Foreign Logistics Firms See Success in Vietnam

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HCMC – While their presence is still small, foreign logistics firms are seeing increasing success and growth in Vietnam. As the country’s economy continues to grow, these firms are expected to continue to increase their level of investment and footprint on the ground in Vietnam.

Vietnam’s logistics market is currently worth US$60 billion. In total, there are around 1,000 logistics firms – 25 of which are foreign firms. Foreign firms of note are Maersk Logistics, APL Logistics, NYK Logistics and MOL Logistics. Most foreign firms can offer third or fourth party logistics (3PL or 4PL) services while Vietnam domestic firms can only handle 2PL services.

Foreign firms in Vietnam currently hold 80 percent of the market share, worth US$48 billion.

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Transportation services (road and ocean) are currently the largest subsectors. The ocean shipping services are dominated by joint ventures while road-shipping services are mostly handled by domestic firms.

Cold Chain (storage and cold transportation), however, is considered the sector with the most growth potential for foreign investors. The continued entry of major retailers and the increasing export of farming and seafood products are expected to create multiple opportunities for Cold Chain specialists. Additionally, due to Vietnam’s traditional “eating fresh” society, the “frozen food” retail sector is currently fragmented and the Cold Chain industry is under-invested. In order to remedy this situation, the government has introduced various financial incentives in order to attract foreign investment into this segment. Japanese firms make up the largest percentage of foreign specialists at this time.

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In reaction to the perceived growth potential of Vietnam’s logistics market, foreign firms are investing heavily throughout the country. For example, in 2013, DHL Supply Chain invested US$13 million in an expansion project. It is expected to build 141,000m2 in storage capacity and have roughly 100 shipping vehicles and 2,200 workers by the end of 2015. According to Oscar De Bok, General Manager of DHL Supply Chain in Southeast Asia, the company is preparing for the fast growth of the retail industry, consumer goods, tech products and automotive industry in Vietnam. Since its entry in 2001, DHL Supply Chain Vietnam has had an annual growth of 45 percent, compared to its annual global growth of 25 percent.

Maersk Line, ocean-shipping subsidiary of A.P. Moller-Maersk, has also constructed four new storage facilities and it is planning on an expansion project in 2015. From 2005 to 2010, Maersk Line’s operations grew by 200 percent.

In January 2014, in accordance with World Trade Organization (WTO) service sector commitments, Vietnam began allowing wholly foreign-invested enterprises to enter the logistics market in almost every sector. However, the container handling services and road transport services sectors still require a joint venture to be formed with Vietnamese partners.

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email vietnam@dezshira.com or visit www.dezshira.com.

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