Vietnam's logistics business is developing rapidly, and its warehousing and operating costs are the lowest in the world

Hanoi and Ho Chi Minh City are two of the favorite cities for foreign investors because their warehouse rents, labor costs, and electricity and fuel prices are among the lowest in the world.

It is understood that in Hanoi, the rent is about US$5 per square foot, and in Ho Chi Minh, the rent is less than US$10.

Analysts at Savills said rental costs did not tell the whole story, with labour costs typically the largest component of warehousing operations, often accounting for more than half of all operating costs.

Across all markets studied, average labor costs were $11 per employee per hour. The cost of electricity and fuel for building and fleet operations is also a major factor in warehouse operations.

Savills said that taking all three together, Vietnam has the cheapest warehouse operating costs, making the country of great interest to international manufacturers.

Troy Griffiths, deputy general manager of Savills Vietnam , said: “The Vietnamese government has been investing heavily in infrastructure while promoting industrial clusters to attract companies with tax breaks, which will attract companies further up the value chain.”

Savills analysts said the boom in e-commerce during the pandemic is driving warehouse demand in most markets, and pressure on warehousing costs is expected to continue.

Since Vietnam has the lowest warehouse operating costs, how is Vietnam's logistics industry developing?

It is understood that the logistics industry is one of the fastest growing sectors in Vietnam's economy, and its growth rate may exceed GDP. The Vietnamese government aims to achieve an annual growth rate of nearly 20% in logistics by 2025.

In the first three quarters of 2020, Vietnam’s import and export revenue was close to US$390 billion, an increase of 1.8% compared with the same period last year, according to the General Statistics Office (GSO).

In terms of weight, Vietnam’s cargo throughput grew steadily between 2010 and 2018, with a compound annual growth rate (CAGR) of 8.4%.

Three-quarters of Vietnam’s freight volume is transported by road, which grew by 5% during the period. Meanwhile, the share of water transport fell from a quarter of cargo tonnage to a fifth. The rail and aviation sub-sectors together transport less than 1% of cargo by weight .

In terms of freight tonne-kilometers, Vietnam’s freight traffic achieved a compound annual growth rate of 9.6% between 2010 and 2018. During this period, Vietnam’s aviation industry grew by 150% and was the main driver of growth.

logistics

Cross-border e-commerce market

Southeast Asia