Logistics restructure investments for decisive battle

Domestic logistics firms have got ready to compete with foreign service providers in Vietnam, the market which has been fully opened since January 11, 2014.

In late 2013, logistics firms heard that Gemadept, a well-known Vietnamese logistics and port development firm, decided to sell Gemadept Tower, a building covering an area of 16,000 square meters on Le Thanh Ton Street, district 1, HCM City to a South Korean partner for $45 million.

Also in 2013, Gemadept successfully took back its investment capital from Vinh Hao, a mineral water brand.

Do Van Nhan, Chair of Gemadept, said the company is implementing its plan to withdraw capital from non-core business fields to gather its strength on its major business fields – logistics and port development.

Nhan said that Vietnam has fully opened its logistics market to foreigners, which means that foreign investors now have the right to set up 100 percent foreign invested logistics firms in Vietnam. If Vietnamese enterprises cannot upgrade their service quality, they would be defeated in the home market.

In order to be able to compete with foreigners, they need to gather their strength to develop logistics services. And in order to do that, Vietnamese enterprises need to restructure themselves to become financially stronger.

In fact, Gemadept began focusing on developing ports and logistics services in early 2013 already. But only on October 14, 2013, did it take the first important step in the restructure plan by buying 12 million shares of Nam Hai – Dinh Vu Port, worth VND120 billion.

The deal helped raise Gemadept’s ownership proportion at the port in Hai Phong City from 54.66 percent to 84.66 percent.

Besides, Gemadept is developing Nam Hai Port, also in Hai Phong, which has the capacity of 230,000 TEUs per annum, 53 percent higher than the designed capacity.

Its Phuoc Long ICD in HCM City and Gemadept Dung Quat in Quang Ngai province have also been well developed, bringing high profits to Gemadept. The port development sees the average growth rate of 23.6 percent in the last three years.

Gemadept’s story is a typical example showing how Vietnamese logistics firms make hectic preparations for the competition with foreign logistics firms.

Do Xuan Quang, Chair of the Vietnam Logistics Association (VLA), has noted that Vietnamese firms now tend to withdraw capital from other business fields to focus on logistics. They need huge money to make investment in technologies and labor force to provide logistics services with international standard quality.

Quang, though admitting the big advantages of foreign invested companies, still believes that Vietnamese can compete equally with foreigners, if they can make reasonable investments to undertake some certain links of the chains.

Some logistics have been seeking the cooperation with commercial banks to draw up more effective solutions for Vietnam’s logistics industry.

OCB Bank and ICD Tan Cang – Long Binh, a subsidiary of Tan Cang Saigon Corporation, have signed a contract on an integrated finance & logistics solution to be provided to import-export companies.

With the solution, the services of making customs declaration, transportation, lending money will be provided to the companies which only need to contact either the bank or the bank’s partners.

OCB said the solution would allow enterprises to cut 5 percent of logistics costs and 20 percent of international payment costs.