Vietnam’s Logistics Sector: A Catalyst for Economic Growth

Vietnam is rapidly establishing itself as a vital player in global logistics, with its logistics sector emerging as a significant economic driver. This transformation is fueled by robust GDP growth, an expanding manufacturing base, and a flourishing e-commerce landscape. A strong commitment from the government and favorable trade agreements further enhance the nation’s prospects, making Vietnam an attractive destination for both domestic and foreign investments.

Economic Context and Growth Prospects

In the first half of 2024, Vietnam’s economy recorded an impressive 6.42% growth in GDP year-on-year. This stellar performance, particularly in manufacturing and export activities, positions Vietnam favorably for logistics investments. Despite a slight downturn during the COVID-19 pandemic, the logistics sector bounced back and contributed 4.92% to the nation’s GDP in 2023, equivalent to over VND 502.56 trillion, according to Statista. Projections indicate that logistics growth will outpace overall GDP growth by 2025, emphasizing the need for multi-modal transport networks and innovative last-mile delivery solutions.

The government has also showcased its commitment to a logistics revolution with the ratification of Resolution No. 163/NQ-CP in 2023, aiming for a more integrated and digitized logistics framework. The explosive growth of e-commerce, set to reach US$52 billion by 2025, will further drive demand for advanced logistics solutions.

Investment Opportunities

Investors can tap into a plethora of opportunities in Vietnam’s logistics sector. Key segments include third-party logistics (3PL), which involves outsourcing logistics services like transportation and warehousing, and fourth-party logistics (4PL), where providers oversee entire supply chains.

Prominent trade agreements, such as the ASEAN Economic Community (AEC) and EU-Vietnam Free Trade Agreement (EVFTA), have bolstered Vietnam’s position as a logistics hub in Southeast Asia. According to a GII Research report, the freight and logistics market in Vietnam is projected to grow from US$48.38 billion in 2024 to US$65.34 billion by 2029, reflecting an impressive compound annual growth rate of 6.19%.

E-commerce and Last-Mile Delivery

As Vietnam’s e-commerce market experiences rapid growth—estimated at US$14 billion in 2022—last-mile delivery has emerged as a pivotal component of logistics. The demand for efficient delivery services is skyrocketing, particularly for cash-on-delivery options, which are popular among Vietnamese consumers.

The courier, express, and parcel services (CEP) segment is currently the fastest-growing logistics function due to this e-commerce boom. With over 800 delivery companies in the sector, competition is fierce. Businesses that can innovate to reduce delivery times and enhance service efficiency will find themselves well-positioned to capture the growing e-commerce market.

Infrastructure Challenges and Government Initiatives

Despite the positive growth outlook, Vietnam’s logistics sector faces notable infrastructure challenges. Issues such as insufficient road and port facilities, high logistics costs, and a skilled labor shortage are prevalent. The government is actively addressing these challenges through substantial investments in public-private partnerships aimed at improving road, rail, and port infrastructures.

The cold chain logistics sector is critical for transporting perishable goods, yet insufficient cold storage facilities remain a barrier to maximizing its potential. There is a pressing need for investments in advanced cold chain infrastructure, including refrigeration technologies and regulatory standards to meet rising demands.

Green Logistics and Sustainability Trends

In response to growing global trends in sustainability, Vietnam is increasingly focusing on green logistics to minimize the environmental impact of its supply chains. The Ministry of Transport is promoting multimodal transport and optimizing routes to enhance connectivity while managing costs. The government is also actively revising tax policies to incentivize companies adopting environmentally friendly logistics practices.

Vietnam’s National Strategy on Green Growth for 2021-2030, with a vision up to 2050, identifies logistics services as a key area for achieving economic restructuring and innovation while ensuring social equity and environmental sustainability.

Navigating Regulatory Frameworks

Foreign investors looking to enter Vietnam’s logistics sector must navigate a complex regulatory landscape. The Commercial Law 36/2005/QH11 and Decree No. 163/2017/ND-CP delineate specific requirements for foreign investment in logistics services.

Decree 163 simplifies logistics service categorizations and sets clear operational standards, improving legal clarity for investors. However, logistics providers utilizing digital networks must also comply with relevant e-commerce regulations.

Setting Up in Vietnam

Foreign companies can establish either wholly-owned enterprises or joint ventures with local partners in Vietnam. Both approaches necessitate regulatory approvals and adherence to meticulous registration and licensing procedures.

Foreign Investment Restrictions:

• Marine Transportation: Foreign firms can invest but face ownership limitations of no more than 49%. Most crew members must be Vietnamese citizens.
• Container Handling Services: Licenses can have up to 50% foreign ownership.
• Rail Freight and Inland Waterway: Investment is capped at 49%.
• Road Transport Services: Companies cannot exceed 51% foreign ownership; foreign drivers are not permitted.

Restrictions on Air Transport:

For air transport, ownership is capped at 34%, with additional stipulations that the largest shareholder must be a Vietnamese entity, ensuring local governance in critical operational roles.

The logistics sector in Vietnam stands on the brink of a transformative era marked by economic expansion, digital innovation, and sustainability initiatives. Investors who adeptly navigate its challenges while leveraging diverse opportunities will be well positioned to contribute to and thrive in this dynamic environment.