feasibility study

FEASIBILITY STUDY OF LOGISTICS BUSINESS IN

VIETNAM

5th March 2013

Private & Confidential

CONTENTS

Section 1 Legal Aspects of Logistics in Vietnam Slide 1-19

Section 2 Macroeconomics of Vietnam Slide 20

Section 3 Overview of Vietnam Logistics Industry Slide 21-24

Section 4 Vietnam Transportation Sector Slide 25-32

Section 5 Transportation by Truck Slide 33-38

Section 6 Vietnam Warehousing & Distribution Sector Slide 39-46

Section 7 Target & Potential Customers Slide 47-66

Section 8 Financial Feasibility Study Slide 67-76

Section 1

LEGAL ASPECTS OF LOGISTICS IN VIETNAM


GENERAL CONDITIONS FOR ENGAGING IN LOGISTIC SERVICE BUSINESS

GENERAL CONDITIONS FOR ENGAGING IN MAJOR LOGISTICS SERVICES

a) Having lawful business registration or investment

certificate under Vietnam Law;

b) Having sufficient facilities, equipment and tools

meeting technical and safety standards and qualified

personnel (For example: facilities, equipment and

tools can be forklifts, chains, conveyors, labeling tools,

packing machines, encoding machine and especially

qualified staff).

c) For services of loading and unloading of goods, the

required foreign capital contribution percentage of the

Company is under or equal to 50% of the charter

capital.

d) For goods warehousing and storage services, the

required foreign capital contribution percentage of the

Company is under or equal to 51% of the charter

capital; this restriction shall terminated in year 2014.

e) For transport agency services, the required foreign

capital contribution percentage of the foreign

investors is under or equal to 51% of the charter

capital. This restriction shall terminate in year 2014.

f) For other subsidiary services, the required foreign

capital contribution percentage of the Company is

under or equal to 49% of the charter capital; this

restriction shall be 51% as from year 2010 and shall

terminate in year 2014.

GENERAL CONDITIONS FOR ENGAGING IN LOGISTIC SERVICES RELATING TO TRANSPORT

a) Having lawful business registration or investment certificate under laws of Vietnam;

b) The Company must satisfy the specific conditions for different transport business (See the following

details).

c) For maritime transport services:

With respect to the Company in management and operation of a vessels fleet: (i) the required capital

contribution percentage of the Company with foreign capital is under or equal to 49% of the charter

capital; and (ii) the Company with foreign capital shall only permitted to establish as from 01 January

2009;

With respect to the Company in supplying international sea transportation services: the required capital

contribution percentage of the Company with foreign capital is under or equal to 51% of the charter

capital. These restrictions will terminate in year 2012.

d) For Internal waterways transport services, the required foreign capital contribution percentage of the

Company is under or equal to 49% of the charter capital.

e) For air transport services, conditions shall be applied in accordance with the Vietnam Civil Aviation Law.

f) For railway transport services, the required foreign capital contribution percentage of the Company is

under or equal to 49% of the charter capital;

g) For road transport services, the required foregin capital contribution percentage of the Company is

under or equal to 49% of the charter capital; this restriction shall be 51% as from year 2010;

h) For pipeline transport services, the Company shall not be permitted to provide pipeline transport

services, except where an international treaty of which Vietnam is a member contains some other

provision.

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SPECIFIC CONDITIONS FOR ENGAGING IN TRANSPORT BUSINESS

SPECIFIC CONDITIONS FOR ENGAGING IN ROAD TRANSPORT BUSINESS

According to the Article 11 of the Decree 91, the Company must fully meet the following conditions:

a) To register for road transport according to law of Vietnam;

b) To ensure the quantity, quality and life of means of transport suitable to types of business:

Having a business plan ensuring the time for performance of itineraries, the time for maintenance and repair to maintain the technical conditions of vehicles;

Having an adequate number of means of transport under the Company’s ownership or lawful rights to use vehicles on financial lease of financial leasing organizations or

hired vehicles of organizations or individuals with the property leasing function under law. The quantity of means must meet the business plan; and the means of transport

remain in the prescribed lifetime; and they must go through technical safety and environmental protection inspection under regulations.

