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Vietnam’s logistics industry: an overview and outlook for 2022

Vietnam’s logistics industry: an overview and outlook for 2022

Saturday 20, 08 2022
According to the Ministry of Industry and Trade, Vietnam's logistics industry will prosper in 2022, which may be a huge momentum for export growth.

Industry overview

Currently, there are no socio-economic organizations that have accurate data on the number of logistics companies in Vietnam, even the Vietnam Logistics Business Association (VLA), which is a specialized association.

Vietnam Logistics Business Association

According to unofficial data, by the beginning of 2022, there had been about 3,000 enterprises of all economic sectors providing logistics services in Vietnam. More than 500 businesses of these are members of VLA, including official members and associate members. Most of the businesses are small and medium sized.

Vietnamese logistics companies are divided into three main groups: (1) Foreign companies with 100% foreign investment capital or joint venture companies, (2) State-owned enterprises, (3) Private companies.

Companies in the first group mostly focus on their global customer segments in each country, who have full logistics awareness and need full-service logistics.

The second group dominates almost all domestic forwarding and transportation services, serving a variety of customer segments and mainly has the strength to specialize in individual segments. Most of the profits in the transportation and distribution sectors fall into this business sector.

Logistics companies in the third group have a lot of potential for future development. Their target customers are major private companies and joint stock companies in Vietnam.

In this third group, both logistics service providers and service users are rapidly changing the perception of logistics. When the owner's interests are attached to the interests of the business, they always calculate the most effective plan for business activities, especially factors affecting costs and competition.

According to the Vietnam Logistics Report 2021 of the Ministry of Industry and Trade, in the first nine months of 2021, the number of newly registered transport and warehousing enterprises increased by 4.61% with capital increasing by 43% over the same period in 2020. At the same time, in 2021, many logistics enterprises saw revenue and profit growth, most with double-digit growth.

The most obvious proof is that the domestic economy gradually recovered, leading to a recovery in sea and inland waterway transport in the first 10 months of 2021 compared to the same period in 2020. Specifically, the volume of goods transported via sea and inland waterways in the first 10 months of 2021 were estimated at 68.1 million tons and 265 million tons, respectively, significantly improving compared to the same period. Notably, the total tonnage of ships increased sharply by 22% over the same period.

The most obvious proof

Source: Agility

Outlook for Vietnam's logistics industry in 2022

A report published by Technavio in March 2021 forecasted that the logistics market would grow at a rate of 1.5% per year in the period 2021-2025. However, with the complicated development of the Covid-19 pandemic, according to UNCTAD, 2022 will still be an uncertain year for global trade, whereby the outlook for the global logistics industry remains a mystery.

However, logistics is still an area that is attracting a lot of investment in Vietnam and is expected to grow significantly thanks to supporting industries, automobile manufacturing, electronic components and investment policies of the State into key economic zones. Leverage to promote logistics also comes from the Vietnam - European Union Free Trade Agreement (EVFTA). After the impacts of Covid-19, market signals have showed a bright outlook for Vietnam's logistics industry in the near future.

logistics

The most prominent highlight of the industry is last mile delivery. This is the movement of goods from the distribution center/depot of goods to the final consumer. Accounting for 28% of total freight costs, the movement of goods at this last stage is gradually playing a decisive role in the customer experience, especially for retailers in the age of e-commerce and omni-channel marketing.

According to the World Bank’s report, the logistics market for e-commerce in Vietnam is currently worth USD 560 million. Notably, large e-commerce companies are now gradually building their own ecosystems, in which e-logistics is an important pillar. The market is becoming more dynamic, and the competition is also fiercer.

Startups, backed by venture capital, are trying to penetrate the logistics market with high-tech, asset-free platforms designed to fully exploit resources available in the market. Traditional businesses are continuing to improve their strength through expanding supply chains and investing efforts in digital transformation, thereby contributing to reforming Vietnam's logistics industry.

Source: MoIT, Agility, Technavio

Compiled by VietnamCredit

 

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