Logistics to maintain high growth: VCBS

Wednesday, Jan 27, 2016 15:17

A container is loaded at a port of the PetroVietnam Technical Services Corporation. Viet Nam's logistics sector is expected to maintain high growth in 2016. — Photo vietnamplus.vn

HA NOI (Biz Hub) — Viet Nam'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, dated January 21, 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 Viet Nam and the Custom Union of Russia, Belarus and Kazakhstan, the Viet Nam – South Korea FTA, the Viet Nam – European Union FTA, and the Trans-Pacific Partnership.

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

The Viet Nam Maritime Administration set a goods throughput target for the country's seaport system at 470 million tonnes this year, up 10 per cent over last year.

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

Last year, the goods throughput of 427 million tonnes, 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 Viet Nam's fleet increased from 30 to 39 last year, and they transported 107.8 million tonnes of goods during 2015, up 9.5 per cent over 2014.

The prices of IFO380 oil in Singapore fell to between US$200 and $300 per tonne over the last six months from the $500 to $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 Viet Nam Container Shipping Corporation (VSC) are witnessing good growth.

For example, VSC last year registered VND926 billion ($41.16 million) in revenues, up 4 per cent year-on-year. Its after-tax profits were VND293 billion ($13.02 million), increasing 18 per cent year-on-year.

This year, its revenues are expected to increase 25 per cent year-on-year at VND1.15 trillion ($51.11 million), and after-tax profits to rise by 13 per cent year-on-year at VND331 billion ($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 per cent to 12 per cent 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.

Viet Nam 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 per cent of the domestic logistics market.

Meanwhile, more than 1,200 local logistics firms made up only 20 per cent of the market.

Quang specified that logistics revenues in Viet Nam represented 21 per cent to 25 per cent of the country's gross domestic product every year, reaching $37 billion to $40 billion annually. Of these amounts, foreign firms obtained up to $30 billion to $35 billion.

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

Viet Nam 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. — VNS

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