Logistics FDI rises in the face of retail expansion

Vietnam’s appeal as a destination for foreign logistics providers is rising on the back of its expanding retail market.

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Several foreign players are entering the market this year, mostly in cooperation with major retailers they already work with in other markets, according to Julien Brun, managing partner of CEL Consulting.

For example, major French retailer AuChan, already very successful in the EU, Russia, and China, brought in FM logistics, a French third-party logistics firm that serves the company globally.

According to CEL Consulting, the wave of investment and expansion in the logistics business in Vietnam has just started. Customers are becoming more mature and demanding as the retail market grows, and competition is changing from being price-driven to more solutions-driven – with the advantage going to firms that can offer more integrated services.

Legislation is slated to favour foreign direct investment (FDI) in logistics, and the volume of business has started to become more interesting to major players, which justifies investment in transport or construction.

In light of this trend, foreign logistics firms have strengthened their presence to capitalise on the growing demand and to serve local customers better. UPS has recently enhanced its services in 10 provinces across central and southern Vietnam, extending its service enhancement programme to 19 cities and provinces this year.

Daryl Tay, managing director of UPS Vietnam, said that UPS already covers all of Vietnam and is able to pick up and deliver shipments to every address in the country. UPS works directly in 95% of cities and provinces, with the remaining 5% covered by partnered agents.

According to Tay, the 19 cities and provinces in which UPS announced service enhancements this year are the locations that see high demand, such as Ba Ria-Vung Tau, Binh Duong, Dong Nai, Quang Ngai, and the surrounding areas of Vietnam’s two biggest cities, Hanoi and Ho Chi Minh City.

With new service enhancements, UPS has reduced transit times for export and import shipments moving within Asia from two days to one, and improved shipment times from Europe from three days to two, he went on to say.

In addition, the cut-off times for pick-up have been extended by up to three hours. This service enhancement is part of UPS’ long-term strategy to provide local small and medium-sized businesses with greater access to global trade.

“The Vietnamese government has expressed a commitment to pursue the 6.7% GDP growth target. Positive discussions are taking place around easing inter- and intra-regional trade with the Regional Comprehensive Economic Partnership (RCEP) and the European Union-Vietnam Free Trade Agreement (EVFTA). We remain confident that trade will continue to flourish with Vietnam’s growing middle class and shifts in manufacturing,” Tay added.

Meanwhile, FedEx Trade Network has launched its first wholly-owned freight forwarding office in Ho Chi Minh City. Udo Lange, the firm’s executive vice president and COO, said that freight forwarding is on the rise in Vietnam, expected to grow to a US$1.4 billion business by 2019. “This projected growth provides tremendous opportunity for FedEx Trade Networks and our customers seeking to conduct business in Vietnam,” he said.

CJ Logistics has recently announced its acquisition of two shipping and logistics subsidiaries under Gemadept Corp. The logistics arm of CJ Group said in a regulatory filing that it has bought a 50.9% stake each in Gemadept Logistics Holding and Gemadept Shipping Holding.

Meanwhile, Thailand’s JWD Infologistics Pcl is looking to enter Vietnam by acquiring a majority stake in a local freight forwarding company early next year. The move is part of its plans to expand in the region, to capitalise on growing demand and to stimulate growth.

VIR

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