c) Means of transport must have itinerary supervision devices;

d) Drivers and attendants: drivers and attendants must possess written labor contracts signed with the Company; drivers must not be persons being in the period of professional

practice ban under law; taxi drivers, bus drivers and attendants must be trained and instructed in transport and traffic safety under regulations of the Ministry of Transport.

e) Persons directly administering transport activities of the Company (who hold any of the following posts: director, deputy director, manager or deputy manager, head of

transport administration section) must fully satisfy the following conditions:

Possessing the professional qualifications of intermediate level in transport or a collegial or university degree in other disciplines;

Having participated in transport management at other road transport enterprises for 3 (three) years or more;

Having adequate necessary time with proof for direct administration of transport activities.

f) Car parks or garage:

The Company shall arrange adequate areas for car parking in accordance with its respective business plans;

Units’ car parking areas may belong to the Company’s ownership or be rented under contracts;

Car parking places must meet the requirements on traffic order and safety, fire and explosion prevention and fighting and on environmental sanitation.

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SPECIFIC CONDITIONS FOR ENGAGING IN ROAD TRANSPORT BUSINESS (cont.)

According to the Article 47,48,49 of Circular 14, the Company uses the transport vehicles bearing name, telephone number, weights and permitted tonnage

on the outer sides of their cabin doors. Taxi trucks must have freight rates posted up on both sides of their bodies. Before putting the vehicles into use for

cargo transport, the Company shall send written notices to the local Transport Department in which they are headquartered or base their branches. During

transport on road, in addition to the transport contract or bill of lading and vehicle paper as prescribed, the driver shall carry along an ex-warehousing bill for

each trip (applicable only to case of ex-warehousing a cargo) issued by the transport hirer or the cargo owner suitable to the category of the transported

cargo.

When transporting the dangerous goods provided under the Appendix 1 of Decree 104/2009/ND-CP, the Company has to obey the provisions strictly on

packing, labeling, coloring and marking, labor safety and training, specialized facilities and obtain the transport license for dangerous goods from one or more

of the following Ministries such as Police, Health, Science and Technology, Agriculture and Rural Development, Natural Resources and Environment.


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SPECIFIC CONDITIONS FOR ENGAGING IN OTHER DIFFERENT TRANSPORT BUSINESSES

a) Sea transport business:

Regarding the Decree No. 115, the Company must satisfy:

Conditions for providing shipping agency business services: The Company providing shipping agency business must establish an enterprise in accordance with law of Vietnam,

and in the case of an enterprise with foreign owned capital the ratio of capital contribution of the foreign parties must not exceed forty- nine (49) percent of the charter capital of

the enterprise.

Conditions for providing towage assistance business in Vietnamese seaports: The Company providing towage assistance business in Vietnamese seaports must establish an

enterprise in accordance with law of Vietnam, and in the case of an enterprise with foreign owned capital the ratio of capital contribution of the foreign parties must not exceed

forty-nine (49) per cent of the charter capital of the enterprise which must have a towing vessel registered to fly the Vietnamese flag.

Conditions for providing other sea shipment services: The provision of other sea shipment services by the Company shall be implemented in accordance with Vietnam's WTO

undertakings and international treaties of which Vietnam is a member.

b) Inland waterway transport

According to the Article 10 of Decree No.21, the Company must satisfy the following conditions:

Having registered for inland waterway transport business;

Vessels to be used in transport business fully meet the conditions for operation as prescribed in the Law on Inland Waterway Navigation;

Crewmembers and vessel operators must have professional diplomas or certificates compatible with their titles and be in the prescribed age group.


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SPECIFIC CONDITIONS FOR ENGAGING IN OTHER DIFFERENT TRANSPORT BUSINESSES (cont.)

c) Air transport business:

Pursuant to the Article 5 and Article 11 of the Decree 30 and the Article 110 of the Vietnam Civil Aviation Law, the Company conducting air transport business must satisfy the following

conditions:

Having a business registration certificate showing that the major business line is air carriage; Having an organizational apparatus, employees who have appropriate permits and

Certificates and is capable of operating aircraft and dealing in air carriage;

Head office and principal place of the Company must be in Vietnam;

Having a plan on assurance of the availability of aircraft for operation; Having a business plan and a strategy on development of air carriage products in accordance with market demands

and complies with Vietnam’s aviation sector development plan and orientation;

Foreign capital must be less than and equal 30% of the required legal capital;

General director, legal representative of the Company must be a Vietnamese citizen. A number of foreigners account for not more than one third of the total number of members of its

executive apparatus.

