American investors eyeing Vietnam's logistics sector

At the Vietnam-United States Trade Forum in Ho Chi Minh City in mid-November, Susan Burns, US Consul-General in Ho Chi Minh City, said that logistics is one of three sectors in Vietnam in which US businesses see great investment opportunities, following clean energy and health.

Burns pointed out that with strong financial potential and an understanding of US regulations, businesses that decide to invest in logistics in Vietnam have many advantages over domestic groups, with most of Vietnam’s businesses in the sector small- and medium-sized.

For instance, the US Federal Maritime Commission’s regulations on container shipping to the US are strict. Logistics businesses for the US need to research carefully regulations and operate high professionally to prevent risks of taxes, fees, and penalties at the place of delivery as well as transshipment. Therefore, US businesses that invest in logistics in Vietnam will have many advantages in transporting goods from Vietnam.

US-Vietnam bilateral trade reached nearly $113 billion in 2021, and the result is expected to be higher in 2022. Vietnam has become a significant link in the global supply chain, playing an important role in the US economy. Vietnam is currently the eighth-largest export market for US agricultural products, while the US is Vietnam's largest export market for agricultural products.

Under Vietnam's service sector commitments to the World Trade Organization, Vietnam has opened certain types of logistic services for foreign investors, previously in some cases with restrictions. For example, foreign investors can establish a 100 per cent foreign-owned company in some stages of logistics in Vietnam such as warehousing service, freight agency, and delivery services. Therefore, these are considered favourable conditions for foreign enterprises to invest in logistics in Vietnam.

A report on the emerging market logistics index released by Agility in February this year ranked the Vietnamese logistics market at 11th out of 50 emerging logistics markets globally. The annual growth rate in the period 2022-2023 of the Vietnamese logistics market is forecast to reach 5.5 per cent.

According to the World Bank East Asia and Pacific Economic Update for October, Vietnam's economy is expected to grow by 7.2 per cent this year, on the back of a rebound in domestic demand and solid performance by export-oriented manufacturing. The positive growth rate is also a factor attracting foreign investors to Vietnam's logistics sector.

With investment opportunities widening in logistics, some US players in the sector have expressed interest in penetrating the Vietnamese market. In September, Charles R Kaye, director general of US-based Warburg Pincus, had a working meeting with leaders of Binh Duong province to discuss the investment plan for a cross-border e-commerce project in the southern province.

Accordingly, Warburg Pincus and its joint venture partner Becamex IDC plan to build a 75-hectare cross-border e-commerce centre, which includes high-tech factories, warehouses for air freight, cross-border e-commerce goods, bonded warehouses, and so on. At the meeting, Kaye expressed his hope that Binh Duong authorities would create favourable conditions for the group to implement soon the project, which is considered creating a highlight to attract investment in the province.

After that, Binh Duong Department of Industry and Trade worked with World Trade Center Tacoma to co-chair a trade promotion conference in logistics at the end of October. The conference was held in the form of offline and online, seeing with the active participation of many enterprises from the two countries and industries’ associations in the province.

The Vietnam Logistics Business Association showed the growth rate of the industry in the domestic market in recent years has reached about 14-16 per cent with a scale of $40-42 billion per year. Currently, in the field of transportation, warehousing, postal services, and delivery, Vietnam's logistics market is attracting more than 30,000 enterprises. Notably, there are 30 transnational logistics service providers operating in Vietnam, such as DHL, FedEx, Maersk, Maersk Logistics, and APL Logistics.

The Vietnamese agricultural sector is on the radar of many Danish investors wishing to implement their fresh initiatives in the Southeast Asian market.

The logistics industry plays a key role in Vietnam’s socioeconomic development. At present, over 30,000 enterprises are providing logistics services including about 4,000 logistics service providers domestically and overseas. About 97 per cent are small- and medium-sized enterprises.

Around 17 Indian companies have joined the business matching event with 70 Vietnamese companies to find partnership opportunities in the engineering sector.

Real estate businesses are struggling to manage, with capital mobilisation channels narrowing, while businesses are operating in moderation, cutting investment, and waiting for policy easing.