EU logistics centre anticipates EVFTA

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Herfurth, one of the world’s leading shipping, logistics, and forwarding firms, last week signed a Memorandum of Understanding (MoU) with Vinalines on establishing the logistics centre. The centre – called Vietnam House – will be located at the port of Antwerp in Flanders, the second-largest seaport and the largest conventional cargo port in Europe. Vietnam House will be a point of entry into Europe for further distribution into the continent and the world.

“The project will help improve the competitiveness of goods produced in Vietnam, as it will offer competitive rates and value-added services. It will also have incentives for firms in Vietnam when they export and import goods to Europe. Instead of being treated [the same as any foreign export], Vietnamese goods using logistics and warehousing services at the centre will enjoy tax reduction, improved trading conditions, customs facilitation, and other incentives,” Le Quang Trung, director of Vinalines’ Business and International Cooperation Department, told VIR.

The Herfurth-Vinalines centre project comes amid the growth of 15-18 per cent in the import-export of commodities between Vietnam and EU countries over the past several years. The EU-Vietnam Free Trade Agreement, which was signed in December 2015 and is expected to take effect in 2018, should serve to increase the bilateral trade between Vietnam and the continent. It also better positions Vietnam to get direct access to a market that accounts for around 22 per cent of the world GDP, 25 per cent of overall export value, 21 per cent of the import value, and 40 per cent of the global foreign direct investment sum.

There have been other Vietnamese attempts at setting up warehousing centres overseas. However, they specialise in just retail business, and suffer from a lack of local and international links. Vietnamese goods exported to the EU as of now are dispersed – which prevents them from enjoying any competitive costs and service advantages. As it stands, most Vietnamese import cargoes are shipped on an FOB (free on board) basis, with the export shipped on a CIF (cost, insurance, and freight) basis. This reflects the fact that Vietnamese importers and exporters do not have much control over transportation of their cargo.

As a focal distribution point of Vietnamese goods to the EU, Vietnam House will take further advantage of integrated logistics solutions and supply chain management. It will help facilitate import and export between Vietnam and the EU with the involvement of a wide range of foreign shipping lines, cargo owners, and exporters and importers operating in Vietnam.

“This facility, as part of Vinalines’ overseas logistics expansion, is the combination of resources from the Vietnamese side, with Vinalines and its partners – including Vinafood, Vinatex, and Lefaso – and the European side, with Herfurth’s Antwerp Port [operation] as well as existing facilities to save investment,” Trung said.

To ensure the success of the project, Vinalines must seek the support of shipping lines, cargo owners, and other partners.

Mitsui O.S.K. Lines, a leading Japanese transportation company which operates many direct routes to Europe, is one of the project’s early supporters.

“The project could be successful if the key points are [there]. What are the advantages you can bring to Vietnamese exporters and importers, and how can you help Vietnamese exporters promote their cargoes in Europe?,” said Nguyen Dinh Tri, general manager of northern branches at Mitsui O.S.K. Lines (Vietnam) Ltd.

Local trade associations are also intrigued by the possibilities Vietnam House will offer. Nguyen Tuong, deputy general secretary and head of the northern representative office of the Vietnam Logistics Business Association (VLA), said that the project is in line with VLA’s proposals to place some logistics centres abroad, particularly in Europe. 45 per cent of VLA’s logistics providers do business with Europe.

But Tuong also sees some challenges. He said, “Vinalines and Herfurth should consider some issues. The first is competitiveness in this area, as nearly 800 European distribution centres are located there, by well-known names such as Nike, Toyota, Honda, Volvo, and Samsonite. The other is how to get support from cargo owners, as the majority are importing on an FOB basis, and exporting on a CIF basis.”

According to Vinalines’ Trung, after signing the MoU, the two sides will work on the investment model for the project and capital investment for the Vinalines-Herfurth joint venture to operate the centre. The centre is slated to begin operation in the next eight months. After implementing this, Vinalines plans to establish similar logistics centres in Cuba, Myanmar, and Malaysia.