Vietnam developing as Asian rival to China
published: cw 18, 2007 in Emerging markets & outsourcingFollowing what has now become a familiar path, DHL has announced the start of an investment programme in Vietnam, aiming to establish a nationwide infrastructure including hubs in Hanoi and Dong Nai and depots in Da Nang and Hai Phong. DHL follows on from rivals such as FedEx that have sought to establish own account operations in Vietnam.
Like China, Vietnam has been slow to permit unrestricted foreign investment, instead relying on joint ventures. In the case of DHL it has established a relationship with the state run post office, the VNPT.
At the moment the sums of money are hardly large, with DHL investing US$14m. However it indicates that Vietnam is being perceived by major logistics companies as an important future market and a rival for investment for China.
An indicator of this is the planned heavy investment in ports by international container terminal and shipping groups. For example the Port of Zeebrugge and Sumitomo are presently discussing a joint-venture with the Vietnamese State shipping line to create two big container ports at Hai Phong and Khanh Hoa. These investments are badly needed as the existing port infrastructure is unable to cope with present trade flows.
Like China, Vietnam is likely to use container ports as a base for accessing world markets, offering foreign manufacturers an alternative to Shanghai and the Pearl River Delta for low cost manufacturing services.
This flood of investment has resulted in economic growth of around 8% in Vietnam in the past couple of years. Although the manufacturing sectors concerned include the usual areas of textiles and low cost consumer durables, an increasing number of electronics and engineering companies are looking to invest in Vietnam. The country also has substantial natural resources including the substantial oil reserves.
Vietnam entered the WTO in 2006 and this continues to have a beneficial affect on the climate for investment, although Vietnam is yet to reform its restrictions on wholly owned logistics operations.
With a broad coastal plan and some good natural harbours Vietnam is not only well positioned to develop its own logistics infrastructure but conceivably could act a magnate for traffic from southern China. However the two countries have a history of acute rivalry. In addition Vietnam would have to access investment flows comparable to those being spent in eastern China.
Source: Transport Intelligence
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