Japan firms covet Vietnam’s logistics

Nippon Express Co., Japan’s largest international freight forwarder, plans to turn Nippon Express Vietnam, its joint venture established in Vietnam six years ago with local firm Transimex Saigon Corporation, into a wholly Japanese invested firm. This strategy is scheduled to complete in 2018.

This ambitious move reflects its confidence in the growth potential of the Vietnamese logistics market, especially because of the country’s strong export growth. Additionally, Vietnam’s logistics market is fully open due to the World Trade Organization’s (WTO) commitments allowing foreign logistics firms to set up wholly foreign-invested entities in Vietnam two years ago.

Following the trend, late last year, Japanese shipping company Nippon Yusen Kabushiki Kaisha (NYK) became a wholly owned subsidiary of NYK after buying 49 per cent of VOSA Group of Companies.

NYK confirmed after the deal that to be able to respond to the anticipated growth resulting from Vietnam’s accession into the WTO, NYK aimed to continue to expand its presence in Vietnam. The company currently plans to participate in a new port terminal project, establish a comprehensive logistics service network, and increase the number of Vietnamese crew members from the current number of around 180.

“Along with the increased volume of trade between Vietnam and Japan, many Japanese corporations are anticipated to penetrate the Vietnamese logistics market which would up the added value for shipments,” Nguyen Huu Hieu, general director of Nexus Group, an independent investment and merger and acquisition (M&A) advisory firm in Vietnam said.

The growing attraction from Japanese firms to enter the Vietnamese logistics market is cushioned by the fact that as of January 11, 2014, wholly foreign-invested enterprises are permitted to provide almost all types of logistic services in Vietnam subject to proper licensing.

The market has been more open to foreign investors, with various co-operation forms and levels in the three groups of services including principal logistic services, logistic services relating to transportation, and other related logistic services.

M&A in the logistics field is promising since the logistic market yields a high annual growth of 20 to 25 per cent thanks to the steadily rising retail and import-export sector value.

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