Beside the above-mentioned conditions, the Company providing air transport services must meet the following minimum capital conditions of 100 billion dong.

d) Railway transport business:

According to the Article 12 of Decree No.109 detailing and guiding the implementation of a number of articles of Railway Law, the Company operating railway transport must satisfy the

following required conditions:

Having business registration compatible with railway transport field ; Having equipment and material foundation suitable to railway transport field; Having the valid certificate of quality,

technical safety and environment protection registry;

Signing contracts for provision of railway communication and transport operation services with railway communication and transport operation organization;

Persons assigned with the prime responsibility for technical management of transport operation must have a university degree and at least three (3) years' experience in railway transport

operation. Personnel directly involved in train operation must satisfy all the conditions prescribed in Article 46 of the Railway Law and must firmly grasp the railway process and

regulations.

For passenger transport and dangerous cargo transport by railways, the Company must have insurance contracts;

For urban railway transport business, the Company must also have plans on organization of train operation, ensuring safe, regular and punctual train operation according to the

announced train operation time tables.


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SPECIFIC CONDITIONS FOR ENGAGING IN OTHER DIFFERENT TRANSPORT BUSINESSES (cont.)

e) Custom agent:

Conditions: Pursuant to the Article 2 of Decree No.14, the Company with a function of customs agent must meet fully the conditions:

Having a business registration or investment certificate under law.

Conducting the business line of forwarding imports and exports or providing the service of hired customs declaration indicated in its business registration certificate.

Having at least one (1) customs agent.

Having its computers connected to customs offices for carrying our e-customs procedures at Customs Departments of provinces or cities (below referred to as provincial-level

Customs Departments), which have applied e-customs procedures.

E-customs declaration: There have been a lot of changes in custom procedures with electronic-customs, one-stop customs, and tax claims… The Decision No.87 on electronic

customs to be in effect on January 1st, 2013 will surely make great changes this year. With the target of having 100% of businesses doing export procedures with electronic

customs in 2013, the task is carrying out in the rest of 13 provincial customs agencies (in 2012, 21/34 provincial customs agencies have electronic customs). In 2013, the

Government should put more emphasis on reformations of administrative procedures related to manufacturing businesses (tax and customs procedures, paying tax through

bank systems, automating file-considering processes…) and should give more trade incentives (reducing production coast, supporting packages…). These things will help

businesses overcome obstacles, creating more employments. Vietnam’s Logistics Performance Index (LPI) has been low for weakness in clearance procedures and administrative

procedures on services, and business. With above changes, there will be a raise in Vietnam LPI in the year to come.


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LAW ON MULTIMODAL TRANSPORT

CONDITIONS FOR INTERNATIONAL & DOMESTIC MULTIMODAL TRANSPORT

a) Conditions for international multimodal transport:

According to the Article 5 of the Decree No.87, the Company with foreign capital in Vietnam may conduct international multimodal transport business only when satisfying all

the following conditions:

Possessing an investment certificate, which covers the international multimodal transport business line;

Maintaining minimum assets equivalent to SDR 80.000 or providing an equivalent guarantee;

Having professional liability insurance for multimodal transport or providing an equivalent guarantee;

Possessing a license for international multimodal transport business.

b) Conditions for the domestic multimodal transport business:

According to the Article 9 of the Decree No.87, the Company with foreign capital in Vietnam may conduct domestic multimodal transport business only when satisfying all the

following conditions:

Having a business registration certificate that covers the multimodal transport business line;

Having a contract on professional liability insurance for multimodal transport;

Complying with business conditions provided for by law for each mode of transport.

