Vietnam’s logistics industry is expected to thrive this year despite the global economic volatility, but sustainable long-term growth needs infrastructure development, analysts said.

Freight volumes would increase in all transport subsectors as the country’s economy recovers, market researcher Fitch Solutions forecast.

Air transport would grow the fastest at 14.6%, followed by road (10.1%) and rail (4.4%), it said.

Shipping is also expected to experience positive growth on the back of strong trade growth, it said.

But Vietnam only ranks 71st out of 201 markets in terms of transport network with a moderate score of 56.8 out of 100, with the limited extent and quality of network infrastructure being “key challenges to investors,” it said.

“An overreliance on road networks for passengers and freight raises the risk of supply chain disruptions. Businesses spend more on insurance to protect against the risk of their goods being damaged and employees getting injured.”

HSBC also said Vietnam needs to focus on infrastructure development, which was interrupted for two years by the pandemic, in a report it released in August.

A master plan for road development approved last September envisages increasing expressways from the current 1,290 kilometers to 5,000 km by 2030.

The pace of construction of the Long Thanh International Airport and north-south high-speed rail network is also picking up.

But many of the projects have experienced delays and cost overruns, with many of the 11 sections of the north-south expressway being completed after their 2017-20 deadlines, HSBC said.

Slow disbursement of public funding for infrastructure is also a hurdle, with spending as of July being only 34.5% of the funds earmarked for this year.

Public-private partnerships are a possible alternative to public projects, but their scale is limited.

Vietnam needs to reform its investment environment to encourage private participation in infrastructure, HSBC said.

Meanwhile private players are investing heavily to expand their capacity.

Gemadept, a leading ocean transporter, will start constructing the second phase of its Gemalink deep-water port soon to open it by 2025.

That will triple its capacity to nearly three million twenty-foot equivalent units (TEUs) a year.

The B2C race is also heating up with J&T Express opening a 60,000-square-meter warehouse in HCMC’s Cu Chi District in May.

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