Investment
Vietnam’s logistics M&A lures foreign investment
Foreign investors have participated strongly in Vietnam’s logistics industry through merger and acquisition (M&A) deals as the industry is projected to account for 8-10 percent of the nation’ GDP by 2025.
Vietnam’s logistics industry is potential due to its strategic position and large market
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E-commerce giants like Alibaba, Amazon and Tencent are gaining footholds in the Vietnamese market. Armstrong and Associates, a US supply chain market researcher, estimated that e-commerce will account for about 7.2 – 7.5 percent of total logistics turnover in Vietnam by 2020.
Vietnam is also seen as a “gateway” for international firms to penetrate ASEAN, a market of 640 million people. Hence, logistics will be a key to promoting exports and imports in Vietnam and ASEAN at large.
According to the research team of the Vietnam M&A Forum, the country is developing a policy to call for private sector investment to develop logistics infrastructure, including airports and seaports. One option being studied allows a company to purchase the right to operate a logistics facility for a certain period of time to raise fund for the development of other projects. In addition, Vietnam is looking to develop a more competitive market for logistics services.
“If the policy is adopted, it will provide opportunities for major investors at home and overseas. Due to the nature of the infrastructure and logistics sectors, deals worth hundreds of millions or even billions US dollars could be concluded, driving the local M&A market forward,” said Dang Xuan Minh, Director General of AVM Vietnam and head of the research team.
Last year, Vietnam saw a boom in M&A deals in logistics that involved both domestic and international players.
Logistics market last year 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.
This deal appears as Vietnam is emerging as a new low-cost manufacturing hub, increasingly high foreign investment attraction thanks to good growth potential.
In addition, along with the compatriot Samsung SDS from South Korea, to set up a domestic joint venture to gain domestic market share, Tae Kwang Industrial Co. Ltd, a South Korean textile and chemical company, has also acquired controlling stake in Gemadept Shipping (GMD).
Earlier, global private equity firm Warburg Pincus established a joint venture with the local real estate and infrastructure Becamex IDC Corporation to develop a $200 million industrial and logistics real estate platform.
With a shift of manufacturing bases from markets like China to Vietnam in line 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,” said Jeffrey Perlman, Managing Director and Head of Southeast Asia of Warburg Pincus.