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RIGHTS & OBLIGATIONS OF THE COMPANY PROVIDING LOGISTIC SERVICES

Rights and obligations of the Company providing logistic services is one of the basic content of the laws on logistics services. Rights and obligations are scattered across the general

provisions and the specific provisions of Vietnam law system relating to logistic services. As stipulated in the Article 235 of the Commercial Law 2005, the involved parties have the

right to discuss with each other on the rights and obligations. It is meant that the laws always prefer the agreement of the involved parties for the subject to the forefront. In cases

where the involved parties cannot reach agreement, their rights and obligations are stipulated in the Article 235. Specifically:

a) To enjoy service charges and other reasonable expenses: service charges are agreed by the involved parties in the contract. The remuneration may be determined by the

absolute amount or as a percentage of value of goods. The remuneration is agreed by the involved parties and depends on the content, the level of complexity of the delivery of

goods to customers who do consignment goods to service providers. In addition to remuneration, the Company may require customers to pay the reasonable expenses related

to the implementation of the service if this is agreed upon in the contract.

b) Besides the right, the Company providing logistics service has the obligation to perform the works as agreed upon with the customers. This is considered the most fundamental

obligations of the Company to ensure the interests of customers. The works can be done as agreed upon in the contract of logistics service. In principle, the Company providing

logistics service obeys strictly the instructions of the customers. However, to ensure the customer’s benefits by the clause 1b,1c of the Article 235 of the Commercial Law 2005

provides: "In the course of the contract, if there is good reason for the benefit of customers, the Company providing logistics services can be done other than the customer's

instructions, but must inform the customers; When a case can not lead to the implementation of part or all of the customer's instructions, the Company must immediately

notify the customer to ask for advice”.

c) The Company providing logistics services also have a duty to perform work for customers in a reasonable time when the parties have agreed. As for logistics services related to

transport, the Company is obliged to comply with the specific provisions of law and transport practices.

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LIABILITY OF THE LOGISTICS COMPANY

LIABILITY LIMITS

The Article 238 of the Commercial Law 2005 specified “Unless otherwise agreed, the full liability of the company providing logistic services shall not exceed the limits of liability for

the full loss of the goods”. Under this provision, the limits of liability of damages the Company in providing logistic services is an exception to the remedy of damages in commercial

activity in general as defined in the Article 302 of Commercial Law 2005 “The value of damages covers the value of the material and direct loss suffered by the aggrieved party due to

the breach of the breaching party and the direct profits which the aggrieved party would have earned if such breach had not been committed”. Moreover, general principle of

liability for damages set forth in the Civil Code 2005, the breaching party causes how much damage they are responsible for such damage. In particularly for logistic services, the

company is entitled to limits of liability that shall not exceed the limits of liability for loss of goods. However, not all cases the Company is entitled to limit this liability. In the case of

"if customers having relevant rights and interests prove a loss, damage or delayed delivery of goods by the Company deliberately act or not to act," the Company providing logistic

services will not be entitled to limit liability damages.

According to the item 1, Article 8 of Decree No. 140, liability limits of the Company providing transport-related logistics services comply with relevant legal provisions on liability

limits in the transport field. It means that “Where the company uses to ship cargo, the liability limits are specific provisions of the Maritime Code, the Decree 115 or in case they use

car to transport cargo, the liability limits are referable to the Road Traffic Law, Law on Road Transport….”. In case, liability limits of the Company providing logistics services other

than those prescribed above (in the item 1, Article 8 of Decree No.140) shall be agreed upon by involved parties. In case, no agreement has been reached between involved parties,

the liability limits are implemented under: (i) If the customer has no advance notice of the cargo value, the maximum liability limit is VND 500 million for each claim for

compensation; and (ii) If the customer has an advance notice of the cargo value and that value was certified by the Company providing logistics services, the liability limit is the whole

value of the cargo.

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LIABILITY LIMITS (cont.)

