110321 logistics in Vietnam

Tài liệu logistic t.Anh

AN OVERVIEW ON THE LOGISTICS MARKET IN VIETNAM

January 2011

© Copyright Istituto nazionale per il Commercio Estero

AN OVERVIEW ON THE LOGISTICS MARKET IN VIETNAM

TABLE OF CONTENTS

I Introduction 3

II A general picture on logistics in Vietnam 3

2.1 Infrastructure, operation and cargo volumes 3

2.1.1 Air 3

2.1.2 River and sea 5

2.1.3 Road 9

2.1.4 Rail 11

2.2 The logistics industry in Viet Nam 12

2.2.1 Some considerations about the industry 12

2.2.2 Some major challenges 13

III Vietnam’s commitment to WTO in logistics 14

IV Leading companies in the market 14

4.1 Vietnam Airlines 14

4.2.Vinalines 15

4.3 Maersk Line 16

VI Major Shipping Lines and Agency Representation 17

Editorial note

The following report, providing an overview of infrastructure and development of the

Vietnam’s logistic sector, has been composed by the Italian Institute for Foreign Trade

(ICE, also known as Italian Trade Commission) of Ho Chi Minh City It has been prepared by a team composed by Ms Nguyen Thi Thu Ha, Mrs Do Nguyen Quynh Anh and Mr Tran Quang Nam, under the supervision of Mr Marco Saladini who also edited its final version

The report is part of the project Distretti e Piattaforme Logistiche all’Estero carried

out by the Office for machinery, technology and services of ICE Rome and, for Vietnam,

by ICE Ho Chi Minh City

I Introduction

Vietnam is located in the south-eastern end of the Indo-Chinese peninsula and occupies a land area of 331,688 square kilometers With a north-to-south distance of 1,650 kilometers, it

is about 50 kilometers wide at the narrowest point It shares boundaries with Laos, Cambodia on the west and China in the north

Vietnam has 58 provinces and five big cities Its geographical topography contains tropical lowlands, deltas, hills and densely forested highlands Major geographic regions in the country include highlands and the Red River Delta in the north, the Highlands in the central region and the coastal lowlands and the Mekong Delta in the south

Vietnam has a population of more than 85 million with an estimated 63% below the age of

30 The Kinh (Viet) ethnic group constitutes the majority of the population (about 86%) and Vietnamese is the most commonly spoken language Literacy level in Vietnam is at around 90% of the total population, which is relatively higher than other developing countries

Vietnam has seen rapid economic growth after adopting economic reforms in 1986, making the nation one of the fastest growing economies in Asia The ongoing efforts of the Government towards international economic integration such as the forming of bilateral trade agreements, attaining memberships of the ASEAN Free Trade Area (AFTA) and, in January

2007, accession to the World Trade Organization (WTO), have led to further rapid changes

in Vietnam’s trade and economic regime Until 2008, the Vietnamese economy has recorded

a growth rate of 7% per year After a slow-down in 2009, when the growth rate was 5,3%, in

2010, the gross domestic product (GDP) grew by 6.8% reaching a value of USD 104.6 billion Besides that, favorable government policies for industrial activities and other important factors such as a relatively low cost of labor and a strategic location in a fast-growing region of the world, have led to the growth of Foreign Direct Investment (FDI) flows into Vietnam and to the establishment of more privately-owned Vietnamese enterprises The inflow, or disbursement, of FDI was reached USD 11 billion in 2010, up 11% as compared with the previous year Vietnam’s imports and exports have been consistently increasing with an annual average growth rate of 20% In 2010, export revenues amounted to USD 71.6 billion, 25% higher than in 2009, whereas the import turnover reached USD 84 billion, 20% higher

All these factors have led to an demand for logistics services in Vietnam in recent years, which has met some obstacles in being satisfied at the desired quality and price levels, due also to some constraints which will be discussed in what follows This gap between demand and supply of logistics services can also be seen as a business opportunities for companies interested in developing their trade in Vietnam The market is slowly but steadily opening to foreign providers, according to the schedules and the commitments agreed upon in the framework of Vietnam’s WTO accession

