Gemadept Logistics claims no fears over foreign rivals

Pham Hong Hai, director of Gemadept Logistics, explained to VIR what market changes were expected from the move.

What is your opinion on competition in Vietnam’s logistics market in the coming time?

Competition will be fiercer as foreign third-party logistics (3PL) providers are now allowed to offer all services. But domestic businesses with good foundations will see new opportunities to co-operate and develop.

Do you mean to say that domestic firms will partner up with foreign logistics providers?

In fact, foreign logistics firms have been active in Vietnam for quite some time through joint ventures with local partners, but foreign ownership was capped at 49 per cent. Now that the market is open, many foreign firms will seek a majority position and they have the driving force of all their know-how, technology, capital advantages and experience. Although domestic firms do have their own strengths such as customer and client networks, infrastructure and already established services throughout the entire supply chain. Both foreign and domestic firms can co-operate to maximise these exclusive strengths.

With such a long history of co-operation, do you think foreign firms will move into opening their own subsidiaries here?

Yes, they have long co-operated, but with the market now totally open, many foreign firms want a majority stake in their joint ventures. Foreign logistics firms are setting up subsidiaries here and I believe they will continue to expand their investments and operations to other areas such as pharmaceuticals, chemicals-cosmetics, fashion, high-technology and auto parts.

How many companies in Vietnam are currently providing logistics services?

According to the Vietnam Logistics Business Association, Vietnam is home to over 1,000 logistics service providers. However, there are very few big domestic businesses while all the major foreign 3PL players are present such as DHL (Holland), Toll Logistics (Australia), Schenker (Germany), Damco (Denmark) and Nippon (Japan).

What is your assessment of the market’s potential?

It has huge potential. When the economy recovers and consumption increases, the demand for transportation and distribution of goods will also increase. Meanwhile, more and more producers want to specialise their operations. They want to focus on production and sales, so they tend to transfer other operations such as distribution and transport to logistics companies.

Is Gemadept afraid to compete?

Gemadept has carefully prepared its human resources and has the necessary technology and infrastructure to compete with our foreign rivals. We have invested in software to manage our warehouses and transportation and we carefully monitor goods. This year we will expand our operations in the north and central regions. Several major foreign and domestic retailers are our customers, including Masan, Vinamilk, Kinh Do, Vinh Hao, P&G, Sabic and Sharp.

Logistics and managing seaports are our core areas of business, with the former accounting for 67.4 per cent of the company’s total revenues and 33.3 per cent of total profits, while the latter accounts for the rest. These percentages are changing as our work with seaports has started bringing in bigger revenues and profits.