According to the Article 24 of the Decree 87, in the case, the Company acting as multimodal transport, the liability limits of the Company are stipulated as follows: (i) The Company

shall in no event be or become liable for any loss of or damage to the goods in an amount exceeding the equivalent of SDR 666.67 per package or unit or SDR 2 per kilogram of gross

weight of the goods lost or damaged, whichever is higher, unless the nature and value of the goods have been declared by the consignor before the goods have been taken in charge

by the Company and inserted in the multimodal transport document; (ii) In case in a container, pallet or similar article of transport is loaded with more than one package or unit, the

packages or other shipping units enumerated in the multimodal transport document as packed in such article of transport shall be deemed packages or shipping units. In other cases,

such container, pallet or article of transport or packaging shall be considered the package or unit; (iii) If a multimodal transport contract does not include carriage by sea or inland

waterways, the liability of the Company shall be limited to an amount not exceeding SDR 8.33 per kilogram of gross weight of the goods lost or damaged; (iv) When the loss of or

damage to the goods occurred during one particular stage of the multimodal transport, in respect of which an applicable treaty or national law would have provided another limit of

liability if a separate contract had been made for that particular stage of transport, then the limit of the Company's liability for such loss or damage shall be determined by reference

to such treaty or national law; (v) If the Company is liable in respect of loss following delay in delivery or consequential loss or damage other than loss of or damage to the goods,

his/her liability shall be limited to an amount not exceeding the equivalent of the freight under the multimodal transport contract; (vi) The aggregate liability of the Company shall

not exceed the limits of liability for total loss of the goods; and (vii) The Company is not entitled to the benefit of limitation of liability if it is proved by the person with related

interests that the loss, damage or delay in delivery resulted from a personal actor omission of the Company done with the intent to cause such loss, damage or delay or recklessly

and with knowledge that such loss, damage or delay would probably result.

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LIABILITY EXEMPTION

The Company providing logistic services is exempt from liability in the following cases: (i) breach of contract is not their fault, and (ii) cases of force majeure (natural disasters,

sabotage, strikes, or due to changes in laws and policies beyond the control of the company.

According to the Article 22 of the Decree 87, in the case, the Company acting as the multimodal transport operator, the Company is not liable for loss, damage or delay in delivery

with respect to goods carried if he/she proves that the event which caused such loss, damage or delay occurred during that carriage is one or more of the following circumstances:

a) Force majeure;

b) Act or neglect of the consignor, the consignee or his/her representative or agent;

c) Insufficient or defective packaging, marking, or numbering of the goods;

d) Handling, loading, unloading, stowage of the goods effected by the consignor, the or his/ her representative or agent;

e) Inherent or latent defect in the goods;

f) Strike or lockouts or stoppage or restraint of labor, whether partial or general;

g) With respect to the goods carried by sea or inland waterways, when such loss, damage or delay during such carriage has been caused by: (i) Act, neglect or default of the master,

mariner, pilot or the servant of the carrier in navigation or in the management of ship; and (ii) Fire unless caused by the actual fault or connivance of the carrier.

In case loss or damage has resulted from un-seaworthiness of the ship, the Company is not liable for such loss or damage if he/she can prove that due diligence has been exercised to

make the ship seaworthy at the commencement of the voyage

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FORMATION OF THE COMPANY


a) Forms of investment:

Pursuant to the Articles 21 of Investment Law 2005, foreign investors shall carry out the following main forms of investment by establishing shareholding company with 100%

foreign owned capital or making a Joint Venture with local investors. Moreover, foreign investors can buy shares, contribute capital; make investment in the merger or

acquisition of local logistic enterprises; buy shares or contributed capital for participation in management of investment; and invest in business development and make

investment in the form of BCC,BOT,BTO or BT contracts.

b) Forms of the Company:

Based on the Enterprise Law 2005, the Company can be established as a limited liability company, or shareholding company and the profits and risks of the Company are

distributed among the parties in proportion to their charter capital contributions.

In a limited liability company, investors (members) are only liable for debts of the Company to the extent of the capital contribution they have poured into the company. There

is usually no minimum capital requirement for foreign investors that intend to establish the Company in Vietnam, although authorities will expect the investor to commit a

reasonable amount of charter capital according to the scale and business scope of the project. The Company can consist of a single member or multiple members, but the total

number of members cannot exceed 50 . The Company cannot issue shares.

Investors (shareholders) can refer to establish a shareholding Company if they want to issue securities and bonds, then plan to go public in the future. The charter capital is

composed of shares belonging to founding shareholders in proportion to the capital they have subscribed. There is no minimum requirement for the charter capital of the

foreign investors. The established joint stock Company is required to have at least three shareholders. There is no limitation on the maximum number of shareholders.

