Vietnam emerges as destination for global supply chain diversification

Vietnam is emerging as a new manufacturing hub as more multinationals shift production from China. Please tell us about the investment opportunities in Vietnam’s logistics sector.

Vietnam remains an attractive market for foreign investors and manufacturers and is set to rise as one of the manufacturing hubs in Asia, potentially replacing China as "a factory of the world" in the future.

This has a huge impact on Vietnam’s logistics sector as the country becomes a destination for supply chain diversification to reduce global overreliance on one country and scale production across multiple suppliers and regions.

Supply chain connectivity is essential both within the region and globally connecting the flow of raw materials to the manufacturing hubs, and the finished goods to the local, regional and global markets. The complexity of supply chain management increases to manage not only the physical flow of goods, but also to manage information and financial flows in the entire supply chain ecosystem.

Vietnam Superport in Vinh Phuc, as a logistics hub with state-of-the-art facilities, will provide multimodal connectivity by air, sea, rail, and road for manufacturers in northern Vietnam to have seamless access to both their suppliers' landscape as well as their customer base regionally and globally. There is also an on-site supply chain and logistics academy to train and develop logistics talents for the industry and contribute to Vietnam’s economic growth.

What are the advantages and disadvantages in Vietnam’s logistics sector for both domestic and international companies?

Vietnam is rising to be a manufacturing hub due to its expanding skilled workforce and strategic location. This is causing the migration of large manufacturing firms to switch their attention from China to Vietnam, increasing the influx of opportunities to transport materials or subassemblies to the latter. With this, Vietnam is growing exponentially to become a factory of the world, driving the growth of demand in air and sea modes to rise significantly.

However, Vietnam has very high logistics costs at 20-25% of its GDP compared to its neighboring countries. These costs have been exacerbated by the disruptions caused by the Covid-19 pandemic since 2020.

To remain competitive, Vietnam has targeted to reduce logistics costs to 16-20% of GDP. In a bid to reduce the costs, the government is developing the structures and ecosystems necessary to support and ensure an efficient supply chain to enable the logistics industry to continue to thrive as a lucrative source of income for the country.

The development of infrastructure includes Vietnam SuperPort, a multimodal logistics hub to facilitate the movement of goods to provide the options for users to store, move, and ship goods within and beyond Vietnam. The growth of Vietnam as a manufacturing hub would also see the necessity to ensure the availability of warehousing equipped with facilities to meet storage demands which would also include the government stepping up on the regulations and processes to reduce inefficiencies in the industry.

Please be specific about the Vietnam Superport project’s business strategy.

The hub is a logistics nerve center with connectivity by air, sea, rail, and road. Our MoUs with connectivity partners such as Vietnam Airlines, Vietnam Railway Corp and recently with Vietnam Maritime Corporation serve to unlock supply chain values by reducing congestion, decreasing multiple touchpoints and increasing efficiency in handling processes for multimodal transit shipments within the country and beyond.

The project plan was launched in November 2020 and the groundbreaking ceremony was held in December 2021.

What is the World Bank’s financial arm IFC doing to support the project?

Vietnam SuperPort has received the interest from the IFC. The World Bank unit provides their support in funding the project to attract more investors, as well as developing a bankable and sustainable project.