Transport and logistics in Vietnam, Vietnam

Transport and logistics in Vietnam. Vietnam is set to see very strong growth in trade over the coming years, which will support ongoing development and expansion of its logistics. The logistics industry is one of the fastest growing industries in Vietnam, but poor infrastructure is increasing its costs. The main logistics hubs can be found in the North (Ha Noi – Hai Phong area) and in the South (the wider Ho Chi Minh city area, including Dong Nai province, Binh Duong province and Ba Ria/Vung Tau. Vietnam’s transport infrastructure is expanding rapidly, however the development in this sector is still far below the needs of the country’s economic and social growth. Opportunities can be segmented into road transport, air transport, railway transport, waterway transport and urban-public transport. Road transport. The road haulage sector will outperform over the next several years, benefiting from the ongoing development of Vietnam as a regional manufacturing hub. Road transport currently plays an important role in Vietnam serving about 75.6% of all freight transport and 94.09% of all passengers transported. Currently Vietnam’s road system is about 258,200 km long of which only 19% is paved and 40% of the network is in poor condition. The lack of a well maintained and sufficiently outfitted road infrastructure network that is able to connect the key population centers with Industrial zones, Focal Economic zones, airports, seaports and inland waterways, has a negative impact on Vietnam’s economic growth. However, amongst others, rising domestic consumer spending power will drive the demand for improved road transport services. Investments have been announced and planned for but the realisation of these ambitions requires more patience. Road infrastructure projects are unlikely to be interesting for Dutch companies due to intensive competition from China, India, South Korea and Japan. Air transport. Air transportation in Vietnam is supervised by the Civil Aviation Administration of Vietnam (CAAV) and the airport infrastructure is developed and managed by three public companies of which the Airport Corporation is the largest. In total, Vietnam has 23 airports and in the Master Plan to 2020 the Government has to upgrade most of these existing airports and develop new airports with a total investment of USD 13,4 billion. The most important project that attracts most attention is Long Thanh International Airport with a total investment of USD 6,7 billion for phase 1. Financing sources for airport infrastructure development come from state budget, ODA and Vietnam is exploring the possibility of Public-Private Partnership financing. Developing greenfield airports and upgrading brownfield airports will provide many opportunities related to consultancy and planning, technology for safety-, security- and logistics purposes, and knowledge transfer. Air freight volumes will rise by 9,2% in 2017 (estimation BMI) to reach 257,540 tonnes, 2018 growth will be 8,3% (estimation BMI). According to statistics from the CAAV the total market volume in 2016 reached more than 52 million passengers (up 29% more than 2015) of which domestic air passenger traffic rose to 28 million (30% increase from 2015). With Schiphol airport being a top ranking European airport and excellent showcase of Dutch technology and planning, the Netherlands is well positioned to offer the required solutions for Vietnam’s need in airport development. Railway transport. Vietnam’s current railway network of 3,200 km has a limited capacity in terms of passenger (5%) and goods (2%) transportation. The Master Plan on railway transport development for 2010 – 2030 will increase the transport capacity and encourage local manufacture of new wagons and locomotives. Also some international routes are planned to link North Vietnam and China and to link Kunming – Vietnam – Cambodia - Malaysia and Singapore. The current railways infrastructure is underdeveloped and poorly maintained which results in not being competitive to other modes of transport like road- and air transport. Rail infrastructure projects are unlikely to be interesting for Dutch companies. Urban-Public transport. Urban-Public transport is mainly concentrated in Ha Noi and Ho Chi Minh City as highly expanding densely populated metropolitan areas. These two cities are facing challenges in applying a modern mass transport system resulting in growing congestion and pollution. Both cities have plans to develop means of public transportation such as bus systems, elevated railways and subways. Ho Chi Minh City will build six subway lines and three tramway lines. Funds for these projects will come from ADB, Japan, EIB and European countries such as Germany and Spain. In Hanoi a network of 8 metro/ elevated railway lines is developed with the first line being operational in 2018. The full network should be operational by 2050. Main funding is through ODA loans made available by China for the first metro line. Opportunities can be found in smart urban-public transport solutions, greening solutions and planning solutions. Waterway transport. With 224 river ports, 8,000 landing stages, 44 sea ports and 219 terminals Vietnam’s waterway transport makes up for 23,6% of all freight transport and 4,7% of all passenger transport. However, of all inland waterways just 20% of total length in under management of VIWA under the Ministry of Transport. Besides, the transport routes are still highly dependent on natural conditions. Although limited investment in dredging and thereby expanding the span of navigable waterways, opportunities can be found in the good reputation that the Netherlands has in this. The logistics industry is one of the fastest growing industries in Vietnam and it is estimated to grow at a pace faster than the GDP growth rate. Currently, the logistics service accounts for 15-20% of GDP in Vietnam. However the underdeveloped logistics infrastructure and – rapidly expanding but currently inadequate - transport infrastructure results in a relative high cost. Ha Noi (North) and Ho Chi Minh City (South) are current major logistics hubs in Vietnam. There is an outsourcing trend for logistic services in Vietnam and they are classified in two groups: Basic services including outbound transportation/warehousing and inbound transportation/ warehousing Specialised services including warehouse management, inventory management, order processing, vendor management, custom information and support, reverse logistics and climate controlled logistics. The players on the market are divided into three groups: Multinational and joint venture companies: targeting global customers in Vietnam by offering logistic packages (such as 3PL package –Third Party Logistics) State owned companies/corporations: this group dominates local market on freight transportation and delivery Joint Stock and private companies: this group targets customers who are in the private sector in Vietnam. This group consists of small, low-capital local companies. Nevertheless, many of them are competing with players in the first group to offer 3PL package to multinational customers in Vietnam. Dutch companies can either set up their operations through a Vietnamese entity to provide logistics services in Vietnam or participate in parts of the supply chain of services such as: