Vietnam’s logistics industry is one of the fastest growing sectors in the world, with a growth rate of 14-16% per year in recent years. However, to promote investment in this sector, Vietnam needs to pay attention to a number of issues.
Vietnam’s logistics industry is one of the fastest growing sectors in the world, with a growth rate of 14-16% per year in recent years. However, to promote investment in this sector, Vietnam needs to pay attention to a number of issues.
 |
| Mr. Thomas Zagler, Partner in Vietnam of Asian Insiders Company |
Promising logistics market
Experts predict that the logistics industry could account for up to 20% of Vietnam’s GDP by 2050, making it one of the most attractive sectors for international investment. Many trends are driving this growth, and understanding these drivers is essential for foreign businesses looking to tap into Vietnam’s promising logistics market.
According to a report by Mordor Intelligence, the logistics market in Vietnam is estimated to be worth around $45.2 billion in 2023 and is expected to grow to over $65 billion by the end of the decade. This rapid growth is attracting foreign businesses, especially those looking to invest in Asia.
E-commerce has become the main driver of the logistics boom. The five largest online retail platforms in Vietnam, including Shopee, Lazada, Tiki, Sendo and TikTok Shop, had a total revenue of 2.79 billion USD in the first quarter of 2024, increasing to 3.3 billion USD in the second quarter of 2024.
It is estimated that more than 750 million products were purchased through e-commerce platforms in the first 3 months of 2024. The increase in online shopping has created a huge demand for logistics services, from storage, management, to transporting goods to consumers.
Notably, the growth of e-commerce is no longer limited to big cities, with rural areas also witnessing a sharp increase in online shopping. By 2026, Vietnam is expected to have 67 million smartphone users, further increasing the demand for logistics services nationwide. With this shift, online retailers are increasingly targeting customers in rural areas, making logistics an indispensable factor in the Vietnamese economy.
Vietnam has many strategic advantages that make it an attractive logistics hub for foreign investors. First, Vietnam’s position in the ASEAN Economic Community allows businesses to access a large regional market. Vietnam has also signed many important free trade agreements (FTAs). In particular, Vietnam is one of two ASEAN countries that has an FTA with the European Union, bringing special opportunities for businesses.
Furthermore, Vietnam has relatively low business operating costs. According to TMX Consulting, Vietnam has the second lowest warehouse operating costs in Southeast Asia, which is attractive to foreign companies looking to expand logistics operations in the Vietnamese market.
 |
| Vietnam's logistics industry is expected to account for up to 20% of GDP by 2050. |
Foreign investors' interest in logistics
Warehousing is a key segment attracting the attention of foreign investors in Vietnam’s logistics sector. FiinGroup’s research shows that international developers currently control nearly three-quarters of Vietnam’s leasable warehouse space. Major players include Singapore’s Mapletree, Warburg Pincus-backed BW Industrial, and GLP Capital’s SEA Logistics Partners. These companies have leveraged their experience in international logistics and warehousing to develop their systems in the Vietnamese market, meeting the growing demand for storage.
The warehousing sector was initially less competitive due to the high capital investment required. However, more and more foreign developers are entering the market as they see the growing demand for warehouse space from e-commerce companies, manufacturers and outsourced logistics service providers.
In addition to warehousing, outsourced logistics services are also attracting the attention of foreign investors. Two types of businesses that are particularly popular are third-party logistics (3PL) and fourth-party logistics (4PL).
A 3PL company takes on one or more specific tasks in the supply chain process, such as transportation or storage. Meanwhile, a 4PL company manages the entire logistics operation for its customers. Although 3PL services are very popular in Vietnam, many businesses are turning to 4PL providers for a more comprehensive and efficient logistics solution.
Investment opportunities in cold chain logistics
One of the most potential areas for foreign investors is the development of cold supply chains, which is an important factor in exporting Vietnam's main products such as fruits, vegetables, seafood and pharmaceuticals. Although Vietnam exports a lot of agricultural products, cold supply chain logistics is still underdeveloped, so the investment potential in this area is very open.
Currently, the demand for cold storage facilities and cold transport services is urgent. Cold chain logistics in Vietnam still faces little competition, but it is also full of challenges. Building cold storage requires much higher costs than traditional warehouse systems. The cost of building cold storage can be three times higher, in addition, these facilities have a shorter lifespan and are more complicated to operate, which makes some investors hesitant. However, the potential for high profits in this field still makes it an attractive option for companies willing to invest.
Increasing Vietnam's attractiveness to foreign investors
Vietnam’s appeal to foreign investors in the logistics sector could be further enhanced if it focused on a few key areas. First and foremost, improving the country’s infrastructure is crucial. While Vietnam has made significant progress in building highways and upgrading seaports, further development is needed to ensure seamless connectivity across the country.
Reports of congestion at some ports and airports indicate that Vietnam’s infrastructure needs to be further developed to meet growing logistics demands. Ensuring the free flow of goods across all regions of the country will be especially important as e-commerce continues to expand from major cities to rural areas.
Recognizing the importance of logistics, the Vietnamese Government has implemented many solutions to address bottlenecks in the supply chain. Resolution No. 163/2022/NQ-CP on promoting the synchronous implementation of key tasks and solutions to enhance competitiveness and develop Vietnam's logistics services has required relevant ministries and sectors to reduce costs and remove obstacles in cross-border transportation. The Ministry of Transport is making efforts to improve multimodal links, including the railway and road systems, which are important factors for the development of Vietnam's transport industry.
Removing legal barriers towards sustainable logistics
Reducing regulatory barriers is also important to encourage foreign investment. Decree 163/2017/ND-CP regulating logistics services is a step in the right direction, but more needs to be done to simplify procedures and regulations for logistics companies.
In addition, sustainability and the development of green logistics projects are becoming an area of interest for foreign investors. International companies are aiming for sustainable development and they are looking to countries like Vietnam to provide solutions. Demand for warehouses equipped with renewable energy sources and infrastructure for electric vehicles is expected to increase in the coming years.
Finally, Vietnam's logistics industry is facing a shortage of skilled labor, especially in senior positions.
Prospects
Warehousing will continue to be a key area of interest for foreign investors in the coming years, with demand for space expected to increase significantly. E-commerce could grow by as much as 30% annually by the end of the decade, increasing demand for logistics services.
However, the rapid growth of the warehouse system also poses the risk of oversupply, which could negatively affect rental prices. Although this is not a concern at present, businesses in the industry should closely monitor the situation to avoid market imbalance.
Apart from warehousing, other specialized areas such as cold chain logistics also open up untapped potential for investors. Companies with expertise in supply chain optimization and efficiency-enhancing technology will be on the lookout for in the coming years.
Meanwhile, foreign investors are likely to shy away from highly competitive segments such as last-mile delivery, where declining margins have caused some companies to back down. While a few foreign companies have entered the space, many are taking a wait-and-see approach, betting on long-term success despite short-term challenges.
Vietnam’s logistics sector holds great potential for foreign investors, but to tap into these opportunities, a number of challenges need to be overcome. Infrastructure development, improved regulation and a focus on sustainability will be key to attracting further investment in the coming years. For investors with a long-term vision, Vietnam’s logistics market can see significant growth and significant returns in the future.
Source: https://baodautu.vn/logistics-viet-nam-hap-dan-nha-dau-tu-nuoc-ngoai-d228688.html
Comment (0)