II A general picture on logistics in Vietnam

2.1 Infrastructure, operation and cargo volumes

2.1.1 Air

Infrastructure

The aviation industry in Vietnam operates under the direct jurisdiction of The Civil Aviation Administration of Vietnam (CAAV) The CAAV currently oversees 22 airports including three international airports: Noi Bai in Hanoi, Danang in Central Vietnam and Tan Son Nhat in Ho Chi Minh City The 19 minor airports are for domestic flights to the three larger hubs They are at Hai Phong, Dien Bien, Na San, Gia Lam, Vinh, Phu Bai, Dong Hoi, Phu Cat, Tuy Hoa, Cam Ranh, Pleiku, Buon ma Thuot, Lien Khuong, Vung Tau, Can Tho, Rach Gia, Ca Mau, Phu Quoc and Con Dao

Currently, Ho Chi Minh City’s Tan Son Nhat is the largest airport, serving more than ten million domestic and international passengers a year In 2007, Tan Son Nhat Airport added

an international terminal The 92,000 square meter facility has a capacity of 10 million international passengers and one million tonnes of cargo per year The previous terminal was converted to serve domestic flights with a capacity of 7 million passengers every year Parking area of the whole airport can accommodate 30 airplanes and about 6,000 cars at a time

Other airports with significant passenger throughput capacity include Noi Bai Airport in Hanoi with 7.1 million passengers, Cat Bi airport at Hai Phong with 500,000 Danang Airport with 1.4 million and Hue’s Phu Bai Airport with 520,000 passengers per year

The most significant new airport project under consideration is the Long Thanh International Airport in Dong Nai Province, 50 km to the northeast of Ho Chi Minh City The project was supposed to start in 2007, however it is still in stand-by Recently, the government has pushed the Ministry of Transport to start the construction in early 2011

The airport is to be built in two phases, with the USD 5 billion-worth Phase I having a designed capacity of 20 million passengers per year The plan for Phase II envisions four runways 4,000 meters in length and 60 meters wide, capable of accommodating heavy long-haul planes, including the Airbus A380 The total capacity will be then upgraded 80 to 100 million passengers and 5 million tones of cargo per year

CAAV is in the process of converting existing airports at Cat Bi Island (near Haiphong), Chu Lai in central Quang Ngai province, Phu Quoc Island, and Cam Ranh from domestic to international airports

Operation and Volume

The two principal airlines operating in Vietnam are Vietnam Airlines and Jetstar Pacific Airlines Both of these airlines are state owned, while Jetstar has a stake in the latter one Other minor airlines have also obtained a license to operate, but so far only Air Mekong has started flying from its base in Phu Quoc island

Air cargo handled in Vietnam grew at the average rate of 17 percent per annum during the 2000-2007 period Though the rate has lightly reduced due to the effects of the crisis in

2009, air freight volume is expected to continually increase in the coming years, also due to the emphasis placed by the government on attracting manufacturers of electronics and high tech industries which require more sophisticated transportation, including the increased used

of air freight

Noi Bai Airport’s cargo operation in Hanoi are handled by Noi Bai Terminal Services with 19 international airlines offering freight services The company is majority owned by Vietnam Airline together with several other Vietnamese freight forwarders Tan Son Nhat Cargo Services, a joint-venture between Vietnam Airline and Singapore Airport Terminal Service, handles international cargo operations for 22 airlines and has an annual cargo throughput of 100,000 tones (about 80% of total international freight volume)

Figure 1 Volume of freight, 2000-2009

Volume of Freight by Air, 2000-2009

0 50 100 150

Year

Domestic Overseas

Source: General Statistics Office

Figure 2 Volume of Freight Traffic by Air 2000-2009

0 50 100 150 200 250 300 350

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

year

Source: General Statistics Office

2.1.2 River and sea

Infrastructure

Vietnam’s dense river and canal network provides the country with a highly developed inland waterway system This is the second-largest sub-sector involved in domestic cargo transport, accounting for 25-30% of total transport volumes This is particularly true of the Mekong River Delta where, in some provinces, it accounts for 60-70% of total transport Currently, the inland waterway transport sub-sector is managed by two state corporations affiliated to the Ministry of Transport, one state-owned enterprise (SOE) affiliated to the Vietnam Inland Waterway Authority, and some enterprises managed by other ministries, operating in support of the power generation, cement, and paper industries In addition, there are about 230 co-operatives and hundreds of inland waterway transport enterprises in the country

