freight transport

Supporting Vietnam’s economic success through greener, cheaper, and more efficient trucking

Vietnam has become one of the world’s fastest-growing economies, with annual GDP growth averaging 5 to 8% over the last few decades. These impressive numbers are largely related to the country’s success in manufacturing and trading, which has lifted millions of people out of poverty.

The trucking industry has played a crucial role in the country’s economic transformation, and currently moves 77% of the total freight-ton volume. Although in 2018, Vietnam jumped from 64th to rank 39th in the World Bank’s Logistics Performance Index—many challenges persist.

At 21% of GDP, logistics costs are a serious pain point that has been stifling the competitiveness of Vietnam’s exports.

The environmental impact of the sector represents another important concern. The Vietnamese fleet comprises mostly small and older trucks, with a significant impact on greenhouse gas (GHG) emissions and traffic congestion. Overall, the transport sector accounts for about 10% of GHG emissions in the country.

To address these issues, our team conducted the first-ever comprehensive study of Vietnam’s trucking sector, which drew on a nationwide survey of more than 1,400 truck drivers, interviews with 150 private and public stakeholders, and a detailed review of the key factors influencing logistics costs and emissions.

The world is going digital—time for the rail industry to jump on board

Over the last five decades, Rail transport has faced major headwinds. The transformation of global supply chains has made the logistics business more challenging than ever, with increasing pressure to deliver fast and flexible services at a lower cost. In that quickly-evolving context, freight rail is grappling with fierce competition from road transport—a trend that will only intensify under the effect of disruptive technologies like autonomous trucks and on-demand mobility services. In addition, railways around the world have been hit by significant government budget cuts, limiting their ability to invest in infrastructure or maintain high service standards. Stiff competition from roads, which have the door-to-door delivery advantage have offered added pain.

At the same time, railways are in the midst of a profound transformation, driven by emerging digital technologies like 5G, big data, the Internet of Things, automation, artificial intelligence, and blockchain. On a recent study tour in China, I had the chance to learn more about these developments, and to reflect on how digitization may help the rail industry reinvent itself.

India: A logistics powerhouse in the making?

The numbers are in: India now ranks 44th in the latest edition of the World Bank’s Logistics Performance Index, a relatively high score compared to other countries at similar income levels. This number matters not just to the logistics sector, but to India’s economy as a whole. Indeed, logistics can directly impact the competitiveness of an entire market, as its ability to serve demand is inextricably linked to the efficiency, reliability and predictability of supply chains.

Broadly defined, logistics covers all aspects of trade, transport and commerce, starting from the completion of the manufacturing process all the way to delivery for consumption. To say that it is a complex business is an understatement.

First, there is always a delicate balance between the public arm, which provides the roads, railways and waterways, and lays down the rules and regulations, and the private sector, which has responsibility for carrying out logistics operations in a smooth and seamless manner. This fine interplay is further complicated by the globalization of manufacturing which—with many more ports of call in the logistic chain—is putting ever-increasing pressure on the sector. In addition, there are very practical challenges in integrating different modes of transport, in speeding up border crossings, and in dealing with trade protections–all of which impact external trade.

But as difficult as it might be, creating a well-functioning logistics sector is essential to any nation looking to compete in the global economy. India is a case in point. To fuel its global ambitions, the country has taken active steps to up its logistics game.

How can Indonesia achieve a more sustainable transport system?

Indonesia, a vast archipelago of more than 17,500 islands, is the fourth most populous country in the world, with 261 million inhabitants, and the largest economy in Southeast Asia, with a nominal Gross Domestic Product of $933 billion.

Central government spending on transport increased by threefold between 2010-2016. This has enabled the country to extend its transport network capacity and improve access to some of the most remote areas across the archipelago.

The country has a road network of about 538,000 km, of which about 47,000 km are national roads, and 1,000 km are expressways. Heavy congestion and low traffic speeds translate into excessively long journey times. In fact, traveling a mere 100 km can take 2.5 to 4 hours. The country relies heavily on waterborne transport and has about 1,500 ports, with most facilities approaching their capacity limits, especially in Eastern Indonesia. Connectivity between ports and land infrastructure is limited or non-existent. The rail network is limited (6,500 km across the islands of Java and Sumatra) and poorly maintained. The country’s 39 international and 191 domestic airports mainly provide passenger services, and many are also reaching their capacity limits.

Intermodal connectivity in the Western Balkans: What’s on the menu?

]

As in most other regions, trucks reign supreme on freight transport across the Western Balkans, a region that encompasses six countries including: Albania, Bosnia and Herzegovina, Kosovo, FYR Macedonia, Montenegro, and Serbia.

The domination of road transport in the freight sector comes with several adverse consequences, including unpredictable journey times, high logistics costs, congestion, as well as high levels of pollution and greenhouse gas emissions. To address this, our team is looking at ways to redirect part of the freight traffic in the Western Balkans region away from roads, and onto more efficient, greener modes such as rail or inland waterways.

You may think we’re trying to bite off more than we can chew here. After all, even advanced economies with state-of-the-art rail infrastructure have been struggling to increase and sustain rail freight transport.

However, as evidenced by the Global Competitiveness and Logistics Performance Indexes, there is strong potential to close gaps in the quality of the Western Balkans transport systems or custom clearing processes. The region has also experienced sustained economic growth (higher, for instance, than OECD countries), while its geographic position makes it a strategic link between Western and Eastern markets, especially considering Turkey’s rail freight developments and global connectivity initiatives.

So where should we start?

Low-carbon shipping: Will 2018 be the turning point?

As highlighted in a previous blog post, international maritime transport has not kept pace with other transport modes in the fight against climate change.

While inland transport was included in the 2015 Paris Agreement and international air transport followed suit in 2016, progress in the international shipping sector, which carries 80% of the world’s trade volume, has been more modest. Back in 2011, the International Maritime Organization (IMO) did adopt a set of operational and technical measures to increase the energy efficiency of vessels. Realistically though, it may take about 25-30 years to renew the world’s entire fleet and make all new vessels fully compliant with IMO’s technical requirements.

In any case, focusing only on technical and operational efficiency simply won’t be enough. The demand for maritime transport is growing so quickly that, even when taking all these energy efficiency regulations into account, CE Delft projects that emissions from international shipping could still increase by 20-120% by 2050, while IMO estimates range between 50-250% for different scenarios. This clearly calls for a bolder agenda that includes credible market-based solutions, too.

Three reasons why maritime transport must act on climate change

For years, the transport sector has been looking at solutions to reduce its carbon footprint. A wide range of stakeholders has taken part in the public debate on transport and climate change, yet one mode has remained largely absent from the conversation: maritime transport.

Tackling emissions from the shipping industry is just as critical as it is for other modes of transport. First, international maritime transport accounts for the lion’s share of global freight transport: ships carry around 80% of the volume of all world trade and 70% of its value. In addition, although shipping is considered the most energy-efficient mode of transport, it still uses huge amounts of so-called bunker fuels, a byproduct of crude oil refining that takes a heavy toll on the environment.

Several key global players are now calling on the maritime sector to challenge the status quo and limit its climate impact. From our perspective, we see at least three major reasons that can explain why emissions from maritime transport are becoming a global priority.

freight transport

follow us

newsletter