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BUSINESS REPORT
Navigating
global tensions
Vietnam’s trade activities and its logistics sector face significant
headwinds from the ongoing tensions in the Red Sea.
| By VIET AN
ne of the main driving forces according to the United Nations Conference nam’s import-export strategy to 2030,” he
behind Vietnam’s economic devel- on Trade and Development (UNCTAD), emphasized. “Logistics costs have skyrock-
O opment has been the significant saw around 12-15 per cent of global trade eted due to disrupted shipping schedules,
growth in its import-export activities. Of pass through in 2023. with delays of up to 10-12 days as cargo
countries to have established commercial Given these constant attacks on cargo ships must make detours around the Cape
relations with Vietnam, EU member states ships, UNCTAD estimates that trade com- of Good Hope at the tip of Africa. Insurance
and the US have consistently remained ing via the Suez Canal has fallen by 42 per costs have also increased due to the height-
its largest trading partners. cent over the last two months. ened risk of attacks, and costs for late
Data from the General Department of This in turn has impacted Vietnam’s cargo delivery are being imposed. It is esti-
Vietnam Customs put bilateral trade between trade activities, since the Suez Canal is a mated that logistics costs in general have
Vietnam and the US at $110.8 billion in crucial maritime link to Europe and the increased by an additional 20-30 per cent,
2023 and with the EU at $58.5 billion. East Coast of the US from Southeast Asia. for both free-on-board (FOB) and cost,
In recent times, however, trade activities According to Associate Professor insurance and freight (CIF).”
to these and other key markets have encoun- Nguyen Thuong Lang, a senior lecturer The World Container Index (WCI),
tered significant difficulties due to tensions in the Institute of Trade and International compiled by Drewry, reached $3,964 for a
in the Red Sea. Economics at the National Economics 40 ft container at the end of January - an
University, large volumes of Vietnamese increase of over 280 per cent compared to
‘SHOCKING RISE IN SHIPPING COSTS’ goods are transported through the Red the end of November - before settling
Attacks on cargo ships have become Sea region. Though detailed figures are down somewhat to around $3,650 at the
increasingly frequent in recent months, not available, estimates put it at around end of February.
seriously disrupting the transportation of $90 billion, accounting for about one- Associate Professor Lang said that, in
goods via the Red Sea; the only route into eighth of the country’s total trade turnover. the worst-case scenario, increased shipping
and out of the Suez Canal and which, “These are important markets in Viet- costs could lead to higher selling prices,
24 | VIETNAM ECONOMIC TIMES | MARCH 2024 en.vneconomy.vn