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RIGHTS & OBLIGATIONS OF THE COMPANY

a) Rights:

According to the Articles 13 to 18 of Investment Law 2005, the Company had the following its rights:

Right to autonomy in investment and business in term of domains and forms of investment, modes of capital mobilization, geographical areas, investment scale, investment

partners and operation durations of projects; register business in one or several branches or trades; set up enterprises under the provisions of law; and make their own

decisions on registered investment and business activities. Possessing an investment certificate, which covers the international multimodal transport business line;

Right to access and use investment resources such as assistance funds, capital sources, land and natural resources; hire or purchase equipment and machinery at home or

overseas for execution of investment projects; hire domestic, foreign labors, specialists for performance of managerial job.

Right to import (equipment, machinery, supplies, raw materials and goods for investment activities) and export products; advertise and market products or services directly sign

advertising contracts with organizations entitled to conduct advertising activities; undertake processing or reprocessing of products; and order processing or re-processing at

home or abroad;

Right to buy foreign currencies at credit institutions licensed to deal in foreign currencies in order to satisfy their current transactions, capital transactions and other transactions

in accordance with the provisions of foreign exchange management law; Right to assign or adjust investment capital or projects; Right to carry out mortgage of land use rights

and assets attached to l and with licensed credit organizations to borrow capital for execution of projects.

a) Obligations:

According to the Articles 20 of Investment Law 2005, the Company had the following its obligations :

To comply with the provisions of law on investment procedures; to carry out investment activities strictly according to contents of investment registration and their

investment certificates; and to be responsible for the accuracy and truthfulness of contents of registration, dossiers of investment projects and legality of documents of

certification.

To fulfill financial obligations and the provisions of law on accountancy, audit and statistics.; To perform other obligations in accordance with the provisions of law; To perform

obligations provided by insurance and labor laws; to respect the honor, dignity and ensure the legitimate interests of laborers.

To respect and create favorable conditions for laborers to establish and participate in political or socio- political organizations.

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BUSINESS ACTIVITIES

Based on Decision No.10 and Decision No.337, the Company with foreign capital will be able to choose and apply some or all business activities below:

Business activity Description Code

Freight rail transport Urban, rural & inter-province transport 4912

Freight transport by road Transport by truck, container truck, specialized vehicles 4933

Transport via pipeline Transport of water, gas, liquid, petrol 4940

Sea & coastal freight water transport Fixed schedule or non-fixed schedule transport 5012

Inland freight water transport Transport via waterways, river, canal, lake 5022

Air transport Ordinary or non-ordinary transport 5120

Warehousing & storage Storage of goods in silos, tanks, warehouse, cold storage, including bonded warehouse 5210

Cargo handling Loading/unloading activities 5224

Other transport support activities

Sorting or organizing activities relating to rail, road, sea or air; freight-forwarding; collection and

distribution of shipping documents, B/L; customs agent, sea/air cargo agent, brokerage for

vessel and aircraft leasing; packing, unloading, sampling and weighing.

5229

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THE NEW LABOR CODE ON THE COMPANY

THE NEW LABOR CODE ON THE COMPANY

The new Labor Code, which will take effect on May 1, 2013, will replace the current Labor Code of 1994, Labor Code 2002, and Labor Code 2006 with the stated aim of improving the

labor market and industrial relations in Vietnam. The new legislation introduces significant new developments relating to labor contracts, work hours, labor outsourcing, internal

labor rules, and foreign employees; each of will be discussed separately below.

Increasing the minimum salary level during probation from 70% to 85% of full salary;

Adding an extra day to the Lunar New Year holiday, bringing the total number of public holidays in Vietnam (during which employees are entitled to fully paid leave) to ten ;

Increasing maternity leave from four months to six months ;

Labor contracts must be signed between the Company and the employee before the employment begins.

Prohibiting the Company from keeping employees’ original identification cards and qualifications. Moreover, the Company may not require an employee to pay cash or provide

any assets to guarantee performance under the labor contract.

