Vietnam’s logistics industry looks bright despite headwinds

Alexer Yap, head of YCH Cambodia, Laos, Myanmar, and Vietnam said, “ASEAN’s economy is expected to grow slowly yet robustly amidst strong inflationary pressures and projected global economic downturns. Despite this, the outlook remains positive for the growth of the logistics industry in Vietnam, reinforced by the massive shift in manufacturing from China to Southeast Asia.”

In addition, Deputy Prime Minister Le Minh Khai recently signed Resolution No.163/NQ-CP to promote the simultaneous execution of important tasks and solutions for the logistics sector. Yap stressed that this is an encouraging move for the nation. Vietnam is experiencing exponential growth as a top-of-mind location in ASEAN to venture into, especially for the manufacturing sector due to its strategic location and low-cost labour. To support this growth, a push for infrastructure, systems, and processes is essential.

He added that this has to come from a top-down approach, exercising simultaneous implementation of regulations to develop the systems, structures, and infrastructure. From YCH Group’s perspective, the signing of Resolution No.163/NQ-CP is a welcoming piece of news to push Vietnam SuperPort to become the first-of-its-kind multimodal logistics infrastructure and ready to drive supply chain connectivity in the region. This will help Vietnam’s aspiration to stay competitive and boost the logistics industry in the country and beyond. Vietnam is at a sweet spot for logistics providers, as its strategic location makes it ideal for facilitating the cross border movement of goods.

Alexer Yap, head of YCH Cambodia, Laos, Myanmar, and Vietnam

Meanwhile, Jan Segers, general manager of Noatum Logistics Vietnam Co., Ltd., said that Vietnam is mainly a free on board market, so shippers and suppliers depend on demand from overseas where presently people are suffering or spending less due to inflation and recession. This is likely to last until the third quarter or even longer. Many of Noatum Logistics’ overseas customers have already postponed their orders or even cancelled them. The company has to look for new markets and products.

He believes that Vietnam can increase the competitiveness of its logistics as long as the congestion around the ports is resolved. Meanwhile, imposing extra costs like infrastructure tax will not boost competitiveness.

According to a global survey released by Germany’s Container xChange, businesses around the world deem Vietnam and India as attractive alternative locations for the diversification of their supply chains away from China this year. 67 per cent of respondents thought that Vietnam and India would emerge as functioning container shipping hubs this year and change the existing layout of the global transport industry.

More trade flows are emanating from these alternative manufacturing centres. Vietnam, for example, now hosts about 20 of Apple’s approximately 200 regional suppliers. It has also become the second-largest e-commerce market in Southeast Asia, after Indonesia. The e-commerce boom has created additional demand for the logistics sector.

In this context, global companies are keeping an eye on the expanding Vietnamese market. FedEx announced in December that it would assist Vietnamese companies in taking advantage of new chances for cross-border trade provided by the Regional Comprehensive Economic Partnership. DHL Express, a leader in global logistics, has spent $2.1 million to build a service centre in Hanoi, which marks another step in the company's continued commitment to facilitating international trade for Vietnam.

Yap from YCH said that Vietnam has a coastline of more than 3,000km that extends from the north to the southwest. Vietnam's geographical standing sees the country sharing borders with China, Cambodia, and Laos, establishing itself as an important logistics route between Indochina and the rest of the world.

“The strategic importance of Vietnam is evidenced by the exponential influx of foreign direct investment,” he said.

“As big manufacturing names start to search for alternatives to China, Vietnam has benefitted significantly from the likes of Apple, Samsung, Intel, and more. Many logistics and supply chain providers recognise this phenomenon and are looking to enter Vietnam to capture the growing demand for logistics and related services. YCH Group is the largest Singaporean investor, as well as the first and one of the largest foreign supply chain providers in Vietnam,” Yap concluded.