Vietnam is on its way to becoming a major manufacturing hub in Southeast Asia, with an increasing number of high-tech factories from leading global corporations establishing their presence in the country. This surge in export-import activities has led to a dynamic logistics sector. Concurrently, the domestic market for consumer goods, agricultural exports, and food products continues to grow, highlighting the need for efficient and swift transportation of goods from seaports to their final destinations. This demands comprehensive logistics solutions that optimize both time and cost. Logistics, as a crucial service, plays a supportive role in connecting and driving socio-economic development at both national and local levels, contributing significantly to enhancing competitive capabilities in the economy.
At the Logistics Conference 2023, themed “Logistics in Vietnam – The Road Ahead,” organized by the Investment Newspaper on October 5, 2023, experts, managers, and business leaders discussed the prospects and challenges of the logistics industry in the context of global supply chain shifts in structure and quality. The emergence of new transportation trends, the rise of new supply chains in the digital economy, and the growth in various manufacturing sectors are seen as favorable opportunities that could propel Vietnam into a potential new logistics market, opening a promising “road ahead”. The potential and opportunities are vast. With the existing advantages in capital and technology held by foreign investors, logistics in Vietnam is poised to be a path full of investment potential.
What are Logistics?
According to Article 233 of the 2005 Commercial Law, “Logistics services are commercial activities in which traders, organizations, and individuals perform one or more tasks, including receiving goods, transporting, warehousing, storing, performing customs procedures, other documentation procedures, consulting customers, packaging, marking, delivery, or other related services, by agreement with customers for remuneration.
In its simplest form, logistics refers to the service of transporting goods from production to end consumers. Logistics optimizes the transportation, storage, and management of orders, ensuring that goods are delivered accurately and promptly from the source to the final customer. Regardless of how much investment a business makes in its products or services, if it doesn’t reach the end consumers, it cannot succeed.
Common Categories of Logistics Services
According to Article 3 of Decree 163/2017/ND-CP, there are 17 groups of logistics services provided. However, Vietnamese logistics businesses predominantly offer services such as warehousing, freight transport, and goods delivery. Although other services within the logistics service chain are also provided by some companies, they are fewer in number and have not received significant attention or development.
- Freight Transport Service. This is the primary link in the logistics service chain, one of the most popular and rapidly developing types of logistics services. It encompasses road, rail, air, sea, and multimodal transport—all combined within a single transport contract. This service ensures the safe and efficient delivery of goods from the point of origin to the destination. Large transport companies are often foreign, while most Vietnamese enterprises only handle a portion of the service for international enterprises and shipping lines due to limited competitive capacity and operating costs. Approximately 80% of transport and delivery businesses are of medium or small scale.
- Warehousing Service. Warehousing has become an essential requirement for businesses. However, warehouse management can be complex and costly. Therefore, leasing warehouses is the choice for many enterprises. Warehousing services are one of the main services provided by Vietnamese logistics businesses, with about 53.7% of them offering warehouse services. This service includes managing, operating, and storing goods, ensuring the organized, controlled, and closely monitored storage of goods throughout the storage process. Warehouse services are divided into two main segments: dry cargo warehouses and cold storage warehouses, primarily serving manufacturers, distributors, and companies in the fast-moving consumer goods sector.
- Goods Delivery Service. This service focuses on delivering goods from sales points or warehouses to end customers. It includes express delivery, doorstep delivery, and same-day delivery. The delivery service is implemented through various modes of transport, including road, rail, sea, air, and inland waterways. The development of e-commerce has led to the growth of the delivery service. E-commerce trading platforms such as Lazada, Shopee, and Tiki, with their demand for rapid delivery, have opened a bustling delivery market. Approximately 80.3% of logistics businesses provide domestic and international goods delivery services.
- Other Related Services. Other services such as technical inspection and analysis, wholesale and retail trade, postal delivery, and other transport support services are also developing in Vietnam. Tasks related to customs procedures, import clearance, and selecting cargo coordination methods are relatively complex for businesses. Logistics services expedite these processes. Logistics providers are responsible for completing customs procedures and clearance for supplier shipments based on agreements consistent with the fundamental principles of the Commercial Law.
Rights and Obligations of Logistics Business Traders
Under Article 235 of the 2005 Commercial Law, unless otherwise agreed, traders engaged in logistics business have the following rights and obligations:
- Entitled to service fees and reasonable expenses.
