Southern Vietnam role growing in global supply chain: Cushman & Wakefield

Southern Vietnam is fully capable of competing with Singapore and Hong Kong as a global goods transshipment hub, and utilizing its production capacity to become an inseparable link in the global supply chain, according to consulting firm Cushman & Wakefield.

Ho Chi Minh City, the country’s largest economic hub and located in the south, is proposing to build a $6 billion international container port in the coastal district of Can Gio that would have a capacity three times higher than the city's Cat Lai Port, now Vietnam’s busiest container terminal, Cushman & Wakefield Vietnam's general manager Trang Bui said Monday.

Hosting a press briefing in HCMC, she noted that prominent in the south is the Cai Mep-Thi Vai deep seaport cluster in Ba Ria-Vung Tau province, which in 2020 successfully received the Margrethe Maersk super container vessel with a tonnage of more than DWT214,000 and a capacity of 20,000 twenty-foot equivalent units (TEUs), measuring 400 meters long and 59 meters wide.

“This marked a turning point in Vietnam's marine transportation. For the first time, ocean carriers were able to provide services directly from Vietnam to North America and Europe without consolidators to connect with regional transshipment hubs like Singapore, Hong Kong, and European ones.”

No consolidators needed and reduced transshipment costs are estimated to save about $150–300 per TEU for containers going to and from Vietnam, she added, “Those seaports able to handle such super container vessels are put on the map of global goods transshipment hubs.”

It is clear that the southern population of 40 million people with a rapidly integrating regional economy is an important factor to the region’s new position in the global supply chain, Trang noted.

The southern road network covers the whole region and plays a key role in connecting the transport network between industrial zones, airports, seas, border gates, and traffic hubs. The Southern Key Economic Zone and Mekong Delta have a total national highway length of 3,507 kilometers and three expressways namely HCMC-Long Thanh-Dau Giay (51 kilometers), HCMC-Trung Luong (62 kilometers), and Trung Luong-Can Tho (23 kilometers), with more in the pipeline.

In addition, Asian Highway 1 (AH1) is the longest route of the Asian Highway Network, running 20,557 kilometers from Tokyo, Japan via Korea, China, Southeast Asia, Bangladesh, India, Pakistan, Afghanistan and Iran to the border between Turkey and Bulgaria, where it joins end-on with European route E80 that runs all the way to Lisbon, Portugal. The Southeast Asian part links Thailand’s Bangkok, Cambodia’s Phnom Penh, and HCMC, then runs to the Cai Mep-Thi Vai port cluster.

Trang noted that the distance via AH1 between Cambodia’s Bavet international border gate and HCMC’s Cat Lai Port is about 90 kilometers, shorter than that to Cambodia’s Sihanoukville Port, which is able to handle smaller vessels as it is not a deepwater port.

Southern Vietnam has about 110 ports, of which gateway ports combined with an international transshipment hub in HCMC have been established. HCMC and its neighbor Ba Ria-Vung Tau have large-scale specialized wharves associated with industrial parks, metallurgical complexes, refineries and petrochemicals, and thermal power centers to receive large vessels.

According to Vietnam Maritime Administration, the volume of goods through seaports nationwide in this year’s first half reached almost 371 million tons, up 2% year-on-year. Of this, HCMC contributed 67.2 million tons and Ba Ria-Vung Tau 46.9 million tons.

Among the eight airports in southern Vietnam, HCMC’s Tan Son Nhat has a specialized cargo terminal. For the airports of Can Tho, Phu Quoc, Buon Ma Thuot, Lien Khuong, Rach Gia, Con Dao, and Ca Mau, investments have been made to complete a cargo handling area separated from the passenger transport chain to facilitate the loading and unloading of goods. In future, when Long Thanh International Airport in Dong Nai province opens, it promises to drive the south to develop into a specialized aviation logistics center.

Huynh Buu Tran, chief operating officer of industrial properties developer KCN Vietnam, told Monday’s briefing: “We recorded a sharp increase in inquiries for production expansion from the end of the first quarter upon the post-pandemic reopening of Vietnam’s international borders.”

“However, some new foreign investors are delaying their decisions due to global market uncertainties, lags in the development of infrastructure connections in the south, increasing transportation costs, lengthy approval procedures, or lack of human resources.”

The KCN Vietnam executive added, “Improving efficiency will help manufacturers, logistics providers, and regulators to minimize foreseeable lags. I think what Vietnam should do urgently is to develop quality infrastructure connectivity and develop Vietnamese supply chains and manufacturers.”

In the south and other parts of Vietnam, international industrial real estate developers operating include BW Industrial, ESR, SLP, Maple Tree Industrial, Gaw NP, Logos, Logis Valley, Frasers Property, Sembcorp, and CapitaLand. Vietnam's status as a new global manufacturing base is making the domestic industrial property market hotter.

According to Cushman & Wakefield’s 2022 report, HCMC, Binh Duong, Dong Nai, Long An, and Ba Ria-Vung Tau supply a total of more than 25,000 hectares of industrial land for the south, with occupancy rates up to 89%. The average rental price is recorded at $135 per square meter each lease term.

Sharp FDI increases in the industrial sector continue to drive the development of diversified product models serving newly established small and medium enterprises in the south. The market for ready-built factories and ready-built warehouses has exploded since 2017 with the establishment of BW Industrial as a joint venture between global giant Warburg Pincus and Binh Duong’s Becamex.

As of Q1 2022, the total supply of ready-built factories in the south reached 4.2 million square meters, and ready-built warehouses, 3.9 million square meters, with rental prices ranging from $3.5-6/square meter per month, according to the report.