Competition for logistics market share: Domestic enterprises are at a disadvantage

"The goose that lays the golden eggs"

According to the latest assessment by Agility, in 2022, Vietnam ranked 11th in the group of 50 emerging logistics markets globally. The annual growth rate of Vietnam's logistics industry is from 14 - 16%, with a scale of 40 - 42 billion USD/year.

The logistics industry in Vietnam is considered by foreign investors as a "golden goose". Photo: Hai Yen

Not only that, the number of logistics enterprises in Vietnam is also increasing rapidly. Statistics from the Ministry of Planning and Investment show that, to date, there are about 3,000 domestic transportation and logistics enterprises, along with about 25 of the world's leading freight forwarding corporations operating in Vietnam, mainly providing services, from the stage of cargo transportation procedures to the stage of tax payment or payment.

With the above figures, economic experts predict that in the coming time, Vietnam will have many opportunities to further develop the logistics industry thanks to favorable geographical features, strongly invested infrastructure and a series of investment promotion policies from the Government; at the same time, it is completely possible to become a "golden goose" for investors with vision and strong potential.

In fact, in recent years, Vietnam has emerged as one of the most attractive investment destinations in Asia over the past 30 years, with a GDP growth rate of 4,100 USD per capita in 2022. According to the Foreign Investment Agency, as of September 20, 2023, the total registered foreign investment capital reached nearly 20.21 billion USD, an increase of 7.7% over the same period in 2022. This shows that Vietnam is still a "bright star" attracting investment in Southeast Asia.

Specifically, recently, FM Logistic Group (France) has just inaugurated FM Logistic Distribution Center in Bac Tan Uyen ( Binh Duong ). With a total investment of 25 million USD, an area of ​​over 20,000 m2 (with the ability to expand to 50,000 m2), FM Logistic provides warehousing, packaging, distribution and e-commerce services.

Previously, in mid-September 2023, SPX - a logistics company headquartered in Singapore - inaugurated an Automatic Goods Sorting Center at VSIP Bac Ninh Industrial Park. This center can handle up to 2.5 million parcels/day after phase I, expected to reach 5 million parcels/day in phase II.

In 2022, Best Express Vietnam will invest 20 million USD to build a goods classification center in Bac Ninh and Ho Chi Minh City; SEA Logistic Partners will invest in the SLP Park Xuyen A project in Long An; Cainiao Network has put into operation the Cainiao PAT Logistics Center (110,000 m2) in Ben Luc district (Long An)...

Logistics company SPX inaugurated an automatic goods sorting center at VSIP Bac Ninh Industrial Park last September. Photo: SPX

In addition to completed and operational projects, many projects are being approved for investment with the rapid investment and capital injection of large corporations, making the Vietnamese logistics market "heat up" every day, especially in the Southern region.

Specifically, at the end of August 2023, the People's Committee of Dong Nai province approved the detailed planning at a scale of 1/500 of the BW Logistics Center in Long Thanh district. The project covers an area of ​​64.4 hectares, about 10 km from Long Thanh airport. The environmental impact assessment report of the project was just approved by the People's Committee of Dong Nai province at the end of September. Also in Dong Nai, the Cainiao Logistics Center Project (Trang Bom) was approved by the People's Committee of Dong Nai province in the first quarter of 2023. The project is invested by Cainiao Network (belonging to Alibaba Group) on an area of ​​16.8 hectares.

According to Mr. Jang Bok Sang, Vice President of the Korea Chamber of Commerce and Industry, Dong Nai is receiving attention from many investors in the logistics sector, including Korean enterprises. Currently, many Korean enterprises with projects operating in Dong Nai wish to invest more in logistics infrastructure. If Dong Nai has enough land fund, simplifies procedures, and shortens the time to process documents, it will receive a large capital flow from Korea.