- During contract execution, if there are justifiable reasons for the customer’s benefit, logistics business traders may perform differently from the customer’s instructions but must promptly inform the customer.
- In cases that may lead to the inability to execute part or all the customer’s instructions, the trader must promptly inform the customer to request instructions.
- In the absence of a specific agreed-upon term for performing obligations with the customer, the trader must perform their obligations within a reasonable timeframe.
- When conducting goods transportation, logistics business traders must comply with legal regulations and transport practices.
Additionally, Article 239 of the 2005 Commercial Law allows logistics business traders to retain a certain quantity of goods and related documents to claim overdue payments from customers but must promptly notify the customer in writing. The funds obtained from the disposition of goods are used to settle the amounts owed by the customer and related expenses.
Conditions for Foreign Investors to Engage in Logistics Business in Vietnam
The logistics market in Vietnam has garnered high regard from foreign investors. How can foreign investors participate in this sector?
Here are the general conditions, as outlined in Article 4 of Decree 163/2017/ND-CP:
- Traders engaging in specific logistics services specified in Article 3 of this Decree must meet the investment and business requirements stipulated by the law for those services.
- Traders conducting part or all their logistics business electronically via the Internet, mobile telecommunications networks, or other open networks must comply not only with the specific regulations for the services outlined in Article 3 of this Decree but also with e-commerce regulations.
In addition to the general conditions for traders engaged in logistics services, foreign investors venturing into logistics business in Vietnam must also satisfy the following conditions:
- For businesses engaged in the transportation of goods by sea, excluding domestic transportation. They may establish companies operating Vietnamese-flagged vessels or contribute capital, purchase shares, or participate in joint ventures, with the foreign investor’s ownership not exceeding 49%. The total number of foreign crew members working on these vessels under the ownership of these companies in Vietnam (or registered in Vietnam) must not exceed one-third of the crew complement. The shipmaster or first officer must be a Vietnamese citizen. Foreign maritime transport companies may establish businesses contribute capital, purchase shares, or participate in joint ventures.
- For businesses engaged in container loading and unloading services within support services for maritime transportation (which may be designated specific areas for service provision or subject to licensing procedures in these areas). They may establish businesses or contribute capital, purchase shares, or participate in joint ventures, with the foreign investor’s ownership not exceeding 50%. Foreign investors may establish a commercial presence in Vietnam through a business cooperation contract.
- For businesses engaged in container loading and unloading services within support services for all modes of transportation, excluding services provided at airports. They may establish businesses or contribute capital, purchase shares, or participate in joint ventures, with the foreign investor’s ownership not exceeding 50%.
- For businesses engaged in customs clearance services within support services for maritime transportation. They may establish businesses or contribute capital, purchase shares, or participate in joint ventures, including capital contributions from domestic investors. Foreign investors may establish a commercial presence in Vietnam through a business cooperation contract.
- For other services, including activities such as bill checking, freight brokerage, cargo inspection, sample taking, and weight determination services. They may establish businesses or contribute capital, purchase shares, or participate in joint ventures, including capital contributions from domestic investors.
- For businesses engaged in domestic waterway freight transportation services, and railway freight transportation services. They may establish businesses or contribute capital, purchase shares, or participate in joint ventures, with the foreign investor’s ownership not exceeding 49%.
- For businesses engaged in road freight transportation services. They may operate through a business cooperation contract or establish businesses, contribute capital, purchase shares, or participate in joint ventures, with the foreign investor’s ownership not exceeding 51%. All drivers employed by the company must be Vietnamese citizens.
- For businesses engaged in air freight transportation services. They must operate by aviation laws.
- For businesses engaged in technical analysis and inspection services. Those providing services to execute the government’s jurisdiction must operate as enterprises with contributions from domestic investors after three years, or as enterprises without restrictions on foreign investment contributions after five years from when private service providers were permitted to conduct these services. They are not allowed to engage in inspection services or issue certificates for transportation means. The provision of technical analysis and inspection services is restricted in areas designated by competent authorities for national security reasons.
- Foreign investors are subject to different conditions for engaging in logistics services under international treaties. the investor may choose to apply the investment conditions stipulated in any of those treaties.
Logistics is an integral and indispensable part of economic life, providing a substantial source of revenue for the country and propelling the outstanding development of enterprises. With the advantages in capital, logistics opens a path full of potential for foreign investors. Let’s delve deeper into this in upcoming articles. Don’t forget to follow and check for more valuable information on our website. If needed, feel free to contact us for further guidance: firstname.lastname@example.org.