Working hours can be determined on a daily or weekly basis; if on a weekly basis, the normal working hours may not exceed 10 hours in one day and may not exceed 48 hours in

one week. With respect to overtime, employees are not allowed to work more than 50% of the official working hours in a day (in cases where weekly working hours are applied,

the total time of normal work and overtime work may not exceed 12 hours in one day), 30 hours in a month, or 200 hours in a year.

Introducing an entirely new section on labor outsourcing. This is good news for foreign-invested companies in the manufacturing and construction sectors, given that such

work often requires seasonal workers and/or limited-time workers during certain periods.

The new Labor Code reduces the maximum term of a work permit for foreign employees from three years to two years. As before, the domestic company is only permitted to

recruit foreign employees for jobs as managers, executives, experts, and technicians, provided that Vietnamese employees are not able to satisfy the production and business

requirements. However, now the Company may only recruit foreign citizens to work in Vietnam upon explaining their needs to employ the foreign workers and receiving prior

approval in writing from the competent Labor Department.

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KEY TAXES AFFECTING THE COMPANY

The year 2012 also witnessed significant reforms in Vietnam’s tax environment. The National Assembly passed several changes in the Tax Administration Law, Personal Income

Tax Law, and Labor Code, which will be effective from 2013. The tax reforms were also brought by the release of various Decrees and Circulars on Corporate Income Tax (“CIT”),

Value Added Tax (“VAT”) and Foreign Contractor Tax (“FCT”), much of which continued the roadmap of tax reform announced earlier by the prime minister in 2011.

a) Corporate Income Tax: In July 2012, the Ministry of Finance issued Circular No.123, replacing several former Circulars. The Circular No.123 consolidated the tax rules and

interpretations provided in various “Official Letters” issued earlier and provided clarifications of the application of tax incentives, some of which were welcomed by businesses,

while others were received with much debate and mixed reaction. Much debate centered on the clarification of unavailability of tax incentives to income from expansion of

investment and investment in “newly established enterprises,” which have undergone changes in the legal form and ownership or which have inherited assets or other

commercial advantages of a former enterprise. The Circular No.123 determined 25% rate of corporate income tax applicable the Company (excluding petroleum enterprises in

prospecting, exploration and exploitation; trading in precious and rare natural ores). The Circular No.123 also confirms that no tax incentive is available to gains from real estate

transactions (derived by businesses other than eligible real estate businesses), and transfer of projects or mining rights. The Circular No.123 restricts the use of losses from

ordinary business activities to offset against “other income” to defer tax incentive period and/or to reduce tax liabilities. It also prohibits the distribution of tax losses to joint

venture partners after dissolution. However, the rules on carry-forward of tax losses were expanded to allow interim quarterly rollover of tax losses. Tax concessions for small-

and medium-enterprises (SME) and labor-intensive enterprises. Incomes from capital transfer determined under the formula: (iii)Taxed income = Transfer price – Purchase

price of the transferred capital – Transfer expense.

b) Tax incentive adjustments for export company:Effective January 1, 2012, following Vietnam’s WTO commitments, export based tax incentives have been abolished. Taxpayers

who were granted export-based tax incentives might now elect an alternative tax incentive scheme and notify the tax authorities of their election. Detailed guidance for making

such an election is available in the Circular No.199 recently released by the Ministry of Finance on November 15, 2012.

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KEY TAXES AFFECTING THE COMPANY

c) Value Added Tax: Effective March 1, 2012, the Circular No.06 took effect and introduced several key changes including: prescribing additional exempt transactions and services

(relating to insurance, financial services, security trading, debt factoring, currency trading, health, education and vocational training); introducing a new list of VAT-ignored

(rather than exempt) transactions whereby buyers may still claim the associated input tax, and hence a relief from VAT leakage; fine-tuning the VAT treatments for services

provided by non-residents, disposal of assets by non-business entities or individuals, disposal of mortgages held by credit institutions, and intercompany transfer of fixed assets

etc. The Circular No.06 also clarifies the application of 0% VAT to in-country import/export activities, prescribes specific VAT treatments for international transport and logistics

services, and allows input credit for VAT suffered by buyers in various situations, including natural shrinkages and damages of inventories, consumption of supplies for mixed

purposes, advertising, marketing and promotion, internal consumption.

