to the extent that logistics operations in Vietnam arecostlier than similar operations in other countries in the region, this is due to apersistent lack of reliability throughout the supply chain. When logistics costsare broken down by their component parts, it is apparent that Vietnam’s relativelogistics underperformance does not originate from the transport costs side of theequation—particularly given the present overcapacity in many transport sectors,which tends to drive down transportation rates—but primarily from the warehousing and inventory carrying costs side of the equation. The latter are directlydependent on supply chain reliability and predictability. As Vietnam seeks tocompete in the world economy and trade in higher-value added goods underjust-in-time production and time-definite local, regional, and intercontinentalitineraries, improving reliability will become critical. This challenge can andshould be seen as a key catalyst for reform.
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