The International Finance Corporation (IFC) is investing in Vietnam’s logistics sector for the first time by providing a financing package of US$70 million to Indo Trans Logistics Corporation of Vietnam (ITL). The funding, announced on August 11, is designed to support the development of the country’s logistics sector, thus facilitating trade and enhancing the competitiveness of the economy in the time of Covid-19.
Vietnam’s logistics sector, according to IFC, has enjoyed strong growth over the past few years. This can be attributed to the record-high foreign investment mainly in manufacturing and processing industries – both require a strong logistics function – and booming local consumption.
However, the logistics sector is fragmented with more than 95% of service providers being local small and medium enterprises with modest operations and lower competitiveness. Consequently, a few players with foreign investment lead the market, providing high value-added services. In view of this, the government is implementing a comprehensive plan to boost the competitiveness of the domestic logistics segment.
IFC’s investment is timely as long-term funding is not readily available in view of the Covid-19 situation. The funding will help ITL, one of the leading domestic logistics companies in Vietnam, transform and grow by acquiring new assets, developing new warehouses and facilities, and deploying advanced information technology systems.
Further, it will enable ITL to provide higher quality and sophisticated logistics services to its customers, including local manufacturers and small and medium enterprises.
“IFC’s long-term funding and international expertise, especially in the context of the current pandemic, is a highly valuable support which will certainly enable us to improve the efficiency of ITL’s existing logistics assets and to expand our network and business portfolio to serve our customers better,” says ITL CEO Ben Anh.
In addition, IFC will help the company improve its environmental, social, and corporate governance (ESG) standards for sustainable development.
High logistics costs impact the overall cost of doing business and negatively affect Vietnam’s competitiveness. “This is why, despite uncertainties amid the ongoing pandemic, IFC is steadfast in its commitment to support essential investment in Vietnam’s logistics supply chain to help facilitate more efficient and competitive trade,” says IFC country manager for Vietnam, Cambodia and Lao People’s Democratic Republic Kyle Kelhofer.
He adds: “IFC’s investment in companies like ITL aims to support the growth of domestic private logistics firms capable of providing comprehensive and efficient logistics services. This will help improve the sector’s capacity to serve the growing higher value-added manufacturing and processing industries, which require a more sophisticated, efficient, and lower-cost logistic function.”