Foreign Funds Pumped into Vietnam Logistics Market

11:05:09 AM | 22/8/2019

Vietnam's logistics industry is likely to grow strongly at 12-14% a year, according to many foreign investors.

Many million-dollar deals

Investment and merger and acquisition (M&A) in the logistics service industry in Vietnam have tended to increase dramatically. Top investors come from Japan, Singapore and South Korea.

In July, Vietnam Maritime Corporation (VIMC) signed a joint venture contract with its Japanese partner, Suzue, on shipping and logistics business. Sumitomo Corporation recently cooperated with Suzuyo and a Japanese public-private investment fund to spend nearly US$40 million buying a 10% stake of Gemadept Corporation of Vietnam. Sumitomo Corporation’s ambition is to build a logistics system connecting factories with ports to serve the export of manufactured products in Vietnam. By acquiring a stake at Gemadept, Sumitomo’s leaders will develop a mobile application that allows container drivers to pre-register the time of loading and unloading at ports and handle other paperwork.

Mitsui O.S.K Lines (MOL), another Japanese investor, also visited Vinh Tan International Port (VTIP) to consider bringing its vessels that transport coal imported from Indonesia to the port.

South Korean investors are equally fast as they have poured millions of US dollars into Vietnam's logistics sector. The featured shark deal was struck by Samsung SDS, a subsidiary of Samsung Group of South Korea, to cooperate with Aviation Logistics Joint Stock Company (ALS) to establish ALSDS Joint Venture and run logistics business at Noi Bai International Airport (Hanoi). In addition, Samsung SDS signed with Minh Phuong Logistics on domestic overland freight transportation.

Besides, Mr. Shamir Rahim, Managing Director of Singapore Waterway Transport and Logistics Company, expressed his desire to collaborate with Vietnam’s logistics business community to turn this potential into reality and ensure logistics supply chains and digitalized goods flows to benefit both sides.

The Vietnam Logistics Business Association (VLA) and the Singapore Logistics Association (SLA) signed a cooperation agreement in 2018. This platform has supported increasing logistics investment projects of Singapore.

Fully tapping Vietnamese logistics market

Mr. Nguyen Tuong, Deputy Secretary General of the Vietnam Logistics Business Association, said the logistics service industry has made impressive growth in recent years. According to the 2018 World Bank Logistics Performance Index (LPI), Vietnam ranked 39th out of 160 surveyed countries, 25 places higher than in 2016 when it stood at No. 64 out of 130 countries, and ranked third in ASEAN (after Singapore that secured the 7th position and Thailand that stood at No. 32). Vietnam’s logistics also topped emerging markets.

However, he also admitted that Vietnam's logistics industry is still exposed to many weaknesses that need to be addressed. For example, shipping costs in Vietnam are three times as high as other countries,, and are uneven across its regions because taxes, road tolls and surcharges are quite high, which in turn reduces the competitiveness of the Vietnamese logistics market with other countries. Another hardship is the weak infrastructure of the logistics industry. Although this industry has grown very strongly over the years, many freight shipping stages by road, by riverway or by rail are still tough.

Nevertheless, many domestic logistics companies have still made bold investment as they anticipate the development prospects of the Vietnamese logistics industry. Mr. Nguyen Thanh Phuong, Chief Executive Officer of Sao Do Group, said, his company owns 1,329-ha Nam Dinh Vu Industrial Park, including the seaport region with seven container and general cargo berths designed for ships of 40,000 DWT, a 105-ha warehouse area, and a 210-ha nontariff area. Statistics showed that, by the end of 2018, after 10 months of operation, the port has welcomed about 200 ships headed for international routes such as to Japan, South Korea, Singapore, Hong Kong and Shanghai, with a cargo throughput of around 200,000 TEUs.

The above figures show that the Vietnamese logistics market is strongly resilient, not only an appetizing pie for foreign investors to bite but also for domestic investors to get rich if they have capital and technology, because of significant capacity for expansion.

Anh Phuong