In the industrial “capital” of Binh Duong, foreign investors are also targeting the logistics “pie”. In early August 2023, representatives of the AP Moller Maersk Group (Denmark) came to Binh Duong and worked with the Binh Duong Provincial People’s Committee to discuss plans to invest in a large-scale logistics center to serve long-term business operations.

Not only that, Warburg Pincus Group (USA) also met with the provincial leaders to discuss the investment plan for the Cross-border E-commerce Center Project. This project is planned by Warburg Pincus and its joint venture partner Becamex IDC to be built on a scale of 75 hectares in Binh Duong New City.

Domestic enterprises are weak at home

In addition to the FDI giants who are pouring capital into logistics, the market has also seen the presence of a number of Vietnamese enterprises. Most recently, on September 29, Transimex Company inaugurated a cold storage facility in Ben Luc (Long An). This cold storage facility has a total area of ​​29,000 m2, invested in a rooftop solar power system, meeting international standards. In addition, Transimex has also invested in logistics centers in Ho Chi Minh City and Binh Duong.

Ninja Van Vietnam Group expands its market through rural transportation services. Photo: NV

In the Central and Northern provinces, many logistics projects have also received strong investment from domestic enterprises. Specifically, Thaco invested in a logistics service chain in Chu Lai (Quang Nam); while T&T Group, in partnership with YCH (Singapore), invested in the Vinh Phuc ICD Logistics Center of over 83 hectares.

It can be seen that domestic enterprises have made a strong rise in the race to invest in logistics infrastructure, but according to the perception of enterprises in this field, there is still a large gap between domestic enterprises and FDI enterprises. The main reason is that FDI enterprises have many strengths in finance, technology and management capacity. Meanwhile, Vietnamese enterprises are mostly small and medium-sized logistics companies.

An advantage for FDI enterprises is that currently, according to Vietnam's specific service commitments when joining the World Trade Organization (WTO), at some stages in the logistics supply chain (such as warehousing services, freight forwarding services, delivery services, etc.), foreign enterprises are allowed to establish 100% foreign-owned companies in Vietnam.

With the advantages that FDI enterprises have, Vietnamese enterprises are gradually being left behind in the "race" to invest in logistics right at home. Ms. Pham Thi Bich Hue, Chairwoman of the Board of Directors of Western Pacific Group, said that not only is the logistics industry at a disadvantage in terms of potential, technology and management, but it is also at a disadvantage due to other bottlenecks such as planning that does not closely follow the actual needs of enterprises, logistics costs are very high and the legal corridor is unclear.

“Currently, transportation costs on total logistics costs in Vietnam are very high, up to more than 60%, about twice as high as in other countries where transportation costs only account for about 30-40% of total logistics costs. Meanwhile, we are focusing too much on key infrastructure areas but forgetting the orientation of basic infrastructure development. On the other hand, managing the logistics industry is not easy because this is an industry that changes every day, every month, every quarter... Sometimes it will be difficult to follow the law for the industry, but at least there should be a relative response to the changes in the logistics industry,” Ms. Pham Thi Bich Hue shared.

According to Ms. Pham Thi Bich Hue, it is time for the Government to redefine the logistics industry, because the nature of the word "logistics" is too broad, including many industries, professions, and fields such as infrastructure, services, people, etc. Accordingly, legalizing and specifying the industry not only helps to clarify the legal framework, making businesses more secure, but also supports attracting investment from logistics "eagles" around the world.

Currently, transportation costs in total logistics costs in Vietnam are very high. Photo: Hai Yen

In addition, many opinions also say that Vietnam needs to focus on type 2 and type 3 seaports such as in Quang Binh, Long An, Phu Yen, Quang Nam, etc. These are all localities that have recorded new growth. However, shipping lines currently do not want to come to this area because the infrastructure is not sufficient, even though there is demand. Currently, goods only go through the main central areas, so they have to be transported by road over a long distance, at a very expensive cost, because there is no other choice. Therefore, type 2 and type 3 ports will be the options in the near future.

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