Tie-ups breed confidence in logistics arena

Ditlev Blicher, managing director at Maersk Asia-Pacific, visited Vietnam last week – a few months after the Danish logistics company announced a merger with Hong Kong-based LF Logistics worth $3.6 billion.

“The groundbreaking partnership between these two logistics giants reinforces the combined power of customer-centric and people-first values that both Maersk and LF Logistics were founded on,” said Blicher. “We view the merger with LF Logistics as an important move to strengthen end-to-end logistics solutions between Vietnam and the world.”

Maersk in Asia has historically focused on ocean transportation and related logistics services out of Asia, transporting and managing goods for consumer markets in the West and beyond. “With the addition of LF Logistics, Maersk gains unique capabilities to serve Asia’s important and fast-growing consumer markets. Furthermore, LF Logistics’ expertise in omnichannel fulfilment positions us well in the global e-commerce market,” he added.

The merger comes at a crucial time for the logistics sector. The impact of the pandemic and global inflation has been especially felt in Asia-Pacific, but Maersk has an optimistic outlook on industry growth, especially in Vietnam, where manufacturing and exports are major economic driving forces.

Last year, Switzerland’s global transport and logistics company Kuehne+Nagel made one of the biggest moves, entering into a $1.5 billion agreement to acquire Apex International Corporation, one of Asia’s top freight forwarders. Apex International belongs to MBK Partners, which has an affiliate company in Vietnam called Apex Logistics.

Vietnam is attempting to promote the raising of capital from the private sector for infrastructure investment through the transfer of the right to exploit some infrastructure, and thereby attracting many investors with deals estimated up to billions of US dollars.

There have been some notable deals in recent years. ITL Corp increased to nearly 97 per cent its ownership in Sotrans Group, which operates in warehousing as well as port and international cargo transportation, in 2020. The value of the deal was not disclosed.

The previous year, Sumitomo Group, together with logistics company Suzuyo and a Japanese public-private fund, spent about $37 million to buy 10 per cent of capital in Gemadept JSC. In 2018, Mapletree Logistics Trust spent more than $31 million to acquire warehouses belonging to Unilever. Also that year, CRE through its subsidiary CRE Asia invested $6.2 million in Sembcorp Infra Services in a stock purchase agreement.

According to the Ministry of Industry and Trade, with the industry mostly comprising small- and medium-sized enterprises, the presence of big foreign names is expected to help improve capital, human resources, and technology for domestic groups.

According to the Vietnam Logistics Business Association, the growth rate of the industry lately in Vietnam has reached about 14-16 per year, with a scale of about $40-42 billion per year.

In terms of related activities in the logistics industry, foreign businesses have quickly taken advantage of the existing network, combining customer sources and domestic operating experience. This helps them reduce the cost of entering the market much compared to starting from scratch.

Participating in the logistics market are about 3,000 domestic enterprises and 25 global forwarding groups in many forms. Currently, 30 transnational logistics service providers are operating in Vietnam such as DHL, FedEx, Maersk, APL, and KMTC Logistics.

According to the Agility Emerging Markets Logistics Index 2022, Vietnam ranks 11th out of 50 emerging logistics markets globally, thanks to the strong transformation of businesses in providing and using such services.

In terms of Agility’s International Logistics Opportunities ranking, Vietnam ranks fourth. The position “is cemented by Vietnam’s increasing popularity as a manufacturing destination for producers seeking to diversify sourcing options and reduce dependency on the Chinese market,” the Agility report said.

With Vietnam’s logistics industry estimated at $80 billion and with an increase of 14-16 per cent annually, the adoption of digital transformation and automation is expected to drive more efficiency in the sector.

Located in the Vietnam-Singapore Industrial Park in Quang Ngai province (VSIP Quang Ngai), Sembcorp Logistics Park is the first ready-built warehouse to provide modern warehousing spaces, promoting operational efficiency and supply chain resilience.

T&Y SuperPort Vinh Phuc – a joint venture between Singapore's YCH Group and Vietnam's T&T Group – signed an MoU with Vietnam Maritime Corporation (VIMC) on November 26 as a partner for sea connectivity for Vietnam SuperPort – a multimodal smart logistics project.