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Vietnam logistics mainstream trend: Exploding logistics in e-commerce, strengthening sector M&A

Two major trends of logistics industry in the period of 2018 - 2019 include booming logistics in e-commerce - retail; in addition, the policy of mobilizing capital from the private sector to invest in infrastructure through the method of transferring the rights to exploit some infrastructure (logistics, airports, seaports ...), attracting large investors with The deal is expected to be worth billions of USD.

2018 logistics growth from 12 - 14%

Vietnam transport and logistics activities are on the rise along with the increase in import and export activities. According to a recent announcement by the World Bank (WB), Vietnam is ranked at 39 with a significant improvement in its LPI (Logistics performance index). 3.27, ranking 3 in ASEAN (after Singapore position 7 and Thailand position 32) ranking of 2018 logistics activities, is considered to have better logistics service performance than comparable income markets.

Vietnam is one of the markets with better logistics service performance than comparable income markets (Source: WB).

Vietnam currently has many advantages to develop transport and logistics industry:

(1) Increasing global trade exchange with international economic integration and successful signing of free trade agreements; (2) Appropriate geographical location to build transit centers of Southeast Asia; (3) Infrastructure: warehouses, highways, seaports and airports are not improved.

The Ministry of Industry and Trade assessed that in 2018 the logistics industry will increase by about 12-14%. The number of transport and logistics enterprises is currently 3,000, including roads, railways, seaways, inland waterways, air routes ...

The development of the transport and logistics industry will also create conditions for Vietnam to quickly become a new production center in the region capable of competing with China.

Industry players also showed growth confidence when more than 73% of enterprises surveyed by Vietnam Report said that the entire transport and logistics industry in Vietnam will achieve growth on two numbers, nearly 27 % predicted to be below 10% in 2019, and no business forecast "unchanged" or "worse than 2018".

Two main trends: Exploding Logistics of e-commerce - retail and M&A in the industry

Booming logistics in e-commerce - retail

Most experts asked by Vietnam Report said that 2018 - 2019 will witness the explosion of transportation and logistics in Vietnam e-commerce.

The increase in cargo traffic through online channels has increased the demand for transportation and logistics, especially fast delivery services. The scale of e-commerce market in 2017 reached 6.2 billion USD, growing 24%, the number of orders through fast delivery companies increased on average 45% in the period of 2015-2020 and could reach 530 million applications goods in 2020.

Many retail businesses such as Vincommerce, Mobile World, FPT, Lotte, Aeon ... are developing E-commerce, or the big e-commerce businesses such as Alibaba, Amazon ... have joined Vietnam. making the logistics market more vibrant, accompanied by the need for technology investment and thoroughness in transport and logistics services.

M&A trend of logistics industry

Vietnam has a policy to mobilize capital from the private sector to invest in infrastructure through the method of transferring the rights to exploit some infrastructure (logistics, airports, seaports ...), attracting many investors. big with deals that are expected to be billions of dollars.

2017 - 2018 witnessed large M&A cases such as Gemadept transferring capital to CJ Logistics, Samsung SDS cooperating with Minh Phuong Logistics ...

Characterized by the industry with many small and medium enterprises, mainly providing 1PL and 2PL services, the participation of foreign big names is expected to "patch holes" in capital, personnel, public technology ... for domestic businesses.

Three growth challenges: infrastructure, capital scale,

fee tax

According to a survey of Vietnam Report, the three biggest challenges of Vietnam's transport and logistics industry now include: (1) Infrastructure such as variable port system, warehousing, connection ... is still limited and inadequate. ; (2) Limitation on capital size, management level, professional qualifications is not high; (3) Taxes, tolls and high surcharges.

According to the evaluation of enterprises in the industry, although the infrastructure has improved compared to the past, there are still many shortcomings. The South-North transport axis is still heavily dependent on the road, much more in need of the railway sector.

The disproportionate development of the port system in Vietnam when more than 92% of the southern container traffic is concentrated in Cat Lai Port, leading to overload and congestion ... causing great waste.

Capital and human resources are the main reasons that domestic enterprises find it difficult to compete with foreign businesses. The majority of over 70% of active transport and logistics enterprises currently have small and medium capital scale, 7% have capital of over VND 1,000 billion, of which large capital groups are multinational enterprises.

In addition, the industry is most relevant to import and export activities, logistics and logistics personnel require professional knowledge, foreign language skills and good work experience. This is the weakness of the domestic enterprises today.

Regarding logistics costs, transportation costs in Vietnam are currently high (3 times higher than regional and world countries) and uneven in regions, mainly due to types taxes, tolls and surcharges are currently quite high, indirectly reducing competitiveness compared to other countries.

Logistics costs allocated by category (Source: Vietnam Report)

Priority recommendations: Legal corridors, infrastructure and IT applications

Surveying enterprises of Vietnam Report transport and logistics industry shows that they expect that legal corridors, infrastructure and IT applications will be prioritized to improve enterprises to improve transportation services. download and logistics in Vietnam in 2019 here.

Along with the development trend of e-commerce, the entry into Vietnam market of big foreign retailers increases the risk of acquiring local logistics channels, causing domestic enterprises to face many disadvantages. According to Vietnam Report, management agencies need to clearly see this issue, supplement necessary legal corridors (such as regulations on limit of foreign ownership ratios in e-commerce enterprises, logistics ...), appropriately adjust tax regulations to avoid price transfer, tax evasion ..., thereby creating a fair competitive environment for logistics enterprises.

Currently, logistics costs are accounting for a large proportion in enterprise costs, making them the biggest barrier to the competitiveness of enterprises. In order to reduce logistics costs, most experts and businesses in the industry said that it is necessary to synchronize transport infrastructure and connections between modes of transport, and at the same time develop a transport floor to connect well. most shippers and enterprises providing logistics services, creating a basis for Vietnamese logistics enterprises to participate more in the supply chain, avoiding one-way transportation.

Vietnam logistics and transport industry still has plenty of room for development. For businesses, in addition to focusing on investment in improving service quality, it is also important to build brand reputation. For foreign manufacturing enterprises, when setting foot in Vietnam, seeking and cooperating with reputable logistics enterprises is an intermediary connecting connecting safe transport of goods to partners and customers, contributing to completing Chain of production - distribution, adversely impact Vietnamese transport and logistics enterprises to participate more deeply and better positioning on global logistics maps.

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