As the traditional routes serving the key industries such as coal for power generation, fertiliser and cement, inland waterway transport also handles a large volume of other building materials and agricultural products

Vietnam’s 3,260 km coastline has 127 ports, of which 25 handle ocean cargo.The five main

locations that receive regular container services in Vietnam are Ho Chi Minh City (handles

72% of total cargo throughput), Hai Phong (20%), Cai Lan (4%), Da Nang (1%), Quy Nhon

(1%) Two new big ports in Ba Ria-Vung Tau province are expected to show up as well

among the major ones, after their inauguration in 2010

Vietnam’s seaport network comprises many small- and medium-sized entities, with inefficient

distribution Most big ports are located far inside rivers, like Hai Phong and Ho Chi Minh City,

with limited depth at the entrance Some ports are located in big cities where road traffic is

particularly congested, making it difficult to forward cargo via other modes of transportation

Except for some new or upgraded ones, most ports have been operating for many years,

lack investment and are seriously degraded The loading and unloading equipment in some

ports is obsolete, leading to low productivity This is one of the major reasons why Vietnam

is ranked behind its neighbours in both the World Economic Forum’s Gobal competiveness

Report 2009-2010, where it comes 99th out of 133 countries in terms of ports infrastructure,

and in the World Bank’s Logistics Performance Index, where it comes in 53rd place, while its

neighbours Singapore and Malaysia are placed second and 29th respectively

The government is aware that port congestion is now a critical issue threatening Vietnam’s

export growth Since 2009 it has approved several big seaport projects which are under

construction

Concentration of medium ports in Hochiminh city

Ho Chi Minh City is a critical gateway, given that 72% of the country’s container throughput

passing through its ports They serve not only their immediate vicinities but also the

neighboring provinces of Binh Duong, Dong Nai, Baria – Vung Tau, where a large number of

industrial and manufacturing plants are based, in addition to the Mekong Delta and the

Central Highlands

However, all ports are located very near to city centre, limiting the capacity and depth at the

entrance and suffering from urban traffic congestion The only exception is Saigon Premier

Container Terminal since it was built in 2008 at the suburban areas It has just begun to

operate by a joint-venture between DP World and Tan Thuan Industrial Promotion Company

Table 1 Facilities at the Main ports in Ho Chi Minh City

Port

information

Cat Lai VICT Saigon Port Ben Nghe

Port

SPTC

Total Berths

of Length

Depth

alongside

berth

-10.5m -10m -11m -10.5m -14m

Max Sixe of

vessel

30,000DWT 25,000DWT 30,000DWT 30,000DWT 2,200

TEU

Quayside

Gantry

cranes

VICT- Saigon International Terminals Vietam Port

Source: Different sources

Figure 3 Map of ports in Ho Chi Minh City

Ba Ria-Vung Tau, new region of deepwater ports

The new region for deepwater ports is Ba Ria-Vung Tau Province Tan Can-Cai Mep was the first container and deepwater port developed in the province in 2008 Construction of the first phase of the project was completed in 2009 The port can accommodate ships up to 80,000 DWT during the fist phase and 110,000 DWT during the second phase which is scheduled to operate in 2011

SSA Marine from the United States of America signed a joint-venture with Saigon Port and Vinalines to build a USD 282 million port on 60 hectares at Cai Mep and Thi Vai rivers The port includeS 600 meters of berth frontage and can handle a container throughput of up to 1.35 million TEU per year The port, which begun operation in 2009, accommodates ships of

up to 80,000 DWT

In 2008, Maersk A/S, Saigon Port Company and Vietnam National Shipping Lines (Vinalines), formed a joint venture for Cai Mep International Terminal (SP-SSA), two-wharf container and deepwater port with an investment value of USD 200 million The project is the most ever significant development funded by the state budget through Official Developing Assistance (ODA) The port has been built from 2008 on 48 hectares, its wharves have a total berth lengths of 600 meters and it can accommodate a throughput of up to 1.1 million TEUs per year The trial is taken in late of 2010, serving to container ship Albert Maersk, 352 meters long and 109,000 DWT in weight The operation of the port is expected to reduce congestion in Ho Chi Minh City’s ports

