VietNamNet Bridge – There are as many as 800 Vietnamese logistics firms in operation, but they are holding a humble market share of only 25%, as most of them are small and short of capital for business expansion, especially in cargo shipping, said the Ministry of Transport.

Limited capital and thus incapacity prevents the local logistics firms from expanding their operations overseas, leaving the lion’s share to multinational companies. Much of the logistics job done abroad is given to agents of multinational companies, while domestic firms have to play as second- or third-tier agents for foreign partners with global networks.

Pham Van Binh, head of business development at New Island Vietnam Co. Ltd., explained Vietnam’s logistics market cannot grow because domestic exporters prefer free-on-board (FOB) and free-carrier (FCA) shipping modes, meaning foreign buyers can choose the transport firms they prefer.

“Obviously, buyers will appoint logistics companies from their own countries rather than Vietnam,” said Binh.

Binh remarked it is difficult to change the situation because local companies work as subcontractors for or export goods to large customers who already maintained long-term contracts with international logistics companies. The giant shoes brand Nike, for example, has signed many subcontracts with Vietnamese firms, but all activities are limited to processing without any terms on logistics business.

Even for imports, local logistics enterprises are losing as well.

Vietnam’s import market is an attractive segment for domestic logistics companies because importers have switched trade terms from Cost-Insurance-Freight (CIF) mode to FOB. However, overseas logistic companies still dominate this market because many foreign enterprises are both direct investors and major importers in Vietnam.

Additionally, Vietnamese logistics firms fail to develop a strong supply chain. Most of the enterprises do not have logistics departments, but maintain sales divisions instead to perform import-export activities. Therefore, they cannot offer value-added logistics services for customers.

About 80% of Vietnamese logistics firms have legal capital of less than VND1.5 billion each, and most of them operate independently, instead of networking with one another to boost their collective competitiveness.    

SGT/VNN