Vietnam Transport Knowledge Series AUSTRALIA–WORLD BANK GROUP STRATEGIC PARTNERSHIP IN VIETNAM

Strengthening Vietnam’s Trucking Sector

Towards Lower Logistics Costs and Greenhouse Gas Emissions

Yin Yin Lam, Kaushik Sriram, and Navdha Khera

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StrengtheningVietnam’sTruckingSector

TowardsLowerLogisticsCosts

andGreenhouseGasEmissions

StrengtheningVietnam’sTruckingSector

TowardsLowerLogisticsCosts

andGreenhouseGasEmissions

YinYinLam,KaushikSriram,andNavdhaKhera

Vietnam Transport Knowledge Series

AUSTRALIA–WORLD BANK GROUP STRATEGIC PARTNERSHIP IN VIETNAM

©2019TheWorldBank

1818HStreetNW,WashingtonDC20433

Telephone:202-473-1000;Internet:www.worldbank.org

This work is a product of the staff of The World Bank with external contributions. The findings,interpretations and conclusions expressed in this work do not necessarily reflect the views of TheWorldBankand itsBoardofExecutiveDirectors.TheWorldBankdonotguaranteetheaccuracyof

thedataincluedinthiswork.

Theboundaries,colors,denominationsandotherinformationshownonanymapinthisworkdonot

implyanyjudgementonthepartofTheWorldBankconcerningthelegalstatusofanyterritoryortheendorsementoracceptanceofsuchboundaries.

Nothingherein shall constituteorbeconsidered tobea limitationuponorwaiverof theprivilegesandimmunitiesofTheWorldBank,allofwhicharespecificallyreserved.

AllqueriesonrightsandlicensesshoudbeaddressedtothePublishingandKnowledgeDivision,TheWorld Bank, 1818 H Street NW, Washington DC 20433, USA; fax: 202-522-2625; email:pubrights@worldbank.org.

Coverphoto:A.T.KearneyPhotoLibrary

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Contents

FiguresandTables............................................................................................................. ix

Foreword .........................................................................................................................xiii

Acknowledgments.............................................................................................................xv

AbouttheAuthors...........................................................................................................xvii

Abbreviations...................................................................................................................xix

ExecutiveSummary .......................................................................................................... 21

Chapter1:Introduction .................................................................................................... 27

EconomicGrowthandtheRiseoftheTruckingSector ........................................................................ 27

TheNeedforThisStudy........................................................................................................................ 28

Methodology ........................................................................................................................................ 30

Chapter2:OperationalAssessment.................................................................................. 35

IntercityTrucking .................................................................................................................................. 35

Supplyfactors ................................................................................................................................... 35

OriginalequipmentmanufacturersinVietnam ................................................................................ 49

Demandfactors................................................................................................................................. 49

Infrastructurerelatedtoroadfreight ............................................................................................... 57

Existingregulations........................................................................................................................... 62

UrbanTrucking ..................................................................................................................................... 66

Casestudy1:Hanoi........................................................................................................................... 66

Casestudy2:HoChiMinhCity ......................................................................................................... 67

Chapter3:LogisticsCostsAssessment .............................................................................. 75

TruckOperatorCostAssessment.......................................................................................................... 77

Methodology..................................................................................................................................... 77

Costheads......................................................................................................................................... 78

Revenuecomputation ....................................................................................................................... 82

Analysisandmodeloutput ............................................................................................................... 82

Keyinferences ................................................................................................................................... 87

WayForward ........................................................................................................................................ 87

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Chapter4:GreenhouseGasAssessment........................................................................... 91

GovernmentofVietnam’sEffortstoReduceGHGEmissions............................................................... 93

GHGEmissionsModel........................................................................................................................... 94

Methodology..................................................................................................................................... 94

Inputs ................................................................................................................................................ 95

Analysisandkeyfindings .................................................................................................................. 99

WayForward ...................................................................................................................................... 101

Chapter5:PolicyandInvestmentOptions ...................................................................... 105

Infrastructure-RelatedPolicyandInvestmentOptions ...................................................................... 106

1.Reducetruckcongestionaroundports ....................................................................................... 106

2.Promote“containeronbarges”toboostIWTusage .................................................................. 110

3.Promotecoastalshippingonthenorth–southVietnamroute.................................................... 113

4.IntegratelogisticsandurbanconsolidationcentersintheICDmasterplan............................... 115

5.Prioritizeandupgraderoadinfrastructure ................................................................................. 120

Supply-SidePolicyandInvestmentOptions ....................................................................................... 121

