Logistics firms struggle with market fully opened to foreign rivals

Thanh Nien News

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Vietnamese logistics firms are having a rougher go of it ever since Vietnam fully opened the market to foreign companies in January, before which point foreign investors could only own a maximum stake of 49 percent in such companies here.

Do Van Nhan, chairman of Gemadept Corp, told the Saigon Times that his firm had been divesting from its non-core activities since early 2013 to focus on port operations and logistics given the forecast of increased competition.

Around the time the Ho Chi Minh City-based firm sold its Gemadept Tower office building to raise US$45 million in capital late last year, it announced it would increase its ownership in the Nam Hai-Dinh Vu Port from 55 percent to 85 percent.

The port, Gemadept’s joint venture with the Vietnam Petroleum Transport JSC, is located in the northern province of Hai Phong and targets the northern market.

Other ports the firm runs include the Nam Hai Port in Hai Phong, Phuoc Long in HCMC, and Dung Quat in the central province of Quang Ngai.

It expects to earn VND2.86 trillion (US$135.65 million) in revenue this year and VND3.51 trillion per year by 2017.

Gemadept, whose revenue growth averaged 23.6 percent over in the past three years, is considered one of very few local logistics companies that has taken action to compete with foreign firms, who are taking advantage of their global network and strong financial capacity.

Dang Dinh Dao, a senior logistics expert and director at the National Economics University’s Institute for Economics and Development Studies, told the Hai Quan (Customs) newspaper late last year that the country’s preparation for the fully-opened logistics market was slow.

This was because leaders had underestimated the role of logistics in the economy, he said, adding that the country has yet to draft any national plans to develop the sector.

Over 1,000 companies in the logistics industry, fourfold the number of their foreign competitors, now hold less than a quarter of the market share.

Meanwhile, major global names in logistics like Singapore-based APL Logistics, Germany’s Hapag-Lloyd, and Japanese shipping firm NYK Line all have a presence in Vietnam.

The local market would likely see even more dominance by foreign firms in 2014, said Dao.

Do Xuan Quang, chairman of the Vietnam Logistics Business Association, expected more competition from foreign firms to prompt local businesses to adapt

He said small Vietnamese firms, which account for the majority of companies in the industry, should upgrade their operations or cooperate with other firms in terms of capital and IT infrastructure to cover specific areas in logistics.

Specializing in different areas instead of whole service packages would help them gain ground against their foreign rivals, he said.

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