Vietnam’s logistics sector has had a promising start in 2021, ranking among the world’s top ten emerging logistics markets in the 2021 Emerging Markets Logistics Index with a score of 5.67 out of 10. It jumped three spots to eighth in this year’s global index of emerging logistics markets after establishing itself as a popular manufacturing hub, particularly with the recent mass relocation of manufacturing out of China.
The logistics industry is expected to grow in 2021 as a result of global recovery.
According to the most recent survey conducted by the Vietnam Logistics Business Association, there are approximately 30,000 logistics companies in the country, with 4,000 of them being foreign-owned. Furthermore, the industry has been growing at a rate of 12-14 percent per year and is now worth more than $40 billion.
According to SSI Securities, the seaport and logistics industry’s growth prospects are positive in 2021, with the industry expected to grow significantly due to the possibility of global trade recovery this year when the COVID-19 vaccine is administered globally. The securities firm anticipates a 10% increase in revenue for the seaport and logistics industry in 2021. The development of Cai Mep-Th Vai and Lach Huyen seaports, for example, would attract large ships to Vietnam rather than Singapore and Hong Kong.
This year will also see Gemalink Port, Vietnam’s largest deep seaport, use at least 80% of its designed capacity, with the goal of reaching its full capacity of 1.5 million TEU by 2022. Gemalink, which began construction in February 2019, is the largest seaport in the Cai Mep-Thi Vai complex, with a total investment of $520 million, and is set to become one of the world’s 19 largest deep seaports, capable of receiving the world’s largest ships (up to 200,000 DWT) today.
Despite being affected by the pandemic last year, the industry was optimistic about the country’s trade growth due to the positive effects of recent free trade agreements (FTAs), such as the EU-Vietnam FTA (EVFTA) and the Regional Comprehensive Economic Partnership (RCEP) (RCEP). Furthermore, expectations for investment inflows triggered by the global production shift away from China are another factor instilling confidence in the sector’s recovery.
According to General Statistics Office data, Vietnam’s total import-export value reached $543.9 billion in 2020, up 5.1% year on year. According to SSI, Vietnam’s import-export value and total goods via seaports will increase by 10% in 2021, owing to global recovery, FTAs, and a global production shift away from China.
The demand for warehousing services is increasing.
This expectation fueled demand for logistics infrastructure as well. For example, the total warehouse area has increased significantly in recent years, and prices have increased by 5-10% year on year. According to Savills Vietnam, the average warehouse rental price in the North and South Economic Zones in 2020 was $4.1 per square meter per month and $4.4 per square meter per month, respectively.
As supply in Ho Chi Minh City and Binh Duong province is limited, new warehousing and distribution center projects are spreading to Long An and Dong Nai. JD.com, for example, has invested in a new 10-hectare warehouse project in the Duc Hoa district of Long An, while Cianiao Network (Alibaba logistics provider) has a new 15-hectare project in the Ben Luc district. Last year, LOGOS Property announced its entry into the market with a $350 million logistics development joint venture. In addition, the Australian developer has invested in its own warehousing project in Long An’s Can Giuoc District.
Huu Thanh Industrial Park is located in Duc Hoa District, Long An province, and has an area of 524.14ha, as well as 395.41ha of industrial land for lease that is under construction and ready to attract investment. With a strategic location adjacent to Ho Chi Minh City and a well-connected traffic system, the delivery speed to Ho Chi Minh City can be shortened.
Labor costs, combined with extremely low energy costs, make Vietnam the cheapest location in the report’s sample (54 markets across 21 countries). Because of its low costs, Vietnam is very appealing to multinational corporations looking to establish a presence in the country. “The government has been investing heavily in all manner of infrastructure while promoting industrial clusters to attract businesses higher up the value chain,” said Troy Griffiths, deputy managing director of Savills Vietnam. To ensure healthy regional competition, high levels of corporate taxation relief are also available.”