6.Introduceafleetmodernizationprogram................................................................................... 121

7.Varytheroaduserchargewithtruckage................................................................................... 124

8.Strengthendrivertrainingandlicensingprocesses..................................................................... 127

9.Improvethefleetthroughagrowth-basedlendingprogram ..................................................... 130

10.Establishcooperativesfortruckowner-operators .................................................................... 132

Demand-SidePolicyandInvestmentOptions .................................................................................... 134

11.Promotebrokeragefirmsforbetterdemand-supplymatching ................................................ 134

12.Increaseinvestmentsindigitalfreightaggregatormodels ...................................................... 136

Process-RelatedPolicyandInvestmentOptions ................................................................................ 138

13.Launchanissueresolutionmobileapp ..................................................................................... 138

14.Rolloute-tollingandCCTVcamerasattollbooths.................................................................... 141

PolicyImpactAssessment................................................................................................................... 142

Reductionintransportationcosts ................................................................................................... 144

ReductioninGHGemissions ........................................................................................................... 145

Reductioninpollutants ................................................................................................................... 145

Reductioninroaddamage.............................................................................................................. 146

Reductioninroadaccidents ............................................................................................................ 147

ReductionintheGoV’sforexexpenditure....................................................................................... 147

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FiguresandTables

FIGURES

Figure1.1.AnnualGDPinVietnamSince1990,atCurrentPricesbyEconomicSector ....................... 27

Figure1.2.GlobalBenchmarksforLogisticsCostsandGHGEmissions................................................ 28

Figure1.3.VolumeofFreightCarriedbyModeofTransport,2006–2016........................................... 29Figure1.4.ComprehensiveFrameworktoAssesstheTruckingSectorinVietnam.............................. 32

Figure2.1.ValueChainintheRoadFreightTransportandRolesofEachPlayer ................................. 36

Figure2.2.FragmentationofRegion-LevelTruckingActivity ............................................................... 37

Figure2.3.Region-LevelTruckingActivity,byCompanySize ............................................................... 37

Figure2.4.DistributionofTruckingCompanies,byRevenue ............................................................... 38

Figure2.5.RespondentsinNationwideTruckingSurvey...................................................................... 39

Figure2.6.IndustryViews:KeyPerceivedChallenges.......................................................................... 40

Figure2.7.IndustryViews:PerceivedImpactofExistingRegulations.................................................. 41

Figure2.8.IndustryViews:OpiniononFuturePolicies ........................................................................ 41

Figure2.9.GlobalBenchmarkofFemaleRepresentationinTransportationSector ............................ 43

Figure2.10.NumberofTrucksinVietnam,2018 ................................................................................. 45

Figure2.11.AnnualTruckSalesinVietnamversusPeers,2014–2016................................................. 46

Figure2.12.DistributionofTruckFleetinVietnambyAge,2018 ........................................................ 47Figure2.13.AnnualTruckSalesinVietnam,byTonnage ..................................................................... 48

Figure2.14.GrossOutputinVietnamandKeyCities ........................................................................... 50

Figure2.15.AveragePopulationinVietnamandKeyCities ................................................................. 50

Figure2.16.FreightVolumeCarriedInandOutofProvincesbyRoadandIWT .................................. 51

Figure2.17.MethodologyforOrigin–DestinationMatrix .................................................................... 52

Figure2.18.Origin-DestinationModelOutput:FreightFlowsfor42ODPairs .................................... 53

Figure2.19.ODModelOutput:Commodity-LevelAnalysis ................................................................. 53

Figure2.20.ExportedValueofSelectedCommodities,AggregatedMonthly...................................... 55

Figure2.21.ExportedValueofAgriculturalProducts,AveragedMonthly ........................................... 56

Figure2.22.ExportedValueofManufacturedProducts,AveragedMonthly....................................... 56

Figure2.23.WEFGCIRoadQualityIndex,2016–2017.......................................................................... 58

Figure2.24.MaritimeCargoThroughputs,byPurposeofTransportation........................................... 59

Figure2.25.DomesticCargoThroughputs,byTypeofCargo............................................................... 60

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Figure2.26.FunctionsofInlandContainerDepots .............................................................................. 62

Figure2.27.GlobalBenchmarkofSpendonRoadInfrastructure ........................................................ 63

Figure2.28.TrafficDensityRepresentationinHanoiUsingCVTSData ................................................ 66

Figure2.29a.TrafficDensityRepresentationinHoChiMinhCityUsingCVTSData ............................ 68

Figure2.29b.TrafficDensityRepresentationinHCMCUsingCVTSData(Zoomed)............................. 69

