Bui Ta Hoang Vu, director of the Ho Chi Minh City Department of Industry and Trade, said investment in the logistics industry remains limited as a result of improper planning, adding that the logistics sector makes up only 8.6% of the southern city’s total Gross regional domestic product (GRDP).
From the perspective of retailers, Nguyen Anh Duc, general director of Saigon Union of Trading Cooperatives (Saigon Co.op), acknowledged that the proportion of logistics costs accounts for only 5% of the modern retail firm’s total revenue.
The expert also noted that logistics enterprises are being forced to consider merger and acquisition (M&A) plans in order to increase their scale in terms of human resources, capital, and management skills to cope with the increasingly tough competition.
This comes after a series of M&A deals in the logistics sector were recently unveiled, with Duong Minh Logistic receiving capital of US$15 million from an unnamed foreign investor during the first half of the year.
Similarly, after announcing the merger in late May, GoTo, Gojek, and Tokopedia said they would co-operate across three spheres, with priority being given to logistics and the nation being considered one of the major markets.
Previously, Indo Tran Logistics Corporation (ITL Corp) also acquired the South Logistics Joint Stock Company (Sotrans Group), which has since increased the ownership rate of ITL Corp. at Sotrans Group to roughly 97%.
According to details given by the Vietnam Logistics Business Association, the Vietnamese logistics industry has attracted the participation of 4,000 domestic enterprises and 25 foreign corporations thanks to improved infrastructure and management technology.
However, foreign investors continue to face a number of hurdles in terms of legal regulations, particularly as they are not allowed to hold more than 49% of shares in a public company.
Jeffrey Tan, head of Corporate Development and Network Connectivity at YCH Group in Singapore, said the establishment of new companies is also subject to conditions of ownership and services, adding that inadequacies which occur in administrative procedures will also ultimately increase the operating costs of logistics companies.
He recommended that the nation primarily focus on reforming administrative procedures, whilst increasing investment in logistics and warehousing infrastructure to build a perfect logistics ecosystem in order to enhance the country’s overall trade competitiveness.
