Foreign capital flows into VN logistics sector

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Foreign investors are pouring capital into Vietnam’s logistics market to seize development opportunities after the pandemic.

According to experts, Vietnam’s logistics sector is still attractive to foreign investors despite barriers caused by legal regulations. Meanwhile, domestic logistics enterprises are mainly small and micro-size with traditional warehouses, lacking infrastructure, technology and capital.Foreign-invested businesses generate more revenue in the Vietnamese market because they have more competitive advantages compared to domestic companies. With 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 foreign investors.According to the Ministry of Industry and Trade, more than 4,000 logistics companies operate in the country. Statistics of the Vietnam Logistics Association show that in the period from January to September 2021, more than 2,500 logistics companies had to suspend operations due to social distancing, while more than 570 others had to stop operation completely.Also, customer habits are changing and shifting to e-commerce logistics. The sharp increase in the number of e-commerce businesses is expected to continue in the coming years, leading to an increase in demand for warehousing and delivery services.Positive outlookMany foreign investors are pouring capital into the Vietnamese market. Recently, GLP officially announced the establishment of GLP Vietnam Development Partners I with a total investment of 1.1 billion USD. The fund receives commitment from a diverse group of investors from pension funds, national investment funds and insurance companies from Asia, Europe, North America and the Middle East.An expert said the cash flow from professional corporations into the logistics segment in Asia-Pacific is very strong and especially in South 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) over the next five years. Of this investment, part of it will be used to expand 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.In a recent report, the Organization for Economic Co-operation and Development (OECD) advised Vietnam to liberalize the logistics sector because barriers to entry for foreign investment are the main cause affecting the growth of the domestic logistics companies, leading to higher logistics costs. The OECD has called on Vietnam to gradually relax regulations on foreign ownership ratio (FOL) towards allowing foreign ownership of up to 100% in the medium and long term.

According to experts, the main opportunity for foreign companies to penetrate Vietnam’s logistics market comes from the structure of the industry. With mainly small companies and high logistic costs, 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 requirements for the infrastructure used such as warehouses and vehicles.Development prospectsThe prospects for Vietnam’s economic development will create a strong momentum for the logistics service industry to develop based on the world and Vietnamese economy having a strong recovery supported by economic stimulus policies.Vietnam is integrating deeply with the world economy, taking advantage of 15 ongoing FTAs, especially CPTTP, EVFTA and RCEP, promoting high import-export growth along with the recovery of foreign investment capital flows. This is an opportunity for logistics service providers to expand their markets and cooperate internationally.Digital transformation is progressing strongly. Vietnam is one of the countries with the highest e-commerce growth in Southeast Asia, thereby creating conditions for e-logistic development.”Green” logistics will lead the transformation of supply chains. The priorities in the logistics sector will be concretized by the use of electric vehicles and solar energy, biodegradable packaging, environmentally-friendly warehouses and reduced carbon emissions. Eco-friendly smart supply chain planning will play an important role.Mai Lan

Rising logistic costs are hindering exports, putting firms at risk.

Foreign investors have increased their capital in the Vietnamese logistics market to seize upon development opportunities after the COVID-19 pandemic, according to industry experts.

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