competitive manner.

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