In today’s globalized economy, businesses are constantly on the lookout for new markets to drive expansion and growth strategies.
One of the most promising markets emerging on the global stage is Vietnam, and its logistics and distribution sector is at the heart of its rapid development.
The logistics industry now accounts for around 4.5% of Vietnam’s GDP, making it one of the fastest-growing sectors in the country, at a growth rate of 14-16% annually according to the World Bank.
With Vietnam’s total import-export turnover reaching $683 billion in 2023 and $369.62 billion in the first half of 2024 – a 16% increase compared to the same period in 2023, the importance and potential of this sector is undeniable.
Market Insights
Logistics Infrastructure: Paving the Way for Southeast Asia’s Next Logistics Hub
Vietnam is making substantial investments in its logistics infrastructure, focusing on enhancing seaports, airports, and transportation networks to foster a more efficient and responsive logistics environment.
In 2024, the government allocated $27 billion for public investment, with a significant portion dedicated to infrastructure projects. Key initiatives include the construction of 5,000 kilometers of new expressways and the expansion of major airports like Long Thanh International Airport, which is poised to become the largest in the country, capable of serving 100 million passengers and 1.2 million tonnes of cargo annually.
Additionally, deepwater ports such as Lach Huyen in Hai Phong are being developed to accommodate larger container ships, enhancing Vietnam’s capacity to handle increasing trade volumes. These efforts are part of a broader strategy to position Vietnam as a critical logistics hub in Southeast Asia, offering lucrative opportunities for businesses to utilize robust and efficient distribution systems in the region.
Vietnam’s Green Growth Strategy and the Transformation of the Logistics Sector
Vietnam’s National Green Growth Strategy for the period 2021-2030, with a vision to 2050, aims to “green-ify” various economic sectors, including logistics. This initiative focuses on restructuring the economy with sustainable growth models, emphasizing environmental sustainability and social equity.
Key sectors in logistics, such as Transportation and Freight Forwarding, Smart Warehousing and Cold Chain, Material Handling Equipment, Logistics Technology Applications, and Industrial and Seaport Infrastructure, are witnessing remarkable advancements.
Additionally, the Vietnamese logistics market is small but has a high growth rate (20% – 25% / year) the rise of e-commerce is revolutionizing the logistics landscape. In recent times, this market is expected to change the face and grow faster due to the development of electronic retail in Vietnam and e-Logistics logistics trends in the world.
In-Depth Analysis
Investors are increasingly drawn to Vietnam’s key sectors, including in the manufacturing and service industries. When comparing these sectors with those in other Southeast Asian- countries, Vietnam stands out due to its competitive production costs, skilled labor force, and strong government support for foreign investment.
For instance, Vietnam’s food processing industry is projected to grow at an annual rate of 8-10% over the next five years, driven by rising domestic demand and export opportunities. This growth is significantly higher than the average growth rate in neighboring countries, offering a compelling advantage for investors seeking to enter the Asian food market.
In the household goods sector, Vietnam’s exports are expected to increase by 15% annually, thanks to its expanding middle class and growing consumer base. The country’s favorable trade agreements, such as CPTPP, further enhance its attractiveness as a hub for manufacturing and exporting household goods to other ASEAN nations and beyond.
Lumber processing is another area where Vietnam is gaining ground. The country is now the fifth-largest furniture exporter globally, with the industry expected to grow by 5-10% annually. This is partly due to Vietnam’s strategic shift towards sustainable forestry practices and its commitment to meeting international standards, such as FSC certification.
Opportunities
As Vietnam’s numerous industries continue to evolve and grow, logistics will remain at the heart of it all. Vietnam is naturally positioned to be a logistics hub, with its advantageous geography offering 2260 km of coastline.
Additionally, with 18 active and planned free trade agreements (the most of any ASEAN country) offering unprecedented access to world markets, a rapidly evolving manufacturing ecosystem, and growing domestic market, Vietnam’s logistics sector is ripe with opportunities.
For example, large global investors may consider making investments in infrastructure development in Vietnam – an opportunity to be invested in the beating heart of Vietnam’s growing economy.
Strategic investors with involvement in the logistics industry elsewhere may consider direct FDI to establish operations in Vietnam, or gain access via M&A opportunities to support local providers with growth.
Finally, boundless opportunities exist for companies who can provide the raw materials, equipment, technology and expertise necessary to fuel the development and evolution of Vietnam’s rapidly emerging logistics space.
The Bottom Line
Whether your business is looking at opportunities in manufacturing, distribution or investment, The Herbers Agency is here to be your trusted partner in Vietnam – providing you with the benefits of being your market representative and helping you find and develop relationships with the right stakeholders.
We are ready to help your business find success in Vietnam.
Contact us today to begin your Vietnam journey!
For more insights on local approach and considering your market entry model on your first step navigating to Vietnam, check out our comprehensive guide on Navigating Vietnam: The First Steps Series. Considering your Market Entry Model
