Logistics is one of the industries in Vietnam which offer a lot of business opportunities. With the development of the economy and high export growth, logistics has become more and more attractive because this sector in Vietnam is still fragmented, not capable of meeting the increasing demand of the market.

Drawbacks

There is a disparity in investment in transportation networks and between types of transport. In particular, the expressway network is seriously imbalanced between the North and the South. National Highway 1 has only two lanes with the speed of 50km / hour and are often congested. The cost of transporting a container of agricultural goods such as watermelon and dragon fruit accounts for over 10-15% of the value of the goods.

Along the central region, the herringbone crossroads are not commensurate with the potential for agricultural transportation from Central Highlands and Cambodia to industrial processing zones and seaports.

The railway system is extremely outdated and no new lines have been opened for many decades. The cost of rail transport in Vietnam per ton / km is much higher than that in the US, where a train can transport 40 containers (double-stacked).

There is always traffic jam right in the economic center of the country, Ho Chi Minh City and the Southeast, which makes the logistics cost of a container from the factory in Binh Duong Province to the seaport (FOB) higher than the cost of transporting containers from Vietnam to Singapore.

This is an extremely huge waste but also a potential investment opportunity.

Improvements

Vietnam’s logistics industry has recently welcomed a wave of investment from start-ups. Two-way transport via digitized technology has created a significant cost reduction because one-way empty vehicles are now loaded with goods upon return. There has also been an increase of 30% in income of truck service providers.

The boom in e-commerce also creates favorable environment for retail-connected logistics.  There are a lot of private forwarding centers located evenly across the provinces, and several payment applications have been introduced.

Currently, it is estimated that 80% of the market share of import and export transportation belongs to foreign corporations. Since the bankruptcy of Vinashin and Vinaline, the development of logistics and ocean logistics has completely been under control of foreign businesses.

Opportunities

At the end of 2020, there was a huge shortage of empty containers which greatly increased costs and slowed delivery progress for the entire commodity export system. This might be an opportunity for automobile engineering enterprises.

Vietnam’s import-export industry has been operating for more than 30 years, however, import-export businesses still follow the safest methods such as CIF (importing) and FOB (exporting). Therefore, foreign investors still have opportunities in shipping costs, insurance fees, and many other high value-added services.

In summary, logistics is one of the industries in Vietnam that offer a lot of business opportunities. With the development of the economy and high export growth, logistics has become more and more attractive because this sector in Vietnam is still fragmented, not capable of meeting the increasing demand of the market.

Alice Hoang Thao – VietnamCredit