Logistics primed for Euro take-off

November 04, 2021 | 10:00
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While foreign investors are keeping an interest in Vietnamese logistics, the country is being urged to take more drastic action to solve existing problems in order to absorb more European investment in particular.
Logistics primed for Euro take-off
Logistics in Vietnam holds great prospects for investors. Photo: Shutterstock

Nick Reijmers, project manager at maritime giant Boskalis, said that Vietnam has seen increasing demand for logistical land close to ports. “A strong increase of foreign-invested enterprises relocating production, warehousing, and logistics to Vietnam leads to high demand for logistics areas and industrial parks around Ho Chi Minh City and Cai Mep-Thi Vai,” Reijmers said at last week’s Netherlands-Vietnam logistics webinar.

Boskalis is one of four businesses in an EU-Vietnam consortium to build Cai Mep Ha Logistics Centre and Downstream Port. The others are BESIX, Hateco, and iPEi.

“The Vietnamese government is currently considering awarding an investment license for the Cai Mep Ha Logistics Centre and Downstream Port project. The logistics park is expected to facilitate foreign investment. It is also the gateway for export from Vietnam’s southern economic zone to markets in the EU, the US, and the Middle East as an alternative to China,” Reijmers added.

Likewise, Royal Schiphol Group N.V. – an independent and commercial enterprise largely owned by the state of the Netherlands – has developed extensive airport investment and operation experience. It introduces innovations all around its airports and, with its strong expertise in airport logistics, Royal Schipol is also eyeing opportunities in Vietnam.

Jasper Hoes from the Port of Rotterdam and Adson Hofman from STC International also discussed with Vietnamese businesses the opportunities in the logistics sector during the webinar.

According to Nguyen Quang Trung, vice president of the Vietnam Maritime Corporation (VIMC), there are huge opportunities for businesses and international investors to invest in Vietnam’s logistics sector. The government in October announced a master plan for seaport development over the next 10 years with the development of related seaport logistics. Moreover, Vietnamese logistics firms are seeking technical, management, and financing cooperation with potential partners.

Trung told VIR, “The Netherlands has strong expertise in trade, technology, and logistics and many powerful Dutch companies are already operating in Vietnam. VIMC is seeking partners to develop inland container depots and in our future development strategy, we prefer international partners who have advantages in technical support, market development, business governance, and finance.”

According to the Ministry of Industry and Trade, Vietnam’s increasing trade, booming GDP, rising manufacturing, and e-commerce sectors have boosted demands for logistics services to meet the needs of transportation and goods storage among international manufacturers.

In addition, Vietnam has ratified and put into practice 15 free trade agreements, including one with the EU, that promise a positive impact on the growth of industrial manufacturing and international trade due to larger export market penetration. This growth potential should increase even further when the EU-Vietnam Investment Protection Agreement enters into force, once it has been ratified by each EU member state.

With the promising landscape, the local logistics industry is attractive to international companies, with mergers and acquisitions being a key trend now, focusing on trucking, warehouses, and the cold supply chain. Yet while the country has attracted some European investment in this field, investors from Southeast Asia, Japan, and South Korea still hold the upper hand.

Despite improvements in the legal framework on logistics, there are still many barriers to the development of trade as well as manufacturing and business activities. The two latest reports from the Organisation for Economic Cooperation and Development (OECD) on package delivery services and the logistics industry in Vietnam attributed the challenges in foreign investment in logistics to legal barriers.

According to the OECD, logistics is generally legalised as a conditional business, with foreign investment required to meet certain conditions with limitations. For instance, foreign investors need to seek approval for any mergers and acquisitions deals, as well as meet some requirements on economic demands. Besides that, currently foreign investors are not allowed to hold over 49 per cent of a listed company.

To lift the barriers to overseas investment attraction into the sector, the OECD recommends that Vietnam removes logistics from the list of conditional businesses.

Worse still, planning for logistics is another problem. Vietnam has been pivoting to encourage investment in the development and expansion of manufacturing in scale and number, while distribution, transportation, and consumption – the logistics segment for manufacturing to improve the value of goods and commodities – have yet to receive due attention.

Prof. Dang Dinh Dao from the National Economics University explained, “The imbalance between manufacturing and logistics happens in strategic planning and development policies in sectors and localities. This increases costs and leaves many segments of the huge population untapped.”

“In the development and expansion of national highways, expressways, and economic corridors, Vietnam has yet to attach due importance to connectivity infrastructure to link means of transport to increase efficiency,” Dao added. “In the short term, the government should complete logistics legal frameworks to create a favourable foundation for related activities, while revising and supplementing regulations in the laws on commerce and investment.”

Tran Thanh Hai - Deputy director, Agency of Foreign Trade, Ministry of Industry and Trade

In recent years, the Vietnamese logistics industry has had a high growth rate of 14-16 per cent. The number of logistics service businesses is currently about 30,000, including warehouse services, forwarding, and transportation. This is the result of the reform efforts of the Vietnamese government in improving the business and investment environment, institutional reform, simplifying administrative procedures, and enhancing trade, investment, and competitiveness.

In the development strategy of Vietnam’s logistics service industry to 2025, the government has identified six groups of tasks, including those on infrastructure development, service quality improvement, and human resource development.

The Netherlands is a true gateway to Europe as home to an abundance of European and regional distribution centres across a multitude of industries like agri-food, fashion, and medical technology. With world-class seaports, airports, and a modern land-transportation system, the Netherlands is considered a leader in European logistics with large and experienced enterprises in the sector.

With the potential of the Vietnamese market and the experience of the Dutch business community, I believe that this is a good opportunity to further promote the cooperation relationship between Vietnam and the Netherlands in the logistics service industry. Vietnam hopes to find a way to enhance the quality of human resources in logistics and maximise the potential of Vietnam’s transport system, especially in seaports, to promote international trade and favourable conditions for economic growth for both countries.

Pham Viet Anh - Vietnamese Ambassador to the Netherlands

After over one year of staying in Holland, I learned that the strength of the Netherlands in the logistics sector matches the current demand of Vietnam. I have already visited Royal Haskoning, Boskalis, Schiphol, Rotterdam, STC, and Naco and realised that logistics is a driver for all socioeconomic activities.

The Netherlands is in a strategic location, the gateway to Europe, and is consistently at the top of the World Bank’s Logistics Performance Index with its high capacity and efficiency, thanks to infrastructure and the labour force.

In addition, efficiency is a key characteristic of all Dutch solutions. In logistics, the strength of the Netherlands derives from holistic, integrated, and synchronous thinking. All solutions aim to harmonise, live with nature, and protect the living environment, thus, making them sustainable, economical, and optimal.

Dutch businesses have a warm relationship with Vietnam. Many large groups have been operating in Vietnam for more than 30 years, such as global technical consultants Royal Haskoning DHV Group, offshore management giant Royal Boskalis Group Westminster NV, the Netherlands Group of Maritime and Transport Schools, Damen Shipyards Corporation, and many more.

In the context that our country is continuing to promote the development of an export-oriented economy, the development of logistics to integrate the global supply chain and value chain is an inevitable need. We are in need of a comprehensive and synchronous logistics system like in the Netherlands, from planning to building large infrastructure projects.

We also need integrated services within major centres such as the Netherlands’s successful models, like airports and seaports, in order to serve all economic sectors. In short, Vietnam is like a piece of land waiting to be cultivated in the field of logistics, waiting for seeds from the Netherlands.

By Bich Thuy

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