Banks and logistics companies shaking hands to become stronger

The Vietnamese logistics market is being dominated by foreign service providers, because most of the 1000 Vietnamese operational logistics companies are small and weak. However, analysts hope the situation will be improved thanks to the hand-shaking deals between the companies and banks.

Logistics companies: numerous, but not strong

At an annual conference of WCA Family of Logistics Networks, the organization gathering the biggest and most prestigious transportation service providers was held in HCM City recently. David Yokeum, Chair of the organization, stressed that WCA, as well as leading logistics companies in the US and Europe, highly appreciate the potentials of the Vietnamese logistics market.

There are 1000 logistics companies in Vietnam, but the high number of companies does not show the strength of the companies. Most of the companies are only capable to provide separated services, while they cannot provide a one stop shop service to its customers, or 3PL (third party logistics) service.

It is estimated that only 10-15 percent of Vietnamese companies now can undertake 3PL service. Meanwhile, foreign service providers are holding 95 percent of the market.

A senior executive of the Military Bank said that the biggest problems of Vietnamese logistics companies are the poor infrastructure and bad equipment, which makes the logistics costs in Vietnam higher than that in other countries; thus putting heavy burdens on enterprises.

Regain market from foreigners, why not?

Dang Tan Phong, Head of the Business Planning Division of ICD Tan Cang Song Than, still keeps optimistic about the prospect of Vietnamese logistics companies. Since the beginning of 2011, when the company opened a modern distribution center, ICD Tan Cang Song Than has made breakthroughs to compete with foreigners for 3PL service contracts.

The above mentioned manager of the Military Bank, said that in order to settle the big problems, is necessary for logistics companies and commercial banks to cooperate to improve their capability

In fact, banks and logistics companies once joined forces to earn money in the past, but the number of cooperation affairs tends to increase recently. The common thing of the cooperation affairs is to take full advantage of involved parties to best support customers in their export activities.

Recently, Vinalink, a freight forwarding service provider and Eximbank signed a cooperation agreement on providing the import-export support service package to customers with the participation of Bao Minh, an insurer. Under the agreement, Eximbank will provide to their customers the banking services relating to the L/C (letter of credit) opening or payment methods and procedures. Meanwhile, Vinalink and Bao Minh will undertake other works, including customs declaration, freight forwarding, insurance policies and other formalities.

Similarly, under the agreement signed between Vinalink and Techcombank, the two sides will cooperate to provide logistics financing service package to domestic enterprises, import-export companies and foreign invested enterprises as well.

Vietinbank, one of the biggest banks in Vietnam, earlier this year signed an agreement with Vietrans to provide the export service package based on the cooperation among Vietinbank, Bao Ngan and Vietrans. Clients can enjoy preferential interest rates applied to all kinds of credit and non-credit services.

The cooperation between Military Bank and Tan Cang Saigon Corporation, the leading container port developer now in Vietnam, has led to the launching of the logistics service fee payment package, a method to modernize the payment method at Tan Cang Port. The package allows clients to shorten the time for following procedures at ports, a very significant thing for enterprises, as the expenses at ports account for 40-60 percent of the logistics fees.-TBKTVN

Tags: Vietnam banking industry, Vietnam finance, Vietnam financial