Figure3.1.AnnualCostsperTruckforShortandLongHauls............................................................... 83

Figure3.2.VariationinTransportationCosts,byTruckSize................................................................. 85Figure3.3.VariationinNetMarginsbyFleetSizeofTruckOperators ................................................. 86

Figure3.4.VariationinROCEbyFleetSizeofTruckOperators ............................................................ 86

Figure4.1.CO2EmissionsinVietnam,2000–2014 ............................................................................... 91

Figure4.2.GHGEmissionsinVietnam’sTransportSector ................................................................... 93

Figure4.3.FrameworkforEstimatingGHGEmissions ......................................................................... 95

Figure4.4.InputstotheGreenhouseGasModel................................................................................. 96

Figure4.5.Flowchart:CalculatingFinalGHGEmissions ....................................................................... 98

Figure4.6.Flowchart:CalculatingMaximumSpeedofFreightMovement ......................................... 99

Figure5.1.SummaryofKeyPolicyOptionstoImproveTruckingSectorEfficiencyinVietnam ......... 105

Figure5.2.TruckFlowRecordedatDRVNManualCountingStationsnearPorts .............................. 106

Figure5.3.TrafficDensityRepresentationUsingCVTSData:DaNangPort....................................... 107

Figure5.4.TrafficDensityRepresentationUsingCVTSData:HoChiMinhPort ................................ 107

Figure5.5.TrafficDensityRepresentationUsingCVTSData:HaiPhongPort .................................... 108Figure5.6.ReducingRoadCongestionaroundPorts:Illustrative....................................................... 109

Figure5.7.UrbanConsolidationCentersatCityFringes:Illustrative ................................................. 118

Figure5.8.PurposesandTypesofUrbanConsolidationCenters ....................................................... 119

Figure5.9.OwnerIncentivesforScrappingOldVehicles ................................................................... 122

Figure5.10.VehicleScrappageProgramsinGermanyandChina ...................................................... 123

Figure5.11.RoadUserChargeVariationbyAge:Illustrative ............................................................. 125

Figure5.12.DriverTrainingandLicensing:ProposedPolicy .............................................................. 128

Figure5.13.DriverTrainingandLicensing:ProposedTrainingCurriculum ........................................ 128

Figure5.14.SampleAppInterfaceforTruckingIssueResolution ...................................................... 139

Figure5.15.IssueResolutionMobileAppDashboard:Illustrative ..................................................... 140

Figure5.16.Post-InterventionReductioninTransportationCosts .................................................... 144

Figure5.17.ReductioninGHGEmissionsEfficiency........................................................................... 145

Figure5.18.Post-InterventionReductioninPollutants...................................................................... 146Figure5.19.Post-InterventionReductioninRoadDamage................................................................ 146

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Figure5.20.Post-InterventionReductioninRoadAccidents,inCostperYear .................................. 147

Figure5.21.Post-InterventionReductioninForexExpenditure......................................................... 148

TABLES

Table2.1.AutomobileProductionCapacityofOEMsinASEAN,2014 ................................................. 47

Table2.2.ComparativeAnalysisofRoadDensity:Expresswayvs.Highway ........................................ 57

Table3.1.DifferencebetweenShort-HaulandLong-HaulOperators .................................................. 77

Table3.2.KeyCostHeadsforTruckOperators .................................................................................... 79

Table3.3.FuelConsumptionbyTruckWeight ..................................................................................... 80

Table4.1GHGEmissionsinEnergy(FuelCombustionandProduction)Sector ................................... 92

Table4.2.Supply-SideInputstoGHGModel:FleetCharacteristics ..................................................... 97

Table4.3.FuelEfficiencyVariationbyTruckSize ................................................................................. 97

Table4.4.FuelEfficiencyVariationbyTruckAge ................................................................................. 97

Table4.5.GHGEmissionsModel:OutputbyPollutantType................................................................ 99

Table4.6.GHGEmissionsModel:SummaryofCalculations .............................................................. 100

Table5.1.KeyCharacteristicsofProposedLogisticsCentersintheNorth......................................... 116

Table5.2.KeyCharacteristicsofProposedLogisticsCentersintheSouth......................................... 116

Table5.3.ICDsProposedforUpgradingtoUrbanConsolidationCenters.......................................... 117

Table5.4.CommodityFlowAnalysisonKeyOrigin–DestinationRoutes ........................................... 121

Table5.5.RoadUserChargeVariationbyAge:ProposedPolicy........................................................ 124

Table5.6.RoadTaxSurchargeStructureinSingapore ....................................................................... 126

