Golden time for logistics M&A deals in Vietnam hinh anh 1Illustrative image. (Photo: VNA)

Hanoi (VNA)
– Vietnam’s location with a network of cargo ports, alongside a large domestic market, leaves room for both domestic and foreign logistics firms to expand business and enter logistics merger and acquisition (M&A) deals.

Vietnam has integrated deeper into the world economy and the country has become an emerging manufacturing hub and an appealing foreign direct investment destination, according to Country Director for the World Bank in Vietnam Ousmane Dione.

E-commerce giants like Alibaba, Amazon and Tencent are gaining footholds in the Vietnamese market. Armstrong and Associates, a US supply chain market researcher, estimated that e-commerce will account for about 7.2 – 7.5 percent of total logistics turnover in Vietnam by 2020.

Vietnam is also seen as a “gateway” for international firms to penetrate ASEAN, a market of 640 million people. Hence, logistics will be key to promoting exports and imports in Vietnam and ASEAN at large.

According to the research team of the Vietnam M&A Forum, the country is developing a policy to call for private sector investment to develop logistics infrastructure, including airports and seaports. One option being studied allows a company to purchase the right to operate a logistics facility for a certain period of time to raise fund for the development of other projects. In addition, Vietnam is looking to develop a more competitive market for logistics services.

“If the policy is adopted, it will provide opportunities for major investors at home and overseas. Due to the nature of the infrastructure and logistics sectors, deals worth hundreds of millions or even billions USD could be concluded, driving the local M&A market forward,” said Dang Xuan Minh, Director General of AVM Vietnam and head of the research team.

Last year, Vietnam saw a boom in M&A deals in logistics 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 Shipping Holding Co Ltd and 50.9 percent of its shares in Gemadept Logistics Holding Co Ltd to CJ Logistics, a member of CJ Group from the Republic of Korea, for 125 million USD. After the sales, its holdings in these two companies shrank to 49.1 percent each.

Another landmark project of Gemadept is the Gemalink deep-sea container terminal in the Cai Mep–Thi Vai port area in the southern province of Ba Ria-Vung Tau. The first phase of this terminal, covering 33 hectares, requires 345 million USD in capital, 25 percent of which is funded by French carrier CMA CGM S.A.

In July, 2017, Samsung SDS, a subsidy of Samsung Group, set up a joint venture with Minh Phuong Logistics, Vietnam’s biggest freight forwarding and inland transportation service operator, which is expected to allow the Korean conglomerate to made inroads into Vietnam’s logistics industry.

Global private equity firm Warburg Pincus established a joint venture with the local real estate and infrastructure Becamex IDC Corporation to develop a 200-million-USD industrial and logistics real estate platform.

With a shift of manufacturing bases from markets like China to Vietnam in line with the rapid rise of domestic consumption, the logistics and industrial real estate market in Vietnam is in the “early innings” and “at an inflection point for outsized growth,” said Jeffrey Perlman, Managing Director and Head of Southeast Asia of Warburg Pincus.

In 2016, Vietnam ranked 64th out of 160 countries in the World Bank’s Logistics Performance Index and fourth in ASEAN after Singapore, Thailand and Malaysia.
Vietnamese firms mainly provide domestic logistics services such as transport service, airport, seaport and warehouse services and cargo loading and unloading services.

Few firms provide international logistics services through acting as agents for foreign enterprises.-VNA