Local logistics firms fail to take on global players

Hanoi (VNA) - Demand for logistics services has been rising rapidly thanks to robust export and import growth, however, the industry accounts for only 4.4 percent of the country's total GDP, according to industry insiders.

Vietnam has roughly 800 logistics companies, a similar number to
Thailand and Singapore but the logistics sector earns almost 15 percent
of the GDP in those countries.

According to a report from the Spire construction consultation company,
Vietnamese logistics companies can only meet 25 percent of domestic demand,
with the greater part of market share held by foreign firms including Maersk
Logistics and APL Logistics.

The Vietnam Freight Forwarders Association (VIFFAS) attributes the failure
of domestic logistics companies to their smaller size and limited ability,
as 80 percent of Vietnamese logistics firms have registered capital of less
than 1.5 billion VND.

The association also notes that domestic logistic companies have failed to
build a global supply network, hampering their efforts to acquire market
share.

General Director of Gemadept - Vietnam 's largest logistics company
with an annual turnover of 1 trillion VND (60.2 million USD) - Do Van Minh,
admitted that even his company cannot provide a complete chain of services,
as technology and global connections proved difficult to acquire.

Minh cited the sportswear company Nike as an example. "As Nike has clients
workdwide, local connections are not enough," said Minh, " Nike uses
Schenker Logistics as they have a global network, domestic firms don't have
that kind of reach," he said.

To improve their network, Gemadept has entered negotiations with
Schenker - the world's number two logistics company - to set up a 15,000
sq.m logistics centre that meets international standards in southern Binh
Duong province.

General Director of Cartridge World Vietnam, Eckhart Dutz, forecast there
will be more logistics companies setting up joint ventures here in the next
few years, as firms look to combine the best aspects of local and foreign
firms - local knowledge and global reach.

The logistics industry is also expected to receive a boost from planned
Government investment of 17.5 billion USD to develop infrastructure.

According to the World Bank, Vietnam 's airport, roadway, port and
telecommunications services - the infrastructure required for a logistics
network - rank fourth in the region behind Singapore , Malaysia , and
Thailand .

Due to infrastructure constraints, freight costs are disproportionately
high in Vietnam , running at around 30-40 percent of total costs,
compared to around 15 percent in other countries.-Enditem