Made in Vietnam: Emerging logistics giant isn’t slowing down post-TPP

The Achilles heel

For Vietnamese manufacturers, supply chain connectivity is essential, which is why industries like textiles are thriving, since their supply chains are less complex and easier to set up, even in underdeveloped countries. For electronics, however, much more modern air cargo facilities are needed. “The country’s air cargo capacity and abilities are improving, but there will be challenges in the future due to growth,” said C.H. Robinson’s Tan. “Customs delays are still a challenge for freight forwarders in Vietnam. Right now, growth is still sustainable for the next three to five years, but without investment, importers and exporters will run into problems.”

Currently, according to Corinna Seidel, department head of communications for the Asia-Pacific region for German forwarder Dachser, “both ports and airports are lacking capacities.” For example, Ho Chi Minh Airport has little ramp room for the cargo aircraft needed to meet the demand from nearby factories. She added that the road and rail network, particularly the north-south railway connection between Hanoi and Ho Chi Minh City is insufficiently developed.

Vietnam, it seems, is responding with economic pragmatism, hoping that current infrastructure development can keep pace with demand for fast and reliable transportation. In a 2014 speech, IATA boss Tony Tyler noted that Vietnam ranks 82nd in the Infrastructure Index of the World Economic Forum’s Global Competitiveness Report. Among the ten ASEAN states, Vietnam is ranked sixth. Vietnam is addressing these low rankings with significant investments. It has announced an aviation master plan to have 26 airports by 2020. Expansion programs are underway at Hanoi and Ho Chi Minh airports, with the new Long Thanh International Airport to be ready by 2020.

From a logistics standpoint, DHL-GF’s Li noted that “there are ample opportunities to move textiles/agricultural products from Vietnam to Europe, and pharmaceuticals, car parts and food products from Europe into Vietnam. Vietnam offers huge potential for logistics development over the coming years. However, for the industry to develop further in Vietnam, there are some areas that need to be enhanced, such as infrastructural development, government policies to support logistics development and simplifying customs processes.”

Japanese investment consulting firm Seiko Ideas Corp. anticipates that air cargo will expand at 6.6 percent per year through 2020. The usual rule applies here – airfreight accounts for a small volume of exports, but up to 25 percent by value. In addition, air cargo accounts for higher value-added production such as more sophisticated electronics and high-value fashion.