Warburg Pincus, the New York-based private equity firm that’s been betting on the growth of the Asian logistics sector, has recently formed a US$200 million joint venture to enter the Vietnamese logistics market.
The venture, called BW Industrial Development JSC, will use the capital to develop and operate modern warehouses and factories in key economic and industrial zones, according to Jeffrey Perlman, head of Southeast Asia at Warburg Pincus.
Earlier, logistics market was tumultuous with the handshake between Vietnam’s biggest freight and road transportation company Minh Phuong Logistics with Samsung SDS, a subsidiary of Samsung, to establish a new joint venture.
According to experts, in order to penetrate into the domestic logistics market where road transportation accounts for as much as 65 percent market share in Vietnam, Samsung has no other way to move faster than to cooperate with Minh Phuong.
With the expertise of a global operator of hi-tech logistics system, the cooperation with Minh Phuong will help Samsung SDS’s information technology and logistics services better penetrate into Vietnam’s freight and cargo industry.
Besides Samsung SDS, Tae Kwang Industrial Co. Ltd, another South Korean company, has also acquired controlling stake in Gemadept Shipping (GMD) to gain a part of Vietnam’s market share.
Prosperous outlook
The deals have appeared as Vietnam is emerging as a high potential market with its logistics industry projected to account for 8-10 percent of the nation’ GDP by 2025.
Besides having a strategic position and a large domestic market, Vietnam’s logistics market is also considered potential as the country has become a new low-cost manufacturing hub and an increasingly high foreign investment attraction, especially for Japanese, South Korean, Chinese and Singaporean investors, thanks to good growth prospects.
Vietnam is also seen as a gateway for international firms to penetrate ASEAN, a market of 640 million people. Logistics therefore will be a key to promoting exports and imports in Vietnam and ASEAN.
The factors are the motivation to promote M&A deals in the logistics sector to happen more strongly in Vietnam.
“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.
The Asian Development Bank forecast the nation’s economy will expand 6.7 percent this year, the second highest growth among Southeast Asian countries, trailing only the Philippines.
Foreign investment in the country’s logistics industry is also forecast to further grow as the government has recently passed a decree, permitting foreign investors to establish their wholly foreign-owned companies providing logistics services.
Under Decree No.163/ND-CP, foreign investors can provide 16 main logistics service types in Vietnam, including container loading and unloading (excluding airports), warehouses for supporting transport, transport and customs agencies, and shipping.
Regarding road transport services, foreign investors can establish 100 percent foreign-owned companies with the condition that all drivers need to be Vietnamese citizens.
Along with newly-established firms, foreign investors can also join M&A activities with the maximum ownership limit of 49-51 percent, depending on the sector, according to the decree.
According to the Foreign Investment Agency under the Ministry of Planning and Investment, logistics has ranked eighth among industries receiving the largest foreign investments to date. Until the end of April this year, foreign companies registered to pour more than $4.7 billion into 692 logistics projects in Vietnam.
The venture, called BW Industrial Development JSC, will use the capital to develop and operate modern warehouses and factories in key economic and industrial zones, according to Jeffrey Perlman, head of Southeast Asia at Warburg Pincus.
Logistics industry will make up 8-10 percent of Vietnam’ GDP by 2025.
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According to experts, in order to penetrate into the domestic logistics market where road transportation accounts for as much as 65 percent market share in Vietnam, Samsung has no other way to move faster than to cooperate with Minh Phuong.
With the expertise of a global operator of hi-tech logistics system, the cooperation with Minh Phuong will help Samsung SDS’s information technology and logistics services better penetrate into Vietnam’s freight and cargo industry.
Besides Samsung SDS, Tae Kwang Industrial Co. Ltd, another South Korean company, has also acquired controlling stake in Gemadept Shipping (GMD) to gain a part of Vietnam’s market share.
Prosperous outlook
The deals have appeared as Vietnam is emerging as a high potential market with its logistics industry projected to account for 8-10 percent of the nation’ GDP by 2025.
Besides having a strategic position and a large domestic market, Vietnam’s logistics market is also considered potential as the country has become a new low-cost manufacturing hub and an increasingly high foreign investment attraction, especially for Japanese, South Korean, Chinese and Singaporean investors, thanks to good growth prospects.
Vietnam is also seen as a gateway for international firms to penetrate ASEAN, a market of 640 million people. Logistics therefore will be a key to promoting exports and imports in Vietnam and ASEAN.
The factors are the motivation to promote M&A deals in the logistics sector to happen more strongly in Vietnam.
“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.
The Asian Development Bank forecast the nation’s economy will expand 6.7 percent this year, the second highest growth among Southeast Asian countries, trailing only the Philippines.
Foreign investment in the country’s logistics industry is also forecast to further grow as the government has recently passed a decree, permitting foreign investors to establish their wholly foreign-owned companies providing logistics services.
Under Decree No.163/ND-CP, foreign investors can provide 16 main logistics service types in Vietnam, including container loading and unloading (excluding airports), warehouses for supporting transport, transport and customs agencies, and shipping.
Regarding road transport services, foreign investors can establish 100 percent foreign-owned companies with the condition that all drivers need to be Vietnamese citizens.
Along with newly-established firms, foreign investors can also join M&A activities with the maximum ownership limit of 49-51 percent, depending on the sector, according to the decree.
According to the Foreign Investment Agency under the Ministry of Planning and Investment, logistics has ranked eighth among industries receiving the largest foreign investments to date. Until the end of April this year, foreign companies registered to pour more than $4.7 billion into 692 logistics projects in Vietnam.
