Multinational corporations have been stepping up investment to expand their logistics business in Vietnam as the fertile market is expected to continue delivering two-digit growth in the coming time.
Foreign investment has transformed Vietnam’s logistics industries in recent years.
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Samsung SDS, for example, has joined a venture with Aviation Logistics Service (ALS) to deliver logistics services at Noi Bai International Airport as it forecast an annual logistics growth of 15-20 percent in Vietnam.
Japanese shipping lines are also interested in developing deep-water container ports in Vietnam, both investment and operation. Among them, MOL Logistics has invested in Vietnam’s two largest deep-water ports Cai Mep Thi Vai and Lach Huyen.
Deutsche Post DHL has recently also announced its participation in the B2C shipping market in Vietnam with the DHL eCommerce agency.
Besides, foreign logistics firms have also boosted the acquisition of local firms to enter the market rapidly as Vietnam deepens its integration into regional and world economies. New York-based private equity firm Warburg Pincus formed a US$200 million joint venture with Becamex IDC to enter the Vietnamese logistics market while Korea’s Tae Kwang Industrial Co also acquired a controlling stake in Gemadept Shipping to gain a share of Vietnam’s market.
Leap in growth
According to the Vietnam Logistics Business Association, Vietnam’s logistics market has grown by about 12-14 percent annually in recent years.
Indian market research firm Ken Research forecast Vietnam logistics and warehousing market will register a positive compound annual growth rate of 13.3 percent during the 2018-2022 period, driven by expanding industrial activities, growing e-commerce industry, upcoming infrastructure in the country and continuous investment by the government in development of logistics infrastructure and steady economic growth.
Besides, logistics therefore will be a key to promoting exports and imports in Vietnam and ASEAN as the South East Asian country is seen as a gateway for international firms to penetrate ASEAN - a market of 640 million people.
“With the transformative shift of the manufacturing base from markets like China to Vietnam as well as with the rapid rise of domestic consumption, the logistics and industrial real estate market in Vietnam is in the early innings and at an inflection point for outsized growth,” Jeffrey Perlman, head of Southeast Asia at Warburg Pincus, said.
With the advantages, logistics services in Vietnam are becoming a fertile land for foreign investors. Most of the world-leading multinational logistics corporations are operating in Vietnam, including DHL, FedEx, UPS and Maersk.
With their rich experience and advantage of capital, technology, personnel and services of international shipping from parent transnational corporations, the investors provide international logistics services and account for a significant market share.
However, Vietnamese logistics service providers also have an advantage of understanding the domestic logistics service market and infrastructure such as seaports, warehouses, ICDs, transport means and stevedoring. They, therefore, provide most of these services for foreign logistics businesses in Vietnam.
The increasing investment by foreign services providers has helped transform Vietnam’s logistics industries in recent years. Vietnam’s position on the World Bank’s Logistics Performance Index (LPI) in 2018 rose 25 places compared to the two previous years, jumping to 39th among 160 surveyed countries.
The government targets to raise the country’s LPI ranking by from five to 10 places by 2025. To meet the target, it plans to upgrade infrastructure, improve the distribution capacity, promote the competence and quality of logistics services, maximize the ability to track and trace consignments, reduce performance times and costs, and enhance the efficiency of customs clearance.
