Illustrative image. (Photo: VNA) Hanoi (VNA) – Vietnam’s location with a networkof cargo ports, alongside a large domestic market, leaves room for bothdomestic and foreign logistics firms to expand business and enter logisticsmerger and acquisition (M&A) deals.
Vietnam has integrated deeper into the world economy and thecountry has become an emerging manufacturing hub and an appealing foreigndirect investment destination, according to Country Director for the World Bankin Vietnam Ousmane Dione.
E-commerce giants like Alibaba, Amazon and Tencent aregaining footholds in the Vietnamese market. Armstrong and Associates, a USsupply chain market researcher, estimated that e-commerce will account forabout 7.2 – 7.5 percent of total logistics turnover in Vietnam by 2020.
Vietnam is also seen as a “gateway” for internationalfirms to penetrate ASEAN, a market of 640 million people. Hence, logistics willbe key to promoting exports and imports in Vietnam and ASEAN at large.
According to the research team of the Vietnam M&AForum, the country is developing a policy to call for private sector investmentto develop logistics infrastructure, including airports and seaports. One optionbeing studied allows a company to purchase the right to operate a logisticsfacility for a certain period of time to raise fund for the development ofother projects. In addition, Vietnam is looking to develop a more competitivemarket for logistics services.
“If the policy is adopted, it will provide opportunitiesfor major investors at home and overseas. Due to the nature of theinfrastructure and logistics sectors, deals worth hundreds of millions or evenbillions USD could be concluded, driving the local M&A market forward,”said Dang Xuan Minh, Director General of AVM Vietnam and head of the researchteam.
Last year, Vietnam saw a boom in M&A deals inlogistics that involved both domestic and international players.
Gemadept Corporation, the country’s leading port and logistics firm, sold a 50.9 percent stake in Gemadept ShippingHolding Co Ltd and 50.9 percent of its shares in Gemadept Logistics Holding CoLtd to CJ Logistics, a member of CJ Group fromthe Republic of Korea, for 125 million USD. Afterthe sales, its holdings in these two companies shrank to 49.1 percent each.
Anotherlandmark project of Gemadept is the Gemalink deep-sea container terminal in theCai Mep–Thi Vai port area in the southern province of Ba Ria-Vung Tau. Thefirst phase of this terminal, covering 33 hectares, requires 345 million USD incapital, 25 percent of which is funded by French carrier CMA CGM S.A.
InJuly, 2017, Samsung SDS, a subsidy of Samsung Group, set up a joint venturewith Minh Phuong Logistics, Vietnam’s biggest freight forwarding and inland transportationservice operator, which is expected to allow the Korean conglomerate to madeinroads into Vietnam’s logistics industry.
Global privateequity firm Warburg Pincus established a joint venture with the local realestate and infrastructure Becamex IDC Corporation to develop a 200-million-USDindustrial and logistics real estate platform.
With a shift ofmanufacturing bases from markets like China to Vietnam in line with the rapidrise of domestic consumption, the logistics and industrial real estate marketin Vietnam is in the “early innings” and “at an inflection point for outsizedgrowth,” said Jeffrey Perlman, Managing Director and Head of Southeast Asia ofWarburg Pincus.
In 2016, Vietnam ranked 64th out of 160 countries in theWorld Bank’s Logistics Performance Index and fourth in ASEAN after Singapore,Thailand and Malaysia.
Vietnamese firms mainly provide domestic logistics services such as transportservice, airport, seaport and warehouse services and cargo loading andunloading services.
Few firms provide international logistics services through acting as agents forforeign enterprises.-VNA
VNA
