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Great potential in Vietnam logistics market

Great potential in Vietnam logistics market

Wednesday 11, 10 2023
According to Cushman & Wakefield, with possibility of becoming a global goods transit center and an extended arm of the world's factory in the future, Vietnam is the top choice of investors in the field of logistics industry in the Asia Pacific region.

A destination for manufacturing and logistics

Cushman & Wakefield's annual survey of leading global clients in 2022 found that India was considered as their preferred emerging market to invest in (excluding Chinese mainland) by more than 60% of respondents.

On the basis of first and second priority, Vietnam was the assessed to be an emerging market, accounting for nearly 80% of the votes, far ahead of India.

Ms. Trang Bui, General Director of Cushman & Wakefield Vietnam, commented that Vietnam is a destination for many businesses in the fields of manufacturing and logistics.

e-commerce industry

The first reason is due to the development of the e-commerce industry. With a large market scale and a rapidly increasing number of online consumers, Vietnam's e-commerce market has experienced a spectacular growth rate.

E-commerce revenue continues to record impressive growth in the first half of 2023, estimated to reach 10.3 billion USD, up about 25% over the same period, accounting for 7.7% of consumer goods and services revenue nationwide.

Furthermore, bordered with Vietnam is China's southern economic corridor including some prominent regions such as Shanghai, Hong Kong, Shenzhen, Fujian and Guangdong. This is the economic region chosen as the headquarters of giants in manufacturing, biochemistry, commerce and electronic technology.

According to estimates by Cushman & Wakefield, this region accounts for more than 30% of China's total GDP in 2021, playing an extremely important role in attracting investment capital and economic development.

Vietnamese industrial parks have received an early wave of investment from global electronics businesses such as Panasonic (1971), LG Display (1995), Canon (2001), Foxconn (2007), Samsung (2008), Fuji Xerox (2013) and recently corporations such as Pegatron, Goertek, Jinko Solar.

Vietnam is facing the opportunity to increase the value of manufacturers' supply chains and this is a golden opportunity to increase the region's GDP. Especially recently, during the visit of US President Joe Biden, an agreement was reached on comprehensive cooperation and development of the high-tech and semiconductor manufacturing market between the two countries.

Besides, infrastructure is also an essential part in promoting the full potential and successful development of the logistics industry. According to PwC, Vietnam is the leading country in Asia in infrastructure investment and is spending about 5.7% of GDP on this field.

Specifically, there is a total road length of 595,201 km, of which, national roads are 25,560km. The expressway network put into operation is 1,239km. Construction is underway on about 14 routes and sections, equivalent to 840 km.

Large cities like Hanoi focus on giving priority to the Ring Road 4 project, while Ho Chi Minh City will prioritize Ring Road 3 to strengthen connections to neighboring localities, increase freight connections, and reduce logistics costs to seaports.

national railway network

Regarding railways, the national railway network has a total length of 3,143km and has 277 stations, and has 02 lines connecting to China at Dong Dang and Lao Cai. In particular, the North owns road, water and iron routes directly to Shenzhen, known as China's Silicon Valley, creating favorable conditions for businesses wishing to expand and distribute production in the region.

Large seaports

In recent times, Vietnam's seaport system has been focused on investment with current scale and technology reaching international level, especially the container port system. Vietnam's two major seaports are Hai Phong and Ho Chi Minh is in the top 50 largest container ports in the world.

The seaport system has 286 wharves, with a total wharf length of more than 96 km. Notably, Cai Mep port has successfully received the super container ship Cosco Shipping Aquarius 197,049 Dwt in 2021, Msc Ditte 200,000 Dwt in 2022 and Oocl Spain 232,000 Dwt in 2023.

Large seaports

In addition, for the first time, ocean carriers were able to provide direct services from Vietnam to North America and Europe without the need for feeder vessels to connect to regional transit hubs such as Singapore or Hong Kong.

Not needing a consolidator ship and reducing transshipment costs is estimated to save about 150–300 USD/TEU for containers going to and from Vietnam.

With favorable geographical characteristics, as well as strongly developed infrastructure and a series of investment promotion policies from the Government, it can be said that Vietnam fully hold the necessary factors to attracting a series of "queen bees" to nest and further contribute to Vietnam's GDP.

With the above attractive conditions, according to Cushman & Wakefield, Vietnam is completely capable of competing with Dubai and Hong Kong, even Singapore or Shanghai, not only striving to become a global goods transit center, but also an important link like the 'extended arm' of the world factory.

This goes hand in hand with rising demand for high-quality logistics real estate. Especially in the last months of the year, when demand from the retail market is forecast to increase fourfold, the "thirst" for factory and warehouse supply becomes even more severe.

Currently, the total warehouse supply in Hanoi and Ho Chi Minh City reaches 2,022,000 m2 and 5,130,000 m2, respectively. Industrial and logistics parks in large cities, especially Hanoi and Ho Chi Minh City, are having high occupancy rates, reaching nearly 100%.

Source: Cushman & Wakefield, theleader

Compiled by VietnamCredit

 

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