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Promising future for logistics

Released at: 16:35, 28/07/2017

Promising future for logistics

Photo: JLL

Ms. Regina Lim, JLL's Head of Capital Markets Research, Southeast Asia, told VET's Quynh Nguyen about the development potential of Vietnam's logistics sector in the years to come.

by Quynh Nguyen

■ What are your thoughts on Vietnam’s logistics sector given the country’ economy is experiencing slow growth?

JLL sees Vietnam and Indonesia as top manufacturing destinations. A young and skilled workforce, relatively low costs, and stable political climate are likely help attract more manufacturing companies to Vietnam.

Albeit with slower economic growth in 2017, Vietnam is still recording among the highest GDP growth in the region. Political stability, low labor costs, and a growing middle-class are also factors driving the development of logistics in Vietnam.

■ You have said that Southeast Asia is poised for a logistics boom. Is this the case for Vietnam too? What are the advantages and disadvantages in the country’s logistics sector compared to elsewhere in the region?

Its advantages are favorable labor costs, improving economic fundamentals, and political stability.

Regarding disadvantages, they include an underdeveloped and non-synchronous infrastructure network, which is a key concern for most investors looking for opportunities in Vietnam. An inadequate legal framework and complex administrative and cargo clearance procedures, among others, are also notable disadvantages.

■ Is there any connection between the boom in e-commerce and the logistics sector?

The development of logistics is necessary for the promotion and application of e-commerce. This is true for both developing and emerging markets. In Vietnam, logistics and e-commerce are still in their infancy, so the connection remains unclear. The association will be demonstrated as the market grows.

■ The TPP was to instigate a “golden age” for Vietnamese manufacturing and logistics. What impact has its failure had on Vietnam’s logistics sector?

It was expected that the TPP would help bolster Vietnam’s economic growth. The withdrawal of the US has made the agreement less significant but other large economies, such as Australia and Japan, are still interested in a trade bloc, without the US. If successful, such a deal would bring a lot of benefits to Vietnam.

Vietnam still has a number of other free trade agreements with other countries and regions, which will help to keep FDI levels healthy, which will inevitably boost logistics growth in the country.

■ If foreign investors were to ask you about doing business in Vietnam’s logistics sector in the next three to five years, what would you advise them?

Now is good time for investors to seek potential sites for future logistics development. While land prices are relatively high in some industrial hubs, such as Ho Chi Minh City and Hanoi, there are still areas with acceptable land prices. As more industrial sites are developed, the land bank will become limited and land prices will increase accordingly. The important thing is that investors be able to identify strategic locations for land acquisition, which benefit from both existing and future industrial parks as well as infrastructure developments.  

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