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Opportunities for Japanese logistics companies in Vietnam

Opportunities for Japanese logistics companies in Vietnam

Saturday 19, 06 2021
According to economic experts, a "golden" opportunity is awaiting Vietnam's logistics sector post Covid-19 pandemic. This is also an opportunity for foregin logistics companies in Vietnam.

A glance at Vietnam’s logistics market: challenges and opportunities

The outbreak of the Covid-19 pandemic has caused many countries to apply social-distancing measures, which has a really heavy impact on logistics activities, thereby disrupting supply chains and trade flows.

According to statistics of the Vietnam Logistics Business Association (VLA), the Covid-19 pandemic is the main reason why 15% of enterprises lost 50% of their revenue compared to 2019, and demand for logistics of more than 50% of enterprises decreased by 10%-30% in 2020 over the same period in 2019.

VLA

The existing difficulties of the manufacturing and logistics industry have become worse during the Covid-19 pandemic.

High logistics cost has caused an increase in the cost of services, reducing the competitiveness of Vietnamese goods in particular, and of the Vietnamese economy in general. At the same time, Vietnam’s logistics companies cannot compete with those of other countries in the region and the world.

It is forecasted that in the coming time, Vietnam's logistics industry will face many more difficulties and challenges due to the impact of the Covid-19 epidemic. For example,  there will be not enough empty containers for export (due to the impact of social distancing), or freight rates will increase dramatically.

Besides the abovementioned challenges, Vietnam's logistics industry may find many opportunities from free trade agreements and the strong development of e-commerce. According to economic experts, Vietnam's logistics sector will enjoy a "golden" opportunity after the Covid-19 pandemic is totally under control.

Specifically, the strong development of supporting industries and increased e-commerce activities will make logistics become a field that attracts foreign investors, especially those from Japan or Korea. Free trade agreements (FTAs), including new generation FTAs, that have taken effect will help Vietnam benefit from the promotion of import and export of goods.

In addition, the forecasts of international organizations for Vietnam's economy including positive GDP growth and trade surplus show that production, business and trade are recovering, and logistics enterprises can take advantage of opportunities to accelerate after a period of decline due to the impact of the Covid-19 epidemic.

Opportunities for Japanese investors in Vietnam’s logistics market

According to statistics, there are more than 1,300 logistics enterprises in Vietnam. In particular, foreign enterprises only account for a very small proportion, from 2% to 3%, however, they hold about 70-80% of the logistics market share.

Most Vietnamese logistics enterprises provide retail logistics services due to their weak potential. In addition, because the market is so fragmented, it is not uncommon for many businesses to provide services at a price close to breakeven in order to survive. Not to mention, there is a huge difference in the service quality between Vietnamese logistics enterprises and foreign enterprises, so many large corporations still choose to use the services of foreign enterprises. In addition, foreign logistics enterprises provide a full package of logistics services, while Vietnamese enterprises often only provide discrete services. This can be considered as an opportunities for foreign investors who want to participate in this market.

According to the Ministry of Industry and Trade, the development trend in logistics service supply in Vietnam will be the cooperation among logistics businesses to share profits from exploiting advantages in infrastructure and transportation, and increasing competitiveness to be a bigger link in the logistics chain.

However, according to economic experts, the operation and characteristics of Vietnam may be different from the experience of investors, in which Vietnamese partners can be of good support.

Currently, Vietnam has mobilized capital from the private sector for infrastructure investment through the transfer of the right to operate some facilities including airports and seaports.

The logistics industry is forecasted to account for 8-10% of Vietnam's total GDP by 2025.

According to the Ministry of Industry and Trade, in recent times, investment, acquisition and merger (M&A) activities in the logistics service industry tend to be quite intense. In particular, many Japanese companies have participated in Vietnam’s logistics industry.

Ministry of Industry and Trade

For example, in early July 2020, Vietnam Maritime Corporation (VIMC) signed a joint venture contract with Japanese partner Suzue on business activities in the field of transportation and logistics.

Sumitomo Group has also cooperated with Suzuyo Company and a Japanese public-private fund specializing in infrastructure investment, spending nearly 40 million USD to buy 10% shares of Gemadept Joint Stock Company - Vietnam's leading enterprise in port operation and logistics.

Another giant from Japan who also joined the logistics market in Vietnam is Mitsui O.S.K Lines (MOL). In early July 2020, MOL visited Vinh Tan International Port (VTIP) to consider bringing in MOL's ships transporting coal imported from Indonesia into the port.

In addition to the above-mentioned logistics M&A deals between Japan and Vietnam, there are also many other Japanese logistics companies that have been operating in Vietnam for a long time. This proves that Vietnam's logistics industry is very attractive and has a lot of room for development.

Below is information about two of the major Japanese logistics enterprises in Vietnam, compiled by VietnamCredit:

Hitachi Transport System Vietnam

Hitachi Transport System Co., Ltd. is a company headquartered in Tokyo, Japan, operating in the field of freight and transportation related services since 1950. In particular, Hitachi Transport System provides services such as 3PL, import and export, transportation, packaging and shipping consultant. With accumulated experience since its establishment, the company has come up with the most optimal solution for customers with a wide distribution network to meet the domestic and international needs of customers.

Hitachi Transport System Vietnam

Hitachi Transport System Vietnam is a subsidiary of Hitachi Transport System with an office located in Ho Chi Minh City. It specializes in ocean freight, logistics solutions and the installation of heavy machinery.

Nippon Express Vietnam

Nippon Express is a logistics consultant, providing one-way business solutions connecting people and companies beyond national and regional boundaries, through diversified delivery methods, integrated transportation on land, air and sea. Nippon Express Company was established in 1937 with additional funding from the Japanese government. Since 1950, Nippon Express has expanded and developed its business parallel to the Japanese economy. In 1958, its first overseas representative office in New York was opened. Since then, Nippon Express's global network has spread to more than 700 locations in 45 countries with 20,753 employees.

Nippon Express Vietnam

Nippon Express Vietnam is considered a giant in the field. It has offices across the country, from Bac Ninh, Hai Phong to Da Nang, Ho Chi Minh City.

Compiled by VietnamCredit

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