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Vietnam’s logistics industry catching waves of foreign investment

Vietnam’s logistics industry catching waves of foreign investment

Tuesday 22, 02 2022
After the disruption of the supply chain due to the impact of COVID-19, logistics companies, especially foreign ones, continue to pour capital into the Vietnamese market to cease development opportunities in the post-pandemic context.

Logistics - An attractive field

Filippo Bortoletti, Senior Director of the International Business Department at Dezan Shira & Associates, a multinational investment consulting company, said that Vietnam's logistics sector is still attractive to foreign investors despite being hindered by legal regulations. Meanwhile, domestic logistics enterprises are mainly small and micro-scale with traditional warehouses, lacking infrastructure, technology, and capital.

Filippo Bortoletti

“Customers can experience a big difference in professionalism and quality between logistics companies. FDI enterprises generate more revenue in the Vietnamese market because they have more competitive advantages compared to domestic companies. As many companies stop doing business during the pandemic, in addition to Vietnam's increasingly important role in the global supply chain, the logistics sector will continue to develop at a faster pace, with many opportunities for investors abroad,” Mr. Bortoletti said.

According to the Ministry of Industry and Trade, more than 4,000 logistics companies are operating in Vietnam. Statistics from the Vietnam Logistics Association show that, in the first nine months of 2021, more than 2,500 logistics companies had to suspend operations due to operational restrictions and distance, more than 570 companies stopped operating altogether. Such figures contrast the double-digit growth of many logistics companies in the year prior.

Besides, customer habits are also changing and shifting to e-commerce logistics. According to Mr. Bortoletti, the sharp increase in the number of e-commerce companies is expected to continue in the coming years, increasing the demand for warehousing and delivery services.

Positive outlook

Many foreign investors are actively investing in the Vietnamese logistics market. Recently, GLP announced the establishment of a logistics investment fund called GLP Vietnam Development Partners I, with a total investment worth 1.1 billion USD. The fund receives commitment from a diverse group of investors from pension funds, sovereign wealth funds, and insurance companies from Asia, Europe, North America, and the Middle East.

Vietnamese logistics market

Craig A. Duffy, Managing Director of the fund, said that the investment cash flow from professional corporations into the logistics segment in Asia-Pacific is very strong, especially in Southeast Asia. In particular, Vietnam is considered one of the most attractive markets thanks to its dynamic population, growing economy, and increasing domestic consumption of the middle class.

Similarly, WHA Corporation PCL (Thailand) has announced a plan for a new revenue stream by investing 50 billion baht (1.51 billion USD) over the next five years. Apart from investing in digital technology, a part of this investment will be used to expand business in Vietnam.

Specifically, WHA plans to expand 352 hectares of an industrial park in Nghe An province in the first quarter of 2022. The group expects sales in Thailand and Vietnam to increase by 46 percent this year.

According to Mr. Bortoletti, foreign companies in the logistics sector still have a strong competitive advantage, with efficient technology and processes, good service quality, and strong human and technological resources. “Foreign companies are willing to utilize domestic logistics services to quickly penetrate the market and get a positive return on investment,” he said.

In a recent report, the Organization for Economic Co-operation and Development (OECD) advised Vietnam to liberalize the logistics sector since entry barriers for foreign investment are the main cause affecting the growth of domestic logistics companies, leading to higher logistics costs. The OECD has called on Vietnam to gradually ease regulations on foreign ownership ratio (FOL) towards allowing ownership of up to 100% foreign shares in the medium and long term.

Organization for Economic Co-operation and Development

Mr. Bortoletti pointed out that the main opportunity for foreign companies to penetrate Vietnam's logistics market would come from the industry structure in the country. With most companies’ small and logistics costs high, foreign companies can penetrate the market quickly by taking advantage of superior technologies and efficient processes.

“However, foreign investors will also face some challenges. Specifically, an FDI enterprise cannot hold more than 51% of the shares in a local logistics business, and there are also some requirements for the infrastructure used such as warehousing and vehicles,” Bortoletti shared.

 

Source: baodautu.vn

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