Van Phong port, an international transshipment port near Nha Trang, Khach Hoa Province,

is to be built by Vinalines to serve as a regional hub similar to those operating in Hong Kong and Singapore The port will accommodate ships of up to 200,000 DWT Current plans for the port include terminals for container ships with loading capacity of 15,000 TEUs and 17 bulk cargo piers capable of handling 17 million TEUs a year The first phase of the Van Phong project, scheduled to start in 2010 or 2011 and finish in 2015, will see construction of two large and five small berths with a quay size of up to 2,260 meters This would allow the

facility to handle 9,000 TEU vessels and have a total container throughput capacity of two million TEUs per year

The Ministry of Transport has assigned Vinalines to develop a deep water port at Lach Huyen, in northern Vietnam near Haiphong The port will be the largest transshipment port in northern Vietnam, accommodating ships of 60,000 – 80,000 DWT The port will include four container terminals, two bulk cargo terminals, and five terminals for food and other goods.Total capacity would be 35 million tonnes of goods per year Its construction is expected to begin in 2011

Operation and Volume

The largest local operator is the Vietnam National Shipping Lines (Vinalines) This state-owned companies is also the main developer of almost all port construction projects in the country

Until 2005, the volume of freight traffic by river has stably grown In the following years expansion became more difficult for the sector since almost all barges, the most common means of river transport in the country, were becoming old and unsafe and there was a lack

of specialized bulk cargo ships

Figure 4 New Port Development Map

Source: Vietnam Infrastructure Report – ICE Hochiminh

Figure 5 Volume of Freight Traffic by River, 2000-2009

0 5.000 10.000 15.000 20.000 25.000 30.000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Year

Source: General Statistics Office

In terms of freight by sea, the data shows a firm growth trend from 2000 to 2010 With respect to the throughput of the port system, Hochiminh City’s ports report that the demand

is usually higher than their capacity APL Shipping line expects demand for container shipment in the south to increase by an average of 20-25% per year from 2011 to 2015

The volume of freight traffic by sea increased on average by 19.6% per year, lifting the total volume to 13.5billion ton km in 2009

Figure 6 Volume freight traffic by sea, 2000-2009

0 20.000 40.000 60.000 80.000 100.000 120.000 140.000 160.000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Year

Source: General Statistics Office

2.1.3 Road

Infrastructure

The statistic of 2007 shows that Vietnam has about 210,000 km of road,17,300 km national highway Roughly 85% of the national roads are paved, while only 54% of the provincial roads, and 20% of the district roads are paved Only ¼ of the road network has more than one

lane and major constraints include narrow widths, poorly designed junctions and restrictive vehicle weight limits

Vietnam does not have a modern expressway linking the northern and southern parts of the country Route 1A running the length of the country is of varying quality, with much of it being a single lane road of insufficient width

To address road infrastructure constraints, the Ministry of Transportation and MPI have developed plans for a series of road upgrades The government has approved an estimated 2,160 km of new highway projects as part of the national Transport Master plan The table below summarizes approved highway projects in Vietnam to 2020

Beside the lack of highway system, the inefficiency of urban roads is also a challenge to container transfer towards or inside major cities The traffic congestion seriously increases time of forwarding The problem, moreover, seems not so easy to be solved in the short term

Table 2 Summary of approved highway projects in Vietnam to 2020

Source: VEC- Vietnam Expressway Corporation, 2008

Operation and Volume

In 2009 there were over 1,050 enterprises registered in the road transport business, which included 16 state-owned enterprises, 233 limited liability companies, 350 private companies and 450 joint stock companies Very few foreign invested companies are present Most road transport companies are of small and medium scale Each company owns about 50 vehicles,

on average

Road transport accounts for around 60% market share of domestic cargo There has been a 16% yearly growth, on average, in the volume of freight road transport over the last 10 years The total freight traffic reached 30 ton/km Bln in 2009 It is assumed that the data should be higher when adding the freight forwarded by tens of thousands of individual