Table5.7.VehicleTaxVariationbyPollutantClassinGermany......................................................... 126

Table5.8.PrioritySectorLendingRegimesinAsia ............................................................................. 131

Table5.9.ImpactandCostAssessmentofPolicies ............................................................................ 148

xiii

Foreword

Overthepastdecades,VietnamhasexperiencedoneofthehighestsustainedGDPgrowthratesintheworld,between5and8percentannually.Throughthisstrongeconomicgrowth,Vietnamhas liftedmillionsfrompoverty:whilein1993halfthepopulationstilllivedonlessthanUS$1.90/day,by2016

thiswasdowntolessthanthreepercent.However,theroadleadingVietnamoutofpovertystretchesahead,withapproximately9millionVietnamesestilllivinginextremepoverty.

Vietnam’sstrongtradegrowthunderpinsthecountry’seconomicdevelopment.Indeed,Vietnamhasearned the reputation as one of the key manufacturing locations in Southeast Asia. However,increased competition for manufacturing locations has sparked debates over global supply chains,

free-tradeagreements,andon-shoring.Justasmanyothercountrieshave,Vietnamhasdependedonlower manufacturing costs to provide a competitive advantage; now, in order to compete in theglobalmarket,Vietnammustseekgrowthopportunitiesinsupply-chainefficiencies.Alltradedepends

on the supply chains linking production and consumption locations within Vietnam and beyond.Bolstering those supply chains—by improving logistics efficiency, a backbone of trade—can helpVietnam secure a competitive position in the global marketplace and ensure continued economic

development.

Truckingcarriesimportantimplicationsforlogisticscostsandgreenhousegas(GHG)emissions.Asthe

dominantmode of goods transport in Vietnam, trucking accounts for 77 percent of domestic tonstransported.Vietnam'slogisticscoststotaledanestimated21percentofGDP,arelativelyhighfigure.In addition, the transport sector contributes 10 percent of Vietnam's national GHG emissions.

Consequently,beforeVietnamcanlowerlogisticscostsandreduceGHGemissions,thecountrymustbetterunderstandandstrengthenitstruckingsector.

Trucking isanunderstudiedsector,both inVietnamandworldwide.This first-ever trucking-focusedstudy in Vietnam hopes to shed light on this often-opaque sector. Based on extensive primary

interviewswith trucking-relatedpublic andprivate stakeholders, companies, anddrivers, this studyhasbuiltmodelstoprovideinsightsintokeyintercityfreightflows,aswellasdriversofcostsandGHGemissions. The study conducted a comprehensive operational assessment of Vietnam’s trucking

sector,alongthedimensionsofinfrastructure,processes,andsupplyanddemand.

Withpolicy-orientedanalysis,thereportrecommendspoliciesthatcouldbeembracedbythepublic

sectortopromotepositiveactionsbytheprivatesector,themainsourceofinvestmentsintrucking.The report proposes policies that could encourage increased and better-quality

investments by the private sector—at the levels of trucking and logistics

companies, fleets, and drivers. The report also makes the case for publicinfrastructure and processes that could improve trucking as a

transport mode. Shifting Vietnam to a multimodal

transport system that takes advantage of inland

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waterways and coastal shipping options represents a holistic solution; in recognition of this, thereport promotes intermodal as well as consolidated infrastructure and processes. Furthermore, to

leveragetechnology,thereportencouragesthesectortousedigitizationandappstohelptransformthelandscapeoftruckingcargodemand-supplymatching.

WehopethisreportpreparedbytheWorldBanklaysthefoundationforanationaltruckingstrategyforVietnam,whichwould, in turn,contribute toenhanced tradecompetitivenessanddevelopmentforVietnam'scitizens.

FranzR.Drees-Gross OusmaneDioneDirector CountryDirector

TransportGlobalPractice Vietnam

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Acknowledgments

ThisreportwaspreparedbytheTransportGlobalPracticeandtheEastAsiaandPacificRegionoftheWorldBank.

