Vietnam's logistics firms see few opportunities in EVFTA
Vietnamese logistics firms’ ability to access the EU market will not be easy because rivals in the EU are strong anf clients there require high-quality services.
Believing that demand for warehouses will increase sharply once EVFTA (EU-Vietnam Free Trade Agreement) takes effect, the developer of Long Hau Industrial Zone said the company has reserved a large area for a logistics center for Long Hau 3 IZ.
Bui Le Anh Hieu, marketing and business director of Long Hau JSC (LHC), said at Partner Day 2020 in Long Hau IZ, many enterprises have built warehouses and the warehouses have been operating well.
According to Hieu, investors have high demand for leasing cold storage and warehouses. With EVFTA, he predicted that the warehouse supply may fall short in the future.
Not only LHC, but infrastructure development companies in HCM City, Binh Duong, Long An, Dong Nai and Ba Ria – Vung Tau, and northern provinces have also been intensifying the development of logistics infrastructure in anticipation of demand rise once EVFTA takes effect.
|The Ministry of Planning and Investment (MPI) estimates that EVFTA would increase Vietnam’s GDP by 2.18-3.25 percent more in the first five-month period, by 4.57-5.3 percent for the next five years, and 7.07-7.72 percent in the next five years.|
According to the Import/Export Department, EVFTA will help expand the scale of the import/export market, thus creating high demand for logistics services.
The Ministry of Planning and Investment (MPI) estimates that EVFTA would increase Vietnam’s GDP by 2.18-3.25 percent more in the first five-month period, by 4.57-5.3 percent for the next five years, and 7.07-7.72 percent in the next five years.
Tobias Gruemmer from A.P. Moller-Maersk said the demand for storage and transportation of goods will increase sharply. The logistics market is expected to become very busy and lucrative for investors.
However, analysts warn that Vietnam’s logistics firms, which are small and weak, will have to compete with European multinational logistics firms with modern large vessels.
In the 2018 Logistics Performance Index (LPI) report of the World Bank, Germany ranked first, while EU countries held four out of five positions in the top five (Germany, the Netherlands, Sweden and Belgium).
At present, many large logistics firms from the EU are doing business in Vietnam, though the country’s market opening level under the WTO is still limited.
With EVFTA, Vietnam’s market opening commitments are stronger, so the competition between Vietnamese and foreign logistics firms will be even more fierce.
The EU will also have to open its logistics market to Vietnam. However, European countries have better logistics services than Vietnam.
Analysts believe that Vietnam’s logistics firms would find it difficult to get orders, especially when international investors and manufacturers have relations with logistics service providers in the EU.
Meanwhile, Vietnam’s companies also do not use logistics services of Vietnamese firms because they mostly export products under the FOB mode.
The EVFTA will abolish 65 per cent of the duties on EU exports to its developing partner, with the remainder phased out over a 10-year period.
Vietnam’s leather and footwear industry should improve its supply chain performance to take advantage of the milestone trade deal that Vietnam has signed with the EU and to recover from the effects of the COVID-19 crisis,