Logistics set for high growth, marine transport expected to benefit: VCBS

Vietnam's logistics sector is expected to maintain high growth this year, according to a Vietcombank Securities (VCBS) report.

The report on the macro-economic situation and stock market prospects stated that seaports and the marine transport industry will benefit from free trade agreements (FTAs) that the country has entered into.

These include the FTA between Vietnam and the Custom Union of Russia, Belarus and Kazakhstan, the Vietnam – Republic of Korea FTA, the Vietnam – European Union FTA, and the Trans-Pacific Partnership.

Global giants such as Samsung, Microsoft, LG and Bridgestone are gradually moving their production chains to Vietnam, boosting import and export volumes.

The Vietnam Maritime Administration set a goods throughput target for the country's seaport system at 470 million tons this year, up 10 percent over last year.

A container is loaded at the PetroVietnam Technical Services Corporation's port. Photo: VNS

Container shipments alone are expected to reach 13.3 million twenty-foot equivalent unit (TEU) in 2016, a year-on-year increase of 11 percent.

Last year, the goods throughput of 427 million tons, with container shipments reaching 12 million TEU, already hit a six-year high.

Notable increases in frozen containers shipped to China, improved Vietnamese vessel performances and falling fuel costs contributed to the "impressive growth", according to the VCBS report.

The number of ships in Vietnam's fleet increased from 30 to 39 last year, and they transported 107.8 million tons of goods during 2015, up 9.5 percent over 2014.

The prices of IFO380 oil in Singapore fell to between USD 200 and USD 300 per ton over the last six months from USD 500 to USD 600 recorded during 2014, significantly reducing freights.

Thanks to these advantages, businesses such as Dinh Vu Port JSC, Doan Xa Port JSC, Hai An Transport and Stevedoring JSC, Gemadept Corporation and Vietnam Container Shipping Corporation (VSC) are witnessing good growth.

For example, VSC last year registered VND 926 billion (USD 41.16 million) in revenues, up 4 percent year-on-year. Its after-tax profits were VND 293 billion (USD 13.02 million), increasing 18 percent year-on-year.

This year, its revenues are expected to increase 25 percent year-on-year at VND 1.15 trillion (USD 51.11 million), and after-tax profits to rise by 13 percent year-on-year at VND 331 billion (USD 14.71 million).

The report, however, pointed out that Vietnamese ships mainly serve domestic transport, and the government's policy to restrict foreign vessel operations in domestic routes helps the local firms to maintain their market.

Harsh competition Vietnamese vessels account for only 10 percent to 12 percent of the import-export transport market, where they face harsh competition from international competitors.

While technology and management capacity on local vessels remains low, there is a lack of linkage between ship owners and import-export businesses.

Tran Anh Tuan, the head of the VCBS analysis department, suggested in an interview with news website ttvn.vn that domestic logistics firms should take advantage of such segments as seaport services and passenger transport in order to compete.

Vietnam Logistics Business Association Chairman Do Xuan Quang told the press last November that 25 foreign companies, including Nippon Express, Expeditors, Panalpina, DHL, Global Forwarding and DGF, accounted for up to 80 percent of the domestic logistics market.

Meanwhile, more than 1,200 local logistics firms made up only 20 percent of the market. Quang specified that logistics revenues in Vietnam represented 21 percent to 25 percent of the country's gross domestic product every year, reaching USD 37 billion to USD 40 billion annually. Of these amounts, foreign firms obtained up to USD 30 billion to USD 35 billion.

VnEconomy online reported in October, citing World Bank sources, that Vietnam's logistics sector was expected to grow by 12 percent per year by 2020, as the country's import-export values were forecast to hit USD 623 billion by the time.

Vietnam Logistics Institute Director Tran Chi Dung told the news website that further investments in human resources and technology and more proper government support were needed for local logistics businesses to improve their competition capacity.

The World Bank said in a report earlier this month that the government should work with private importers, exporters and private companies to improve freight logistics because the evolving economy needs new strategies for strong growth.