Cargo containers are loaded from ships at Tien Sa Port in the central city of Da Nang. (Photo: VNA)Hanoi (VNS/VNA) - The logistics market in Vietnam is booming withmillion-dollar merger deals being signed and many foreign companies striving toincrease market share.
But manylocal logistic companies are still thinking too small and are findingthemselves suffering at the hands of bigger competitors.
PieterPennings, consulting director of CEL Consulting, said local businesses arefeeling the pressure from larger, foreign companies.
He alsobelieves Vietnamese companies need to expand their tech network in order tokeep up with the competition.
Earlierthis month, Singapore-based Symphony International Holdings spent 42.6 million USDto buy 28.57 percent of Indo Trans Logistics Joint Stock Company (ITL Corp)from Singapore Post.
Previously,the subsidiary of Japanese Sumitomo Group, SSJ Consulting, spent nearly 40million USD to buy 10 percent of voting shares in Vietnamese logistics firmGemadept Corporation (Gemadept).
Thetransaction is expected to take place in the next two weeks. SSJ Consulting hastwo main shareholders, Sumitomo Group, holding 51 percent and Japan OverseasInfrastructure Investment, holding 46 percent.
At the2019 Annual General Meeting of Shareholders, Gemadept approved the cancellationof a number of business lines with limit on foreign ownership under 49 percentto welcome new foreign investors.
Logisticsis defined as the pillar field of Gemadept. In 2018, Gemadept sold part of itsownership in two subsidiaries to Korean firm CJ Logistics and collected about 125million USD. In mid-2017, another Korean firm Tae Kwang Industrial Group alsooffered to buy 51 percent of Gemadept shares, with an expected value of 444million USD.
Alsoduring this time, there was another “silent and quiet” M&A deal, in whichBest Inc, a global franchise company in the field of express delivery whereAlibaba holds a minority stake, purchased VNC Post Company, from VinaCapital.
SymphonyInternational Holdings, SSJ Consulting, Sumitomo Corporation, Best Inc, CJLogistics are all well-known names in multi-industry investment in Asia. Theyobviously are eyeing logistics market shares in Vietnam and in Southeast Asia.
Over thepast 35 years, Symphony has been looking for opportunities to collaborate withexclusive suppliers in the region.
Investingin ITL Corp would benefit the company as the middle class is growing in Asia,Anil Thadani, Director of Symphony, told Dau Tu (Investment)newspaper.
ILT Corp,established in 1999, has a wide network in the logistics industry in Vietnamand is expanding to Cambodia, Laos, Myanmar and Thailand. ITL Corp providesaviation services, international transportation services, express delivery,e-commerce services and warehousing services with an international standardpremise system of more than 150,000 sq.m nationwide.
In 2018,ITL Corp achieved a 50 percent growth compared to 2017, three times higher thanthe average growth of the logistics industry. The company aims to developcross-border e-commerce in the next five years.
Via thedeal between Sumitomo and Gemadept, Sumitomo hopes to build a logistics systemconnecting factories to ports to serve the export of manufactured products.
Sumitomowill develop a mobile application that allows container drivers to pre-registerthe time of loading and unloading goods at ports and to handle other paperwork.
Gemadeptcurrently owns six ports and accounts for more than 10 percent of logisticsmarket share in Vietnam, while Sumitomo is managing three industrial parks in Hanoiand a logistics facility in Vietnam.
Sumitomorepresentative told Dau Tu that an estimated 14 millioncontainers of goods were transported to and from Vietnam each year. With anaverage growth rate of 7 percent per year, this figure could increase to 23million containers by 2025 and logistics would become a promising sector in Vietnam.
Localfrailness
Vietnameselogistics businesses are under high competitive pressure, said Pieter Pennings,consulting director of CEL Consulting.
Thecountry currently has more than 1,300 logistics enterprises, of which only aminority of 2-3 percent are foreign firms, but they hold 70-80 percent of theindustry's market share.
Vietnamlogistics enterprises mostly provide small services, due to their weakcapacity. Due to the large gap between service quality of Vietnam and foreignfirms, customers still choose to use the services of foreign providers,according to Pieter.
Foreignlogistics enterprises can easily provide their services to large corporationsbecause they can offer full-package logistics services, while local businessesonly provide sporadic and disjointed services.
Especially,very few domestic firms own effective information technology systems comparedto competitors from abroad.
Thelogistics industry is expected to account for 8-10 percent of Vietnam's GDP by2025. Enterprises in the group of countries that are investing heavily in Vietnamsuch as Japan, the Republic of Korea, China, Singapore and France will continuetheir investment more continuously.
Accordingto Pennings, foreign investors will focus to expand their business horizontally(expanding the network) and vertically (expanding service packages, increasingthe capacity of providing package services). However, the characteristics of Vietnam’sindustry sector may be different from the experience of investors and this isthe parts that Vietnamese partners can support.-VNS/VNA
But manylocal logistic companies are still thinking too small and are findingthemselves suffering at the hands of bigger competitors.
PieterPennings, consulting director of CEL Consulting, said local businesses arefeeling the pressure from larger, foreign companies.
He alsobelieves Vietnamese companies need to expand their tech network in order tokeep up with the competition.
Earlierthis month, Singapore-based Symphony International Holdings spent 42.6 million USDto buy 28.57 percent of Indo Trans Logistics Joint Stock Company (ITL Corp)from Singapore Post.
Previously,the subsidiary of Japanese Sumitomo Group, SSJ Consulting, spent nearly 40million USD to buy 10 percent of voting shares in Vietnamese logistics firmGemadept Corporation (Gemadept).
Thetransaction is expected to take place in the next two weeks. SSJ Consulting hastwo main shareholders, Sumitomo Group, holding 51 percent and Japan OverseasInfrastructure Investment, holding 46 percent.
At the2019 Annual General Meeting of Shareholders, Gemadept approved the cancellationof a number of business lines with limit on foreign ownership under 49 percentto welcome new foreign investors.
Logisticsis defined as the pillar field of Gemadept. In 2018, Gemadept sold part of itsownership in two subsidiaries to Korean firm CJ Logistics and collected about 125million USD. In mid-2017, another Korean firm Tae Kwang Industrial Group alsooffered to buy 51 percent of Gemadept shares, with an expected value of 444million USD.
Alsoduring this time, there was another “silent and quiet” M&A deal, in whichBest Inc, a global franchise company in the field of express delivery whereAlibaba holds a minority stake, purchased VNC Post Company, from VinaCapital.
SymphonyInternational Holdings, SSJ Consulting, Sumitomo Corporation, Best Inc, CJLogistics are all well-known names in multi-industry investment in Asia. Theyobviously are eyeing logistics market shares in Vietnam and in Southeast Asia.
Over thepast 35 years, Symphony has been looking for opportunities to collaborate withexclusive suppliers in the region.
Investingin ITL Corp would benefit the company as the middle class is growing in Asia,Anil Thadani, Director of Symphony, told Dau Tu (Investment)newspaper.
ILT Corp,established in 1999, has a wide network in the logistics industry in Vietnamand is expanding to Cambodia, Laos, Myanmar and Thailand. ITL Corp providesaviation services, international transportation services, express delivery,e-commerce services and warehousing services with an international standardpremise system of more than 150,000 sq.m nationwide.
In 2018,ITL Corp achieved a 50 percent growth compared to 2017, three times higher thanthe average growth of the logistics industry. The company aims to developcross-border e-commerce in the next five years.
Via thedeal between Sumitomo and Gemadept, Sumitomo hopes to build a logistics systemconnecting factories to ports to serve the export of manufactured products.
Sumitomowill develop a mobile application that allows container drivers to pre-registerthe time of loading and unloading goods at ports and to handle other paperwork.
Gemadeptcurrently owns six ports and accounts for more than 10 percent of logisticsmarket share in Vietnam, while Sumitomo is managing three industrial parks in Hanoiand a logistics facility in Vietnam.
Sumitomorepresentative told Dau Tu that an estimated 14 millioncontainers of goods were transported to and from Vietnam each year. With anaverage growth rate of 7 percent per year, this figure could increase to 23million containers by 2025 and logistics would become a promising sector in Vietnam.
Localfrailness
Vietnameselogistics businesses are under high competitive pressure, said Pieter Pennings,consulting director of CEL Consulting.
Thecountry currently has more than 1,300 logistics enterprises, of which only aminority of 2-3 percent are foreign firms, but they hold 70-80 percent of theindustry's market share.
Vietnamlogistics enterprises mostly provide small services, due to their weakcapacity. Due to the large gap between service quality of Vietnam and foreignfirms, customers still choose to use the services of foreign providers,according to Pieter.
Foreignlogistics enterprises can easily provide their services to large corporationsbecause they can offer full-package logistics services, while local businessesonly provide sporadic and disjointed services.
Especially,very few domestic firms own effective information technology systems comparedto competitors from abroad.
Thelogistics industry is expected to account for 8-10 percent of Vietnam's GDP by2025. Enterprises in the group of countries that are investing heavily in Vietnamsuch as Japan, the Republic of Korea, China, Singapore and France will continuetheir investment more continuously.
Accordingto Pennings, foreign investors will focus to expand their business horizontally(expanding the network) and vertically (expanding service packages, increasingthe capacity of providing package services). However, the characteristics of Vietnam’sindustry sector may be different from the experience of investors and this isthe parts that Vietnamese partners can support.-VNS/VNA
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