Theteam, ledbyYinYinLam, includedJenJungEunOh,HoangDungAnh,LuisBlancas,NguyenChiKien, Kaushik Sriram, and Navdha Khera. The team extends its appreciation for the guidance ofGuangzhe Chen (Senior Director, Transport Practice), Franz R. Drees-Gross, (Director, Transport

Practice), Ousmane Dione (Vietnam Country Director), Almud Weitz (Transport Practice Manager,Southeast Asia and the Pacific), Achim Fock (VietnamOperationsManager) andMadhu Raghunath(VietnamInfrastructureProgramLeader).Inaddition,theteamacknowledgestheexcellentresearch

andsurveysconductedbyA.T.KearneyandCELConsulting.TheteamconductedthestudyincollaborationwiththeGovernmentofVietnam,andappreciatesthe

strongsupportandadvicegenerouslyprovidedbyMr. LeDinhTho,ViceMinisterofTransport.Mr.NgyenCongBang,DeputyDirector,DepartmentofTransport,MinistryofTransport(MoT)andMr.LeDo Muoi, Deputy Director, Transport and Development Strategy Institute (TDSI), along with their

respectiveteammembers,alsoprovidedimportantresearchcollaboration.OthergovernmententitiesandorganizationsthatprovidedvitalinputsincludedthePlanningandInvestmentDepartment,MoT;International Cooperation Department, MoT; Directorate for Roads of Vietnam (DRVN); Vietnam

Inland Waterways Administration (VIWA); Vietnam Maritime Administration (VINAMARINE); CivilAviation Authority of Vietnam (CAAV); Vietnam Railway Authority (VRA); Vietnam Register (VR);VietnamLogisticsBusinessAssociation(VLA);VietnamAutomobileTransportationAssociation(VATA);

VietnamShippers’Council(VSC);andAirCargoServicesofVietnam(ACSV).Thereportrecognizestheinsights provided by the numerous government entities, private sector companies, associations,

transportstakeholders,andtruckdrivers.The work benefitted from the suggestions provided by the following peer reviewers: Arnab

Bandyopadhyay, Cecilia M. Briceno-Garmendia, Olivier Hartmann, Matias Herrera Dappe, RobinBednall,andDuc-CongVu.

TheteamalsoappreciatestheexcellentproductionsupportprovidedbyNguyenThanhHang,NguyenMaiTrang, IraChairaniTriasdewi (Administration),DangThiQuynhNga (Operations),NguyenHong

Ngan(Communications),andKaraS.Watkins(Copyediting).

Theteamthankfullyacknowledgesthegeneroussupportfrom

theAustralia—WorldBankGroupPartnershipProgram—

Phase2(ABP2).

xvii

AbouttheAuthors

Yin Yin Lam, a Senior Trade Logistics Specialist in theWorld Bank,manages andworks on logisticsprojectsacrossAsia.HerprofessionalexperienceincludesworkontransportinfrastructureandpolicyadvisoryinVietnam,China,India,Indonesia,Philippines,Singapore,andsomecountriesinEuropeand

Africa.WhileworkingforglobalportoperatorPSA,YinYinworkedonpublic-privatepartnershipsandinvestments in emerging economies. She served on the logistics sector development team at theEconomicDevelopmentBoardof Singapore, a leading trade logistics hub.As aRegionalDirector at

InternationalEnterpriseSingapore(formerlytheTradeDevelopmentBoard),shemanagedteamsandfacilitated Singapore-based companies to increase trade and investments in Southeast Asia andEurope.SheservedasaBoardDirector’sAdvisorintheAsianDevelopmentBank.Sheholdsamaster’s

degree in economics for development from the University of Oxford, a post-graduate diploma infinancial sectormanagement from theUniversity of London, and a bachelor’s degree in economicsfromtheNationalUniversityofSingapore.

Kaushik Sriram, a Senior Principal at A.T.Kearney in the Singapore office, leads projects in thetransportation and automotive sector across Asia. His professional experience includes work intransportation, automotive, and policy advisory across Southeast Asia and India, includingmultiple

projects related to commercial vehicles and trucking. Having worked across automotive OEMs,suppliers,andindustryassociations,Kaushikhasdeepexpertiseinthecommercialvehiclesector.Hehasalsoworkedextensivelyresearchingtheimpactofdigitalizationonseveralsectors,bothfromthe

standpointofpolicymakingandstrategy.Heholdsamaster’sdegreeinbusinessadministrationfromthe Indian Institute of Management Bangalore, and a bachelor’s degree in technology from theNationalInstituteofTechnology,Trichy.

NavdhaKhera,aconsultantatA.T.Kearney,lendstothisstudyherexperienceintransportationandlogisticsprojects in thepublicandprivatesector.Shehasworkedon transport infrastructurepolicy

projectsinAsia,includingtruckingsectorpolicyforIndia.Navdhaholdsamaster’sdegreeinbusinessadministration from the Indian Institute of Management Bangalore, and a bachelor’s degree intechnologyfromtheIndianInstituteofTechnology,Delhi.

