The Ministry of Planning and Investment and the World Bank in Vietnam have released the flagship Vietnam Development Report, “Connecting Vietnam for Growth and Shared Prosperity”, together with one of its background papers, “Vietnam: Connecting Value Chains for Trade Competitiveness”, providing a comprehensive overview of Vietnam’s transport connectivity and how it supports three critical national development goals: integration, inclusion, and resilience.

The report states that developing quality connective infrastructure and logistics is crucial to lowering trade costs and boosting Vietnam’s further integration in both the global and domestic markets. This will require a new approach to planning and additional investments in strategic connective assets.

“The rapidly changing patterns of international trade and domestic consumption coupled with increasing natural disaster risks will have implications on Vietnam’s future connectivity needs,” said Mr. Ousmane Dione, World Bank Country Director for Vietnam. “Upgrading connectivity, not just physical infrastructure but also transportation and logistics services, with the right policies and investments will help Vietnam go a long way towards achieving deeper integration, promoting inclusion, and building resilience.”

The report found uneven development of transport infrastructure around the country, capacity bottlenecks at major gateways, and a major imbalance in supply and demand. The country’s trade flows are concentrated at a quarter of all border gates - two airports, five seaports, and five border-crossing points - which collectively handled 86 per cent the value of total trade in 2016. As trade grows, so does congestion around these international gateways and border-crossing points.

Within the country, the movement of goods is conducted mainly on the road network, which carries three-quarters of total cargo volumes. Vietnam’s extensive network of natural waterways is under-utilized because its ports and landing stages are ill-suited to accommodate larger volumes of cargo. The use of container-based cargo, which enables efficient intermodal transfers, is relatively limited. Meanwhile, Vietnam’s 2,600-km railway network remains stuck at a low state of development.

The report highlights the steps Vietnam can take to address the fragmented state of connectivity to better facilitate international trade:

Reconfigure the network of international gateways by bringing a network perspective in planning and developing gateways, moving away from the current decentralized planning.

Re-orient transport and spatial planning to support critical value chains by creating a new ecosystem of trade and transport links that will be critical to facilitating supply chains and the movement of inputs and final products.

Create “economic densities” along new corridors by encouraging the development of the land surrounding high-value transport nodes for high productivity activities.

The report also sheds light on an often-overlooked issue of how domestic transport and logistic systems lagging behind the increasingly sophisticated demands of middle-class consumers. As incomes rise, there is a greater demand for a higher standard of services - such as safety, punctuality, freshness, and traceability of traded goods - as well as for competitive prices.

Despite these demand shifts, longstanding supply chains remain intact, particularly for food. A majority of consumers still prefer sourcing foods from traditional markets. “Cold chains” - refrigerated transportation and storage of perishable foods from farms to consumers - are fragmented and mostly serve the export market. Such underdeveloped food supply chains result in food losses estimated to be equivalent to 2 per cent of Vietnam’s GDP, a high incidence of food-borne diseases, and environmental pollution, according to the report.

The rapid development of e-commerce also generates growing needs for new types of logistics services, including door-to-door connectivity and last-mile delivery, especially for low-value, small-size parcels. This brings further challenges to Vietnam’s already built-up, congested cities.

The report proposes key measures to develop transport and logistics services to better integrate domestic markets.

It also suggests solutions to improving the resilience and reliability of the transport system and deliver on “last-mile” inclusion in lagging areas with better connectivity.