The decline in global consumer demand is a short-term concern, however, it does not affect Vietnam's logistics growth in the long term, according to Mr. Andy Ho.
New statistics from the Vietnam Logistics Business Association show that logistics services are worth 20-22 billion USD per year, accounting for 20.9% of the country's GDP. With an annual growth rate of 16-20%, this is one of the most steadily growing service industries in Vietnam in recent times.
To seize development opportunities, VinaCapital Group and AP Moller Capital have recently "joined hands" to expand investment in the transport and logistics infrastructure sector in Vietnam. Responding to VnExpress , Mr. Andy Ho - General Director of VinaCapital Investment Council, shared the decisions behind this deal, and at the same time, assessed the development potential of the Vietnamese logistics market.
Mr. Andy Ho - General Director of VinaCapital Investment Council. Photo: NVCC
- What is the reason that VinaCapital and AP Moller Capital decided to "join hands" to invest in the transport and logistics infrastructure sector in Vietnam?
- Logistics plays an important role in Vietnam's economic growth. Therefore, the opportunities for investment, development and consolidation of businesses in the transport and logistics sector are huge.
AP Moller Capital, a member of the AP Moller Group, is a fund manager with a wealth of capital and experience in managing and investing in developed and emerging markets. The combination of AP Moller with VinaCapital's extensive network and capital management experience in Vietnam will create a potential investment platform to transform the logistics industry in Vietnam.
In terms of cooperation, we will seek deals to co-invest and support the development of invested enterprises. This is done by leveraging our extensive operating network combined with each party's expertise and understanding of the domestic market.
- To optimize efficiency, what is the investment strategy of VinaCapital and AP Moller Capital?
- VinaCapital and AP Moller Capital's investment strategy is implemented through capital contributions to the businesses we invest in. This aims to achieve two goals: bringing profits to investors and helping businesses develop with operating experience and capital.
The Fund seeks investment opportunities where value can be created through market share growth, effective management and improved operational performance. In terms of investment criteria, in addition to focusing on businesses with high assets and growth potential, we also look for businesses with dedicated and visionary management teams, scalable business models... Through this, VinaCapital and AP Moller Capital can integrate technology and best practices in operations, management and sustainable development.
- Compared to other countries in the region, what advantages does Vietnam have to develop infrastructure and maritime transport, sir?
- In recent years, some investments have been made to develop the shipping industry infrastructure, but there is still much room for development and growth. Therefore, we are looking at the huge potential opportunities in the port, warehouse and transportation sectors.
In terms of market opportunities, Vietnam also has many unique advantages in developing the logistics industry such as a long and continuous coastline, stable growth in foreign direct investment, a solid production base and increasing domestic consumption demand (due to rising income, the development of the middle class and high urbanization rate).
In addition, public investment in infrastructure is crucial to boosting Vietnam’s attractiveness as an FDI destination in the long term. Government investment in infrastructure increased by 50% year-on-year in 2023 to around US$30 billion.
Accordingly, improving infrastructure also increases the attractiveness of the logistics industry in terms of efficiency and profitability. For any developing economy, infrastructure always plays a very important role in the development roadmap. Investment in infrastructure has so far only reached 15% of the total budget allocated for this year, equivalent to 3.0% of GDP, so the acceleration of public investment will take place in the second half of 2023.
- On the other hand, how do you assess the challenges in developing the transport and logistics infrastructure sector in Vietnam?
- In fact, logistics in Vietnam is a fragmented, fragmented and inefficient industry. This, combined with limited infrastructure, can significantly increase the cost of transporting goods. However, we see these challenges as opportunities and always want to focus on them.
- How do these challenges motivate the long-term investment plans of VinaCapital and AP Moller Capital?
- As mentioned above, the small-scale and fragmented nature of the logistics and transportation industry presents an opportunity for the cooperation of AP Moller Capital and VinaCapital.
The challenge for investors like us is to find viable targets to invest in in terms of scale or profitability. In addition, it is important for us to identify opportunities that can leverage the expertise, finance, and management of AP Moller Capital and VinaCapital to optimize the investment.
Furthermore, allowing increased foreign ownership in certain transport and logistics enterprises will increase attractiveness to investors and help create strong, sustainable Vietnamese enterprises that can compete and succeed in regional and global markets.
- How do you predict the future of logistics and transportation in the context of decreasing global consumer demand?
- We see the slowdown in global consumer demand as a short-term concern and a reflection of weaknesses in the current business cycle. However, this obstacle does not negatively impact Vietnam’s long-term growth prospects. Therefore, the logistics and transport sector will continue to grow strongly.
Reports indicate that inventory liquidation is taking place in developed markets. This will end by the end of the year, putting Vietnam in a good position to take advantage of the recovery or normalization of trade volumes. Therefore, we believe that this is a key time to invest in the transport and logistics sector.
In addition, there are signs that the Government is ready to introduce support measures for the industry, for example the proposed increase in handling fees for port operators, expected to be applied in 2024, will be a positive driver for industry profits.
Hong Thao
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