E-COMMERCE
ACCELERATION
Southeast Asia is also seeing some
of the world’s fastest growth in
e-commerce purchases. In the
12 months to the end of June
2019, the number of people in
Asean countries who made online
purchases grew by 17%, according
to the GlobalWebIndex. Nine in ten
Indonesian Internet users between
the ages of 16 and 64 now make
online purchases each month,
compared to the global average
of 75%. Thailand, Malaysia and
Vietnam are all ahead of the global
averages, too.
Zara have all used Vietnam
as a manufacturing base.
Meanwhile, global technology
companies Apple, LG,
Microsoft and Samsung have
invested billions of dollars in
Vietnamese factories. Other
Southeast Asian countries
with a strong manufacturing
base include Thailand,
Malaysia and Indonesia.
The global shipper CH
Robinson saw the potential
in Southeast Asia several
years ago and opened an
offi ce in Ho Chi Minh City,
in 2015. It was a logical fi rst
port of call, as 70% of total
cargo volumes in Vietnam
go through there. Matt
Castle, Vice President, Global
Forwarding, says that the
experience of operating in
Vietnam has been so positive
that CH Robinson has since
expanded to Hanoi, as well
as develop a strong presence
in Bangkok and Thailand
generally.
But Castle has seen a major
acceleration in the Southeast
Asian cargo market over the
past 18 months, especially
in Vietnam. Last year, when
President Donald Trump fi rst
imposed tariffs and other
trade barriers on China, a lot
of CH Robinson’s customers
began to change their strategy
in the Asia Pacifi c region.
“They realised they were too
heavily invested in China and
needed to start diversifying
their procurement strategies,
which led into their logistics
strategies,” Castle recalls.
The impact of
manufacturers looking to
move away from China and
into Vietnam, in particular, has
been signifi cant for air cargo.
For example, AirBridgeCargo
recently announced a 53% rise
in volumes going out of Vietnam to the US. ABC was previously
running weekly fl ights out of Ho Chi Minh and Hanoi, but has
increased the frequency to three and two fl ights respectively. ABC
puts the rise directly down to the shift in production from China
to Vietnam.
Nevertheless, these sudden shifts in strategy are causing
logistical problems for air cargo operators. ABC has had to deal
with a sudden large imbalance between exports and imports.
Only about 30% of the company’s inbound cargo for Southeast
Asia from the US is heading for Vietnam. Instead, most of it
goes to Taiwan or Singapore, or other destinations. As a result,
despite the boom in trade to the US, ABC needs to solve a host of
logistical problems to ensure shipments remain profi table.
Future prospects bright
The opportunities for air cargo shippers based in Vietnam are
likely to continue as the manufacturing exodus from China
continues. According to a report from Japanese investment
bank Nomura Securities, for example, Vietnam is poised to gain
product orders diverted from China that are equivalent to 7.9% of
its GDP. The same Nomura report also found that other countries,
such as Malaysia, Indonesia and the Philippines, will also benefi t
from the trade spill-over, albeit on a smaller scale.
There remain signifi cant barriers to overcome, however, in
order to take advantage of the potential. In particular, Vietnam’s
underdeveloped infrastructure, including poorly built roads and
congested ports, remains a hindrance. Meanwhile, the nation’s
airports are congested with passenger aircraft, meaning slots
have become an issue, especially at Ho Chi Minh and, to a lesser
extent, at Hanoi airport. The new US$5.4bn airport planned at
Long Thanh, near Ho Chi Minh, would ease the burden, but
won’t be operating within the next fi ve years.
Capacity is a problem right across the Asia Pacifi c region,
according to Vinoop Goel, IATA’s Regional Director for Cargo and
External Relations, Asia Pacifi c. “Most airports already operate
way beyond their stated capacity – both airside and landside.
Several airports have issues with either the ability to handle
airport and warehouse capacity due to spikes in air cargo volumes
or infrastructure in and out of the airport complex,” he says.
“Some airports that do not have infrastructure barriers include
Kuala Lumpur International airport and Singapore Changi
airport. While others, like Suvarnabhumi airport in Bangkok and
Soekarno-Hatta International airport in Jakarta, have expansion
plans – but have yet to act on them.”
The question of production planning
Production capacity is another issue that needs to be addressed
urgently. In Vietnam, the demand from multinationals wishing
to relocate manufacturing from China is outstripping supply.
And the problem is not unique to Vietnam. The authors of
the Nomura report suggested that Southeast Asian countries
needed to “invest in production capacity and improve labour
productivity through training programmes, or the movement
When we talk
about air cargo in
Southeast Asia,
all roads lead to
Vietnam
Frederic Horst, Managing Director,
Cargo Facts Consulting
www.airlogisticsinternational.com December 2019 39
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