Vietnamese logistics firms losing domestically

Date posted: 05.11.2015

Foreign sea freight logistics companies, which account for only 3-4 per cent of the number of companies operating in the sector in Vietnam, are handling more than 80 per cent of the country’s imports and exports, Mr. Do Xuan Quang, Chairman of the Vietnam Logistics Association, told a press conference on August 3 on Logistics Roads to ASEAN +6 after the AEC.

There are about 40 foreign sea freight logistics companies operating in Vietnam, mainly performing import and export activities between Vietnam and the US and the EU.

“The 1,300 domestic firms, meanwhile, only focus on serving the local market or import-export activities between Vietnam and neighboring countries,” he said.

Most Vietnamese logistics firms are small and medium-sized enterprises (SMEs) with registered capital of VND6-7 billion ($275,000-$321,000), he added.

Limited capital and low capacity prevents local logistics firms from expanding their operations overseas. Much of the logistics tasks conducted overseas are given to agents of multinational companies, while domestic firms have to play the role of subcontractors for foreign partners with global networks.

One of the reasons for the failure of local businesses to win shipping contracts is because domestic exporters prefer free-on-board (FOB) and free-carrier (FCA) shipping modes, meaning foreign buyers choose the transport firms they prefer. They will obviously appoint logistics companies from their own countries rather than Vietnam, according to industry insiders.

Many local export and import firms also assigned goods to be shipped by foreign companies as they are not fully certain about the quality of services provided by domestic logistics firms.

However, insiders told the press conference that Vietnam’s logistics industry still has great potential to develop as Vietnam has recently signed free trade agreements (FTAs) with other countries and will become part of the ASEAN Economic Community (AEC) later this year.

To survive and develop, according to industry insiders, local logistics firms have to cooperate with other partners to develop, guide their business strategies, seek capital to invest in more infrastructure, and improve their service quality to raise their competitiveness in the market.

Source: VET