The International Finance Corporation (IFC), part of the World Bank Group, is making its first investment into Vietnam’s logistics sector.
The lender will provide a $70 million financial package to Indo Trans Logistics Corporation (ITL), it said in a statement on Tuesday. The package is an attempt to support Vietnam’s logistics sector and enhance the country’s economic competitiveness amid the turmoil caused by COVID-19.
“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,” said Kyle Kelhofer, IFC country manager for Vietnam, Cambodia and Laos.
The loan will help ITL acquire new assets, develop new warehouses and facilities, and deploy advanced information technology systems. It is also expected to help the company provide higher quality services to more local manufacturers and small and medium enterprises (SMEs).
“IFC’s long-term funding and international expertise, especially in the context of the current pandemic, is highly valuable support which will enable us to improve the efficiency of ITL’s existing logistic assets and expand our network and business portfolio…,” said Ben Anh, CEO, ITL.
Increasing foreign investment, mainly in manufacturing and processing industries, along with booming local consumption have fueled the growth of logistics in Vietnam over the past few years. However, the local market is still fragmented with over 95 per cent of service providers being SMEs with modest operations and lower competitiveness, according to IFC.
Moreover, high logistics costs are a hindrance to boosting Vietnam’s competitiveness both globally and domestically. Logistics costs account for over 20 per cent of the country’s GDP, show data from the Vietnam Logistics Business Association.
“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,” said IFC’s Kelhofer.
Founded in 2000, ITL provides integrated 3PL logistics, aviation services, freight forwarding, warehousing and contract logistics in Vietnam. The company operates in 30 cities across Vietnam, Cambodia, Laos, Myanmar, Thailand, and Singapore, through a network of 17 subsidiaries and seven associate companies.
In July last year, UK-listed Symphony International Holdings acquired a nearly 30 per cent stake in ITL for $42.6 million, paving the way for the exit of Singapore’s SingPost, which had acquired the shares for $10.8 million in 2011. In 2015, global fund manager Franklin Templeton, through its $220 million Templeton Strategic Emerging Markets Fund IV, invested $15.8 million in ITL in the form of a convertible loan.