Middle East conflict: What should Vietnamese firms do to ease logistics bottlenecks?

Rising tensions in the Middle East have made maritime routes through the region less secure, forcing many companies to seek alternative ways to maintain supply chains to the market. Given this, im-export consultancy firm Vietgo and its partners in the region have proposed logistics solutions for Vietnamese businesses.

Middle East opportunities in a conflict-time economy

According to Vietgo CEO Nguyen Tuan Viet, geopolitical tensions in the Middle East are unlikely to derail the Vietnamese government’s target of achieving double-digit export growth this year. However, the changing environment requires businesses to stay flexible, adjusting both their export product mix and supply strategies for the market.

Oman is one destination highlighted by Viet and Vietgo’s partners in the Middle East.

Muhammad Zeeshan, a representative of Khazina for Business in Oman, said the country remains safe and trade flows are continuing normally. He said Oman is still open to imports, adding that goods can be transported overland from Oman to neighboring countries affected by the conflict.

Meanwhile, businesses from the UAE and Kuwait said the two countries have been heavily affected by hostilities involving the U.S., Israel and Iran. Maritime logistics through the Strait of Hormuz have been nearly paralyzed, while air transport has also faced major disruptions. Kuwait shut its seaports and airports for five consecutive days, with the UAE experiencing similar difficulties.

Zeeshan said ocean freight rates from Vietnam to the Middle East are among the most competitive compared with other Southeast Asian countries, giving Vietnamese exporters an advantage as demand for “wartime” goods such as clothing and food in the region remains high.

Once the conflict subsides, demand is likely to shift toward reconstruction-related products, Viet noted.

What businesses should watch?

Zeeshan said that once shipments arrive in the Middle East, Oman continues to provide a full range of transport services, including bulk shipping and overland transport to neighboring countries.

Meanwhile, Viet noted that Oman may increase imports from Vietnam in the coming period. “Companies in Oman could directly import goods currently in short supply in the Middle East and re-export them to neighboring countries during this period,” he explained.

Viet held that disruptions to trade with conflict-affected areas are likely to ease within the next few weeks due to humanitarian factors.

Vietnamese businesses should closely monitor payments via letters of credit (LCs) during this period, he said, explaining that with the shipping sector facing disruptions and vessels harder to secure, LCs could easily expire before shipments are completed. Companies should proactively seek extensions to avoid payment difficulties, he suggested.

According to ALSI, a leading logistics firm in Oman, it is well known that the oil industry is the backbone of Oman’s economic development. The current fluctuations in the oil sector can make a heavy impact on the economic growth of the country.

To support this imbalance in the oil sector, Oman is keenly concentrating on diversifying the economy by developing the non-oil based sectors. With an aim to reduce the over-reliance on the oil sector, Oman will now focus on developing the logistics to achieve economic growth.

“The potentiality of Oman to develop as a global logistics hub is boundless because of its geographic location. The future of logistics sector of Oman is extensively strong because it links both the east and west sides of the world,” ALSI said.