d) Foreign Contractor Tax: The foreign contractor tax regime has also undergone several changes as a result of the changes in CIT and VAT regimes. The Circular 60 took effect on

27 May 2012 and introduced several changes including the imposition of Foreign contractor tax on cross-border trading transactions conducted in the forms of DDP/DAT/DAP of

INCOTERM and in-country import/export transactions. Also, several on-line transactions are now taxable including advertising, marketing, and training. Some of the deemed

withholding VAT and CIT rates have also been changed. For instance, the CIT withholding rates have reduced from 10 per cent to 5 per cent for interest and from 2 per cent to

0.1 per cent for overseas re-insurance commissions, while the deemed CIT rate for management services in hotels, restaurants and casino has increased from 5 to 10 per cent.

e) FDI profit remittance: According to Circular No.186/2010/TT-BTC dated 18.11.2010, and effective as of 02.01.2011, guiding the offshore remittance of profits earned by the

Company with foreign capital, profits are remitted abroad are lawful profits after fulfilling all their financial obligations towards the Vietnamese Government. Profits to be

remitted abroad from Vietnam may be (i) in cash complies with the law on foreign exchange management and (ii) offshore remittance of profits in kind and conversion of their

value comply with the law on goods import and export and relevant laws. Profits to be remitted abroad are determined based on audited financial statements and CIT

finalization declaration. The Company may not remit abroad profits they shared or earn from their direct investment in a year of profit generation in case that year’s financial

statements of the company in which they make investment still contain accumulative loses after such losses are carried forward.

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ASEAN’S COMMITMENTS ON LOGISTICS

ASEAN’S COMMITMENTS ON LOGISTICS

It has been 6 years after accepting the Protocol 2007 on building a roadmap for fast integration of logistics services in ASEAN countries for an ASEAN single-market in 2015 by means

of liberalizing measurements in all services. Liberalizing trade and customs procedures includes removing most of tariff and non-tariff barriers. Right in 2006 Vietnam issued a list of

items and special preferential tariff rates to implement ASEAN’s Common Effective Preferential Tariff (CEPT) the period of 2006-2013. Vietnam has prepared and carried out seriously

the roadmap of reducing taxes and giving out tax incentives to encourage liberalization trade, investments and expand Vietnam import-export to regional countries. And it has had

achievements as improvements in clearance procedures, applying e-customs; approaching one-stop customs…these are premises for Vietnam to integrate to ASEAN regional

logistics. In the process of implementing ASEAN Protocol, Vietnam has actively approved issues related to free trade and customs to keep everything on track and to meet

requirements. Especially, the implementation of Greater Mekong Sub-Region Cross-border transport Facilitation Agreement and cross-border agreements with Laos, Cambodia, and

China has initially carried out effectively.

Implementing free trade and investments in logistics sector, offering investment chances for businesses in logistics sector. For ASEAN countries, 2013 is the time set for liberalization

most of substantial logistics services subsectors. Vietnam has conformed, encouraged and facilitated trade and investments in logistics sector. Many FDI businesses from other

ASEAN countries have been in many logistics sub-sectors in Vietnam and even hold great market shares. Vietnam has had a new appearance in its infrastructure and sea ports since

2009 today through the Government’s processes of liberalization and diversify. Vietnam has contributed greatly to Roadmap Towards an Integrated and Competitive Maritime

Transport, ASEAN Multilateral Agreement on the Full Liberalization of Air Freight Services, as a base for ASEAN “Open Skies” in 2015.

Upgrading logistics management ability besides regulations of logistics services in Vietnam Commercial Law (2005), there are regulations of conditions for doing logistics businesses,

sea transport and multi-modal transport… and other related law (Laws of Maritime, Road, Railway, Civil Aviation…) Logistics management agencies (the Ministry of Trade and

Industry, the Ministry of Transport…) have issued legal documents to serve the roadmap to regional and international logistics integration. In 2011 and 2012, Vietnam in turn

approved ASEAN Framework Agreement on Multi-modal Transport and on Facilitation of Cargo in Transit.

18


WTO’S COMMