Vietnam’s logistics industry will need an extra two million workers by 2030, but vocational schools are not up to producing them.
“The demand for human resources in logistics is very high; however, graduates of vocational schools do not meet the requirements of employers in both quality and quantity,” says Vietnam Logistics Association’s (VLA) president Le Duy Hiep.
Hiep was speaking at the Forum on Human Resource Development in the Logistics Industry and Future Trends in Vietnam recently held in Ho Chi Minh City.
Developing sufficient human resources in this sector requires the central government, localities, logistics companies and vocational schools to work together, he said.
The vast majority of Vietnam’s logistics workforce are trained in-house, and only recently have institutions implemented formal training programs, leading to major shortages in a sector that grows at nearly 10 percent a year.
“The biggest difficulty is finding a worker with sufficient technical knowledge and English proficiency, most recruits we hire have to be retrained before they can start working. This is very expensive and time consuming for us,” said Tran Thi Hanh, owner of a cosmetics business.
According to the VLA, from now until 2020, Vietnam’s logistics industry will require around 200,000 high quality workers, with professional qualifications, skills and English proficiency. This number will rise to two million by 2030 to cater to new demands in the Industry 4.0 area.
A costly sector
Vietnam’s logistics sector, despite being crucial to the economy, has typically suffered exorbitantly high costs and made relatively low contributions to GDP.
The sector contributes just 3-4 percent to Vietnam’s GDP every year, Deputy Prime Minister Vu Duc Dam said at a logistics forum last December.
The cost of logistics services in Vietnam at the end of 2018 accounted for 25 percent of the country’s GDP, while the rate was just 9.5 percent in the U.S, 11 percent in Japan, 16 percent in South Korea, and 21.6 percent in China, said the Vietnam Chamber of Commerce and Industry (VCCI).
According to the Ministry of Industry and Trade, the main constraint for the sector’s growth is that there are many small firms and few large-scale ones.
Of 3,000 logistic firms in Vietnam, 90 percent have a registered capital of less than VND10 billion ($429,400), while just five percent have between VND10-20 billion ($429,400-$858,800), and the remaining five percent, over VND20 billion, according to the Ministry of Industry and Trade.
Prime Minister Nguyen Xuan Phuc had said at a conference last year that Vietnam’s logistics costs were also driven by the high costs of transporting goods via land. In Vietnam, transportation accounts for 59 percent of all logistics costs, he said.
Phuc called for infrastructure improvements so Vietnam can stop excessive reliance on land-based transportation. The PM said he wanted the country’s logistics costs to drop to 16-20 percent of GDP by 2025, but at the same time, he also said that logistics companies should aim for revenue growth of 15-20 percent by 2025.
Last year, the World Bank ranked Vietnam 36th among 160 countries in the world and third in ASEAN on the Logistics Performance Index, up 35 places from 2016.
World Bank country director Ousmane Dione said that the logistics sector in Vietnam has a lot of potential to grow, as over $1 billion worth of goods cross Vietnam’s borders every day, a load that increases 10 percent a year.