Logistics has to play a crucial role in the success of the Vietnamese e-commerce market, property consultant Jones Lang LaSalle (JLL) has said in a report.

It said the launch of BW Industrial Development JSC in Viet Nam, a joint venture between leading global private-equity firm Warburg Pincus and giant State-owned developer Becamex IDC Corp last January demonstrates the potential of the country’s logistics market.

“Compared to regional peers, Viet Nam’s logistics market is still in its infancy, and features low-specification premises located in remote locations.

Significant investment is needed in technology, infrastructure and factories/warehouses to deal with obstacles like traffic congestion as well as the higher logistical costs in rural areas.

“Driven mainly by potential growth in the e-commerce and manufacturing sectors, the Viet Nam logistics market will move to the next level, evolving in the same way as other markets.”

JLL takes information from the latest annual real estate report by Urban Land Institute/PwC, which says the logistics industry is now the hottest area for real estate investments in the Asia Pacific region.

With considerable growth in smartphone penetration in major cities, the e-commerce market will grow significantly since shopping via smartphones keeps growing every year, resulting in more pressure on the logistics industry.

According to KPMG’s international survey ‘The truth about online consumers’, Vietnamese consumers are leaning towards online shopping for they can easily compare prices, find online sales or get better deals from online retailing platforms such as Amazon, Lazada and Tiki.

Mentioning about challenging, JLL said: “While Viet Nam’s overall spending on infrastructure is relatively high when compared to neighbouring countries; there is still a long way to go.

“Many infrastructure projects face delays due to land compensation, funding and limited success in public-private partnerships.”

It quoted the 2018 Doing Business report by the World Bank as saying it currently takes Viet Nam 105 hours to export a product of comparative advantage and 132 hours to import auto parts.

This is significantly longer than only 62 hours for export and 54 hours for import in Singapore.

Cross-border trading cost, consisting of documentary compliance and border compliance costs, in Viet Nam is less competitive than most of its regional peers.

Of the total, cost of documentary compliance accounts for more than 30 per cent compared with just 10-15 per cent in developed nations such as Singapore.

The remarkable variance in the cost structure suggests more improvement is required in the documentary compliance area. — VNS