For many years, AEON has become an effective “export” channel for Vietnam agricultural produce into Japanese supermarkets. Mr. Shiotani Yuichiro, CEO of AEON Vietnam, shared that Vietnam’s mangos are not really competitive in the global market due to the nearly 20% higher cost compared with Thailand and Philippines products. This is caused by the huge logistics costs in Vietnam, which has also been a painstaking problem for the Vietnamese garment industry.
Doors wide-opened for EU investors
Not only does high logistics cost influence “made in Vietnam” commodities’ competitive advantages, but it has also become a barrier for enterprises when intruding into high-value markets. However, the Vietnamese logistics industry is granted a number of opportunities thanks to EU – Vietnam Free Trade Agreement (EVFTA), which is expected to come into force from August 1st, 2020 and will be followed by a great influx of investments from European companies.
According to Mr. Tobias Gruemmer, Maersk Area Head of Operations in Vietnam, the Vietnam Government has recently imposed more policies to motive imports, and domestic manufacture, which has led to a shift in the supply chain. This is definitely a golden time for logistics field to have more breakthroughs based on their internal and external force.
With EVFTA, Vietnam will welcome more EU investors to co-ordinate in providing logistics services, marine transportation in the domestic market, involving marine enterprises, cargo/container handling and warehousing services.
Mr. Nguyễn Cảnh Cường, Trade Counsellor in Britain, deemed the current times as a great opportunity for Vietnam logistics companies to consolidate cooperation and raise more funds from multi-national companies, modern world-class carriers and therefore, enhance their share on the global logistics market.
As said by a representative of the Vietnam Logistics Business Association (VLA), the annual growth rate of the logistics field in Vietnam has reached 14-16%, with the scale of USD 40-42 billion per year. There have been approximately 3000 local enterprises and 25 global companies in the domestic market, which accounts for 21-25% GDP. A noteworthy point is that 80% of the whole market share belongs to international enterprises.
Currently, 20 global companies present in Vietnam include: DHL, FedEx, Maersk Logistics, APL Logistics, CJ Logistics, KMTC Logistics…
M&A waves under COVID-19 pandemics
Merger and Acquisition activities in logistics field are forecast to significantly increase when EVFTA comes into effect. In 2019 particularly, there have been many M&A projects equivalent to millions of dollar in value. Symphony International Holdings (Singapore) has bought $42.6 million stocks owned by Singapore Post in ITL Corp. Another one is $40 million shares for 10% in Gemadept bought by SSJ Consulting. CRE – a huge group in Japan, also invested $6.2 million into Sembcorp Infra Services (SIS) via its subsidiary – CRE Asia.
Mr. Nguyễn Đức Tài, the Chairman of Board of Mobile World Group (MWG), shared that the company was interested in acquiring 20-30% of the total share at some enterprises in warehouses and transportation to improve their retailing supply chain. He believed that this was the most suitable time to buy stocks at the best price.
In fact, Vietnamese logistics companies are encountered with many challenges from COVID-19 epidemics. Compared with the same period last year, about 15% of all companies have been subject to 1 50% reduction in total revenues and over 50% have to cut down on activities both domestically and internationally. In certain companies, the context is getting so negative that they have to lay off half of their human resources and are in a serious need of monetary fund to continue operations.
Meanwhile, to make a good use of the EVFTA, Mr. Trần Thanh Hải, Deputy Director of Import and Export Department, proposed the government to continue the process of perfecting the legal frameworks for logistics field, suitable for the current development trend of Vietnam and the world; improve all the administrative procedures, national single-window system, ASEAN single window, digitalization on the customs declaration, and application of e-commerce,…
On the enterprises’ perspective, a representative from Bee Logistics showed their desire towards the governmental support by encouraging Vietnamese people to use “Made in Vietnam” products, and facilitate domestic logistics firms to partake in large bidding projects, instead of prioritizing multi-national or FDI companies.
As said by Mr. Julien Brun, Managing Partner of CEL Consulting, accompanied by a trend of shifting supply chain out of China, the logistics market has experienced drastic changes. Especially, the US government is under discussion about establishing the Economic Prosperity Network, including Japan, Korea, New Zealand, India and Vietnam. This new potential market may involve certain requirements related to reliable supply chains, highly innovated products and a transparent legal framework about commodities’ origins.
Edited by: Dandelion