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Abbreviations

3PL Third-PartyLogistics

ASEAN AssociationofSoutheastAsianNations

CAAV CivilAviationAuthorityofVietnam

CAGR CompoundAnnualGrowthRate

CBU CompletelyBuiltUp

CKD CompletelyKnockedDown

CO2 CarbonDioxide

CVTS CommercialVehicleTrackingSystem

DRVN DirectorateforRoadsofVietnam

FDI ForeignDirectInvestment

FEU Forty-FootEquivalentUnit

FTL FullTruckload

GDP GrossDomesticProduct

GHG GreenhouseGas

GoV GovernmentofVietnam

GVW GrossVehicleWeight

HCMC HoChiMinhCity

ICD InlandContainerDepot

ISO InternationalOrganizationforStandardization

IWT InlandWaterwayTransport

JICA JapanInternationalCooperationAgency

Km Kilometer

LSP LogisticsServiceProvider

xx

LTL LessThanTruckload

MoIT MinistryofIndustryandTrade

MoT MinistryofTransportation

MtCO2e MillionMetricTonsofCarbonDioxideEquivalent

OD Origin-Destination

OEM OriginalEquipmentManufacturer

RFID RadioFrequencyIdentification

RO-RO Roll-On/Roll-Off

ROCE ReturnonCapitalEmployed

SME SmallandMedium-SizedEnterprises

SOE State-OwnedEntity

SDR SpecialDrawingRights

TCO TotalCostofOwnership

TDSI TransportDevelopmentandStrategyInstitute

TEU Twenty-FootEquivalentUnit

UCC UrbanConsolidationCenter

VAMA VietnamAutomobilesManufacturersAssociation

VEC VietnamExpresswayCorporation

VINAMARINE VietnamMaritimeAdministration

VIWA VietnamInlandWaterwaysAdministration

VLA VietnamLogisticsBusinessAssociation

VND VietnameseDong

VR VietnamRegister

VRA VietnamRailwayAuthority

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ExecutiveSummary

Roads form the backbone of freight transportation in Vietnam. In 2016, roads accounted for 77percentofthefreightvolumetransportedinthecountry.LogisticscostsinVietnamaccountfornearly21percentoftheVietnam’sGDP,higherthanmostofitspeersintheAssociationofSoutheastAsian

Nations (ASEAN), which affects the competitiveness of exports and adds to the cost of goods forproducers and consumers. Further, the Government of Vietnam (GoV) has signedmultiple climatetreatiesandhasbeenfocusingonreducingthegreenhousegas(GHG)emissionsinthecountry.The

truckingsectorcontributestonearly4percentofthecountry’semissions,whilethetransportsectorasawholecontributesabout10percent.Yet,theVietnamtruckingsectorisunderstudied.Thisstudytakesa first-evercomprehensive lookat thetruckingsector todefinepoliciesaimedat (a) reducing

logisticscosts,greenhousegasemissions,andtheemissionof localpollutants in truck-basedsupplychains;(b)improvingthefunctioningandattractivenessofthetruckingsectorasanindustrytoattractqualityprivatesectorinvestments;and(c)improvingtheregulatory,planning,andoversightpractices

bythepublicinstitutionsresponsibleforthetruckingindustryatthenationalandsub-nationallevels.

Methodology

The study encapsulates the findings of a nationwide trucking survey with more than 1,400 truckdriversandmorethan150companiesfromthetruckingindustry,tounderstandthecommodityflows,

logisticscosts,andGHGemissions.Thestudybuilt threeoriginalground-upmodels toestimate themain intercity trucking flows, the key drivers of transport costs, and GHG emissions. To form adetailedoperationalassessment,apartfromthequantitativemodelingdone,thestudyalsoincludes

insights into truck operations through extensive surveys and structured interviews with truckoperators,shippers,andlogisticscompaniesoperatingonintercityaswellasintra-cityroutes.Basedonthevariousassessments, thestudyproposes14policyoptionstostrengthenthetruckingsector,

and to lower logistics costs and GHG emissions. The policy interventions are divided across fourcategoriesrelatedtotrucking:infrastructure-related,supplyside,demandside,andprocess-related.

Intercityoperationalassessment

Theoperational assessmentof the trucking industryhighlights thekey challenges facedby industryplayers.Oneofthemajorissuesisthehighcompetitioninthemarketduetoexcessivefragmentation,whichdrivesdownthemarginsandsustainabilityofthetruckingsector.Theaveragenumberoftrucks

per company is around five,with thehighest fragmentation seen in theNorthwest,Northeast, andRedRiverDeltaregions.FleetmixinVietnamisextremelyskewedtowardssmalltrucks(68percentofthecountry’struckfleetislessthan5Tinsize),whichaddstothecongestiononroads.Thenational

truckingsurvey indicatesthe industrywelcomespoliciesaimedatprovidingasaferenvironmentfortruck drivers, highlighting the importance of road safety for policy making in future. Other keyconcerns found by the study include the expense of informal fees (about 10 percent of a truck

operator’scost)andlimitedplatformsforefficientsupply-demandmatching(about50to70percentemptybackhaulforsomeoperators).

