In recent years, Vietnam has been steadily carving out a prominent position for itself as a rising star in the region’s logistics ecosystem. It has been ranked in the top 10 places in the 2023 Agility Emerging Markets Logistics Index compiled by Agility, one of the world’s top freight forwarding and contract logistics providers. This article explores the key reasons behind that phenomenon.
Reported by SUVI, 2023-08-18
Deepening Involvement in Logistics
The country’s strategic efforts to enhance its logistics capabilities have not gone unnoticed. With a commitment to modernizing and streamlining its logistics networks, Vietnam has been proactively attracting businesses and investors seeking a reliable and efficient trade gateway.
More evidently, logistics is one of the fastest expanding sectors of Vietnam’s economy, whose growth may outpace GDP. The steady growth in Vietnam has led it to become an industry valued at US$ 40 billion today. The Vietnamese government aims to achieve an annual logistics growth rate close to 20 percent by 2025.
Geographical Advantage
One of Vietnam’s prime assets in its ascent as a logistics powerhouse is its strategic geographical location. With more than 3,200 km of coastline bordering the Vietnam East Sea and the Gulf of Thailand and major international container ports in the north (Haiphong), center (Da Nang), and south (Ho Chi Minh City, Vung Tau) of the country, Vietnam is an ideal transshipment hub for shipping.
Large container ships often dock at Hai Phong International Container Terminal (HICT), cutting the time and expense of carrying containers to northern Vietnam or even China. The port at Da Nang is also pivotal to trade, connecting Vietnam with Myanmar, Thailand, and Laos.
Situated in the heart of Asia, Vietnam also serves as a pivotal crossroads for regional and international trade routes. This advantageous positioning allows the country to connect seamlessly with neighboring countries and major markets. As pointed out by Vietnam Plus, this central location further positions Vietnam as a crucial hub, reducing transit times and costs for businesses and enhancing its attractiveness as a logistics focal point. It also has the second-highest number of international ports in ASEAN.
Supply Chains Moving Outside of China
The US-China trade war and the pandemic have forced manufacturers to diversify their supply chains and shipping networks. This has resulted in businesses relocating their operations from China to Vietnam over the last few years.
This broad phenomenon is known as the ‘China plus one strategy.’ Following this principle, international firms keep some aspects of their business in China but place other factors like production centers, warehouses, and more in countries outside China. This shift has been accelerated by factors such as rising labor costs in China and geopolitical uncertainties.
As highlighted by CBIP Logistics, Vietnam has capitalized on this trend by offering a competitive manufacturing environment and a skilled, more reasonable workforce. This proactive approach has led to increased foreign direct investment (FDI) inflows, creating opportunities for logistics services that support the movement of goods in and out of the country.
New Trade Deals and Infrastructure
Beyond cheaper manufacturing than China, Vietnam offers other meaningful draws like big trade deals and new infrastructure projects.
The country’s participation in free trade agreements (16 FTAs have taken effect), such as the CPTPP and EVFTA, has unlocked new avenues for trade expansion. This sentiment is echoed by Vietnam Briefing, which emphasizes that these agreements provide Vietnamese businesses with preferential access to vast markets and stimulate growth in the logistics sector.
Expanding Economy, Manufacturing, and E-commerce Sectors
In the past two decades, Vietnam has evolved into a leading manufacturing hub in ASEAN. The country’s GDP growth and increasing consumer demands have created fertile ground for logistics services to flourish.
As pointed out by Vietnam Insider, the growth of the manufacturing and e-commerce industries has led to higher demand for efficient and reliable logistics solutions, positioning Vietnam as a crucial link in the regional supply chain.
Political Stability: A Pillar of Success
Vietnam’s unwavering political stability stands as a foundational pillar supporting its growth as an Asia logistics star. A consistent political environment has bolstered investor confidence and facilitated long-term planning for businesses and logistics providers alike. This stability, highlighted by CBIP Logistics, has been integral in creating an environment conducive to both domestic and foreign investments, ensuring a steady trajectory for the country’s logistics ambitions.
Conclusion
Vietnam’s meteoric rise as Asia’s logistics star is a testament to its strategic vision, geographic advantage, shifting supply chains, trade agreements, and a robust economy. The convergence of these factors has positioned Vietnam at the forefront of the region’s logistics landscape. As the country continues to develop its infrastructure, deepen its trade engagements, and leverage its political stability, it is poised to shape the future of logistics in Asia and beyond. With each passing year, Vietnam’s ascent as a logistics powerhouse becomes clearer, signifying a promising era of growth, connectivity, and prosperity.
