Opportunities for investors in Vietnam’s logistics landscape

Over the past 20 years, the industry has strongly developed in terms of quantity and quality in providing logistics services at home and internationally.

Nguyen Tuong - Senior adviser, Vietnam Logistics Business Association

Before the pandemic emerged, logistics performance was booming in Vietnam. According to the 2018 Logistics Performance Index compiled by the World Bank, Vietnam ranked 39 out of 160 countries and territories, an increase of 25 ranks against 2016 and third spot in ASEAN, after Singapore and Thailand.

However, the logistics industry still faces some weak points: the logistics equivalent to GDP of 16.8 per cent in 2020 is much higher compared with the global average of 10.7 per cent. In ASEAN, Vietnam is higher than Singapore (8.50 per cent), Malaysia (13 per cent), and Thailand (15.5 per cent). The country does not boast many powerful third- and fourth-party logistics groups, and the application of up-to-date science and technology in logistics services are not yet up to the requirements.

The country is calling for investment to further develop the logistics industry. They are gateway seaports in the three regions of the country; container ships development for intra-Asia and long-range services such as to America, Europe, and Australia on joint-venture modes or long-term credit arrangements; seafarer training development; and regional logistics hubs/centres.

Other projects inviting investors are cold chain storage and haulage, with priority for the Mekong Delta; digital transformation in logistics service projects; and merger arrangements to help local logistics providers expand services to new markets, particularly to nations with free trade agreements with Vietnam.

Vietnam has issued a legal framework to facilitate the development of the logistics industry. Decision No.221/QD-TTg from February 2021 set the goal that by 2025, the proportion of logistics services’ contribution to GDP will reach 5-6 per cent (it was 4-5 per cent in 2020), logistics service growth rate will hit 15-20 per cent (12-14 per cent in 2020), the logistics service outsourcing rate will move to 50-60 per cent (70 per cent in 2020), and logistics costs will remain around an equivalent of 16-20 per cent of GDP.

Moreover, the 13th National Party Congress stated the need for strong development of the service sector on the basis of the application of modern sci-tech achievements, especially higher value-added services. There also needs to be a focus on developing a number of service industries such as tourism, commerce, telecommunications, IT, transportation, logistics, technical services, legal consulting services, and other areas to increase the efficiency of logistics services.

Currently, foreign investors now may contribute capital, purchase stakes in an enterprise, or establish a joint venture or business cooperation contract upon provisions of concrete transport-related logistics services.

In operations of freight services using inland waterways or railways, foreign investors are allowed to set up an enterprise, contribute capital, or purchase shares in an enterprise with an overseas capital contribution not exceeding 49 per cent of the total legal capital.

In terms of road freight services, investment is carried out through the aforementioned forms or through a business cooperation contract, but with foreign capital contribution not exceeding 51 per cent of the total legal capital, and 100 per cent of drivers of the enterprise must be Vietnamese citizens. In air transport operations, the provisions of the Law on Civil Aviation and other related regulations shall apply.

Foreign investors may invest 100 per cent in storage and warehouse services, freight transport agency services, and express courier services.

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