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Thedemandassessmentindicateseightmajorroutes,from/toHanoi–HaiPhong,Hanoi–HoChiMinhCity (HCMC), HCMC–Da Lat, and HCMC–Can Tho, as the key routes for commodity flows and

accountingfornearly30percentoftheoverallintercityflowsinthecountry.Thestudyalsohighlightsthestatusofroadinfrastructureandanalyzesthegovernmentexpenditureonoverallinfrastructureinthe country. While the GoV spends 8 percent of the GDP on infrastructure, only 1.2 percent is

dedicated to road infrastructure. Thisproportionof spendon road infrastructure to total spendoninfrastructureinthecountryislowerforVietnamascomparedtoitspeers.Thestudyalsocoverstwoother potential modes—coastal shipping and inland waterways—to divert the traffic from roads.

Thesemodes currently account for 5percent and17percentof thedomestic freight flow (in tons)respectively.1 With a coastline of 3,200 kilometers and approximately 19,000 kilometers of inlandwaterways,Vietnamhasthepotentialtoincreasemulti-modalityinthetransportationofgoodswithin

thecountry,whichcouldbebeneficialtologisticscostsandGHGemissions.

This reportdiscussesthespecificgaps in thecurrent infrastructureof theportsandwaterways, the

cargo handling equipment available at landing stages, market structure in terms of availability ofcoastal shipping lines, the size and design of the vessel fleet, and the supporting infrastructure atinlandcontainerdepots(ICDs).

Urbantruckingoperationalassessment

The study also discusses the urban itineraries, which are the first- and last-mile deliveries for theintercityroutesandthedrayagetoandfromports.Thestudycoverscasestudiesoftwomaincities—HanoiandHoChiMinhCity(HCMC)—andaimstounderstandtheimpactofurbanfactors,including

restricted truck entry timings and passenger traffic congestion on roads.Many logistics companieshaveofficessetupinHanoi;consequently,thecityactsasatransitstopforgoodsbroughtfromand

sent toHai Phongport.On theotherhand, thepresenceofHoChiMinhport near the city centerleadstohightrucktrafficwithinthecity.Servingasaccessroadsconnectingtheportstothenearesthighway, the city roads—already highly congestedwith passenger vehicles—also add to the traffic

volume. The study indicates limited separation of industrial and residential zones via land useplanninginthesecitiesaswellas lackofconsolidationviaurbanconsolidationcenters.This impactstheproductivityofthelogisticscompaniesduetotheirsub-optimalrouteplanning,heavycitytraffic

congestion,andlackofdedicatedcity-portroads.

LogisticscostsandGHGassessments

Thecostassessmentmodeltalksaboutthekeydriversforcontrollingthetransportationcostsforthetruck operators.With transportation costs accounting for nearly 60 percent of the overall logistics

costs, the study covers this significant cost aspect. The transportation costs are estimated (inVietnamesedong)atVND2,775perton-kmandVND952perton-kmforashort-haulandlong-hauloperator, respectively, withmargins ranging from 3 to 5 percent for small truck operators owning

fewer than 10 trucks. The top five cost heads for the truck operators are fuel costs, tolls, informalfees, interest costs, anddriver salaries,whichaccount for 80percentof the total costs. Themodelindicatesthatthelogisticscostsperton-kmreduceswithanincreaseinthenumberoftrucksowned,

increaseintonnageoftrucks,andbettertruckutilizationrates.

Further,theGHGemissionefficiencyforVietnamisestimatedat143gofCO2perton-km.Themodel

identifiesthreeareas,whichdirectlyaffecttheGHGemissionefficiencyandformthecornerstoneofpolicyimperatives—fleetmix,backhauling,androadinfrastructure.

23

Policyoptions

Thestudyculminateswithadiscussionofpolicyoptionsaimedatstrengtheningthetruckingsectorand reducing logistics costs and GHG emissions in the country—based on the key challenges andissues identified in the study—along with the key drivers identified for logistics costs and GHG

emissions.Thepolicy interventionsaredividedacross fourcategories: infrastructure-related, supplyside,demand side, andprocess-related.Thekeypolicy recommendations foreach category includethefollowing:

! Infrastructure-relatedpolicyoptions

! Reduce congestion around ports through the provision of centralized parking bays and

consolidationyardsnearports(short-term)andwideningofroads,strengtheningofroads

tohandleheaviertrucks,lanereservation,anddedicatedtruckcorridors(medium-term).

! Promote “container-on barges” to boost inland waterway transport (IWT) usage by

adopting fleet sizes/designs/waterways suitable for containerization, allocating berthing

windows at maritime ports for IWT barges, along with improving container handling

facilitiesatriverports.

! Promote coastal shipping on the North Vietnam–South Vietnam route by encouraging

more coastal shipping lines, domestic shipping centers, reducedport handling costs for

domesticcargo,andincreasedRO-ROvesselsthatpromotetrucking–coastalitineraries.

! Integrate logistics centers and urban consolidation centers (UCCs) in the existing ICD

master plan,with logistics centers prioritized at ICD locations closer to industrial zones

andUCCsprioritizedatthecityfringesofHanoiandHCMC.

! Prioritizeandupgradetheroadinfrastructureoftheeightkeyroutes,takingintoaccount

themajorshareofintercitytruckingtraffic.Elevatedroads,overpasses,additionallanes,

andlanereservationscanbeexplored.

! Supply-sidepolicyoptions

! Introduceatruckfleetmodernizationprogramwithincentivesfortruckownerstoscrap

their older vehicles. This could includeoffering registration taxwaivers and scrap value

rebates,andencouragingOEMdiscounts.

! Varyexistingroaduserchargeswithfleetagetodisincentivizetheuseofoldertrucks.

! Strengthendrivertrainingbyaddingpersonalhealthandsafetycomponentsandphysical

tests.Enhancethelicensingprocessthroughperiodictrainingsfortherenewaloflicenses.

Making a registry of licensed drivers and their driving records available to trucking

companiescouldalsoincreasethequalityoftruckdrivers.

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! Improve Vietnam’s fleet through a growth-based lending scheme aimed at preferential

lending rates for the purchase ofmore fuel efficient and larger-sized trucks, subject to

companygrowth,toreduceexcessivetruckingsectorfragmentation.

! Establishcooperativesforowner-operatorstoallowthesmallerplayerstopoolresources

and help them achieve scale efficiencies. Simplify the implementation of regulations

specifyingminimumassetspertruckingcompany.

! Demand-sidepolicyoptions

! Promote brokerage firms through defining regulations for the registration of brokers,

providing incentives forbrokeragefirms,allowing100percent foreigndirect investment

(FDI) for successful foreign brokerage firms to set up branches in Vietnam and

encouragingcooperativestocreatepan-Vietnambrokerages.

! Increase investments in digital freight aggregator models through government policies

promoting fundraising, research and development, FDI, mentorship, and open data

sharing.

! Process-relatedpolicyoptions

! Launchanissueresolutionmobileapptoreportissuesfacedbyatruckdriverduringhis

trip,suchasaccidentsandinformalpayments,alongwithanissueresolutioncommittee

toresolvetheissues.

! Roll out e-tolling and CCTV cameras at tollbooths along key routes to avoid the

unnecessaryandunauthorizedstoppingoftrucks,whichincreasescostsandemissions.

Thesepolicyinterventionsareexpectedtodrivethefollowingchangesinthesector:

! Reductioninroadfreightshare

! Improvementintruckutilizationrates

! Reductioninvehicleages

! Increaseintheaveragecarryingcapacityoffleet

! Reductionintransittimes

! Improvementindrivingethicsandgovernance

The study estimates the successful implementation of these recommended policies could reducetransportationcostsbyapproximately16percent,whileloweringGHGbyapproximately7percent.

Otherpositiveimpactsoftherecommendedpolicyoptionsincludereducedpollutants(byabout14to16 percent per ton-km), reduced road damage (by approximately 5 percent), reduced number of

accidents (by about 10 percent), and reduced forex expenditure (by approximately 7 percent)resultingfromlowerrequiredfuelimportsduetotheyoungerfleetandhighercapacityutilization.

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ThisreporthopestoprovideanenhancedunderstandingoftheVietnamtruckingsectorbyprovidinga first-ever comprehensive and trucking-focused study of the sector. In turn, the greater

understanding of this dominant transport mode could form the foundation of a national truckingstrategytoimprovethesector’simpactonlogisticscosts,theclimate,andeconomiccompetitiveness.

Note

1.Railway’sshareislessthan1percent.