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Vietnam logistics industry: development trends

Vietnam logistics industry: development trends

Thursday 23, 04 2020
The development of Vietnam's logistics industry is developing based on two main factors: e-commerce - retail and the merger and acquisition (M&A) within the logistics industry itself.

Modest business potential

According to the Vietnam Logistics Report 2019 published by the Ministry of Industry and Trade on developing logistics enterprises' capacity, in 2018-2019 period, transportation, warehousing, forwarding and other related services all saw positive growth.
Although the number of domestic logistics enterprises is large and tends to increase compared to that of foreign ones, most of Vietnam's logistics enterprises are still small and medium in terms of capital, labor and technology.

Notably, the financial capacity of Vietnamese logistics enterprises is still modest (80% of them have a legal capital of VND 1.5-2 billion). Besides capital problems, most of Vietnamese logistics enterprises are inexperienced and have limited competitiveness, so they have not had the opportunity to enter markets with great demand. Moreover, there is still a lack of linkages among businesses and different stages of logistics activities.

The Ministry of Industry and Trade said that human resources is also an obstacle because most of the employees in the field of logistics in Vietnam have not been trained properly and methodically. The capacity of Vietnamese logistics businesses is therefore limited by the quality of staff that does not meet the needs.

Up to 93 - 95% of logistics workers are not properly trained. They can only undertake work in small supply chains such as delivery, warehousing, bill of lading processing ... Additionally, the workforce of logistics enterprises in Vietnam are quite small. The number of enterprises with less than 50 employees account for about 32.4% while that of large-scale ones (over 1,000 employees) account for a small proportion of only about 10.8%.

In addition to the human factor, according to the Ministry of Industry and Trade, technology is also a key competitive advantage in the potential yet competitive logistics market. In Vietnam, one of the reasons why logistics services are provided unprofessionally is the poor application of information technology.

There have not been many businesses that can apply technology in the era of Industrial Revolution 4.0, when the volume of goods is large, and the demand for time as well as the safety and quality of goods is growing. However, the Ministry of Industry and Trade thinks that recently, logistics industry in Vietnam has achieved an important milestone in modernization. Technological innovation and investment are really beginning to shape logistics enterprises, becoming an indispensable trend of the logistics market.

Information technology plays an important role in the development of logistics service providers, which is considered as the "lifeline" connecting the components of the entire logistics service chain. “New logistics businesses have used technology to enhance their service, while traditional logistics enterprises are modernizing at an increasing rate, especially automating manual processes. In addition to investing in hardware or software packages, logistics businesses are also investing to develop faster in terms of technology... ", the report pointed out.

2 major development trends

Vietnam logistics industry: development trends

Logistics development in e-commerce – retail

Most logistics experts believed that the 2018-2019 period would witness the explosion of logistics in Vietnam's e-commerce industry. The increase in the volume of goods traded through online channels makes demand for transport and logistics, especially delivery services, increase. The scale of e-commerce market in 2017 reached USD 6.2 billion with a growth rate of 24%. The number of orders for fast delivery companies grew by 45% on average in the period 2015-2020 and is expected to reach 530 million in 2020.

In particular, that many retail businesses including Vincommerce, Mobile World, FPT, Lotte, Aeon ... are aiming to develop e-commerce, or the e-commerce giants like Alibaba and Amazon have entered Vietnam has made the logistics market more exciting, accompanied by the need for technological investment and thoroughness in transport and logistics services.

M&A in logistics industry
Vietnam currently has mobilized capital from the private sector to invest in infrastructure through the transfer of the right to exploit some infrastructures (logistics, airports, seaports ...), attracting many big investors with deals estimated to be worth billions of US dollars.

In 2017-2018, the logistics industry witnessed many big M&A deals including Gemadept transferring capital to CJ Logistics, Samsung SDS cooperating with Minh Phuong Logistics ... Similarly, a series of M&A deals in logistics also took place in 2019. They are: Sumitomo Corporation together with logistics company Suzuyo and a Japanese public-private fund spending about Yen 4 billion (USD 37 million) buying 10% of capital at Gemadept Joint Stock Company; Symphony International Holdings announcing that it had spent about 42.6 million USD to buy shares of Indo Tran Logistics and Transport Joint Stock Company (Indo Trans Logistics Corporation - ITL Corp); Minae Financial Group and Naver, headquartered in Seoul, South Korea, purchasing two commodity supply centers in Vietnam for 53 billion won (USD 47.01 million). 
“As an industry with many small and medium-sized enterprises, the participation of foreign giants is expected to "fix the gap" in capital, personnel, technology ... for domestic enterprises” the Ministry of Industry and Trade said.

>>Vietnam’s logistics industry: 5-year potential

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