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Logistics companies in Vietnam: Chances and challenges

Logistics companies in Vietnam: Chances and challenges

Tuesday 03, 08 2021
Logistics is a promising field in Vietnam. However, challenges remain for the logistics companies in Vietnam.

Difficulties for logistics companies in Vietnam

Vietnam is one of the most dynamic economies in Southeast Asia, with a CAGR of 16.65% projected for the logistics industry in the period from 2018 to 2023. The LPI of Vietnam assessed by the World Bank was in 39th place.

Despite being a much potential logistics investment destination, Vietnam’s logistics industry had weaknesses that investors need to take a look at for better planning before entering the market.

Logistics

Currently, about 4,000 enterprises are operating in the field of logistics, of which about 70% are concentrated in Ho Chi Minh City and neighboring provinces. Enterprises are divided into three main groups: State-owned enterprises, private enterprises, and foreign-invested enterprises.

Notably, Vietnam logistics companies currently hold a lot of infrastructure and assets for logistics activities (logistics centers, warehouses, seaports, etc.) but their activities are still isolated, mainly operating in the country, serving only in each specified segment, lacking a seamless connection to provide integrated logistics services. Very few Vietnamese logistics enterprises have logistics activities abroad.

Besides, Vietnam logistics companies are mainly small-scale. Up to 50% of enterprises in the field of logistics are registered as one-member limited liability companies. It is difficult for Vietnamese multinational enterprises and small and medium-sized enterprises to attract qualified human resources when compared with foreign-invested enterprises.

The application of information technology in the logistics activities of enterprises is still at a very modest level, mainly focusing on the field of customs declaration and vehicle tracking and monitoring.

There are five main limitations in Vietnam’s logistics industry.

First is the fact that the economic and geographical advantages of each province have yet been fully exploited. The infrastructure for logistics activities is still not high. The same goes for the connection between commercial infrastructure, transport infrastructure, information technology infrastructure in the country, so the efficiency of logistics activities is still low.

Second is the presence of regulations overlap. There are administrative procedures and specialized inspections that are not suitable. Some policies have not been promptly revised to suit the characteristics of logistics activities in practice.

five main limitations in Vietnam’s logistics industry

Third is, according to the Ministry of Industry and Trade, service costs are still high due to many reasons such as limitations in business size and capital, the ability to apply information technology as well as the level of human resources that have not been met operational requirements, restrictions on logistics infrastructure and road transport costs, port surcharges imposed by foreign ship owners, etc.

Fourth is the work of statistical data, assessing the status of logistics development still faces many difficulties and inadequacies. Statistical data is an important basis for accurate research and assessment of the current situation and to make recommendations on mechanisms and policies. However, at present, the statistics and evaluation of logistics development still face many difficulties, there is no synchronization.

Fifth is, as the Ministry of Industry and Trade pointed out, the management staff in logistics is still limited in terms of both human resources and qualifications. Many officials have not been properly trained in the right fields, operating in a part-time manner, so they face many difficulties in management.

Logistics investment opportunities in Vietnam

Vietnam is proving to be a promised land for logistics investment. Jones Lang LaSalle (JLL), the global commercial real estate services company, considers Vietnam to be one of the fastest-growing e-commerce markets in Southeast Asia, recording a massive acceleration of e-commerce in 2021 when most people are stuck at home and spend more time online. JLL believes that logistics is an indispensable part of promoting the full potential and successful development of the e-commerce market. Many foreign logistics service providers and e-commerce operators are making great efforts to not miss the opportunity to penetrate the Vietnamese market.

Logistics investment

According to Mr. Paul Fisher, General Director of JLL Vietnam, compared with other countries in the region, Vietnam's logistics market is still in its infancy, the market mainly provides products with low technical standards, developed in areas far from the center. The market needs a large amount of capital to invest in infrastructure and to develop modern facilities.

"With the development potential of the e-commerce industry and the manufacturing sector, we believe that the Vietnamese logistics market will step up a higher ladder in the development process of this market, similar to the progress that other markets in the region have experienced”, the General Director of JLL Vietnam affirmed.

 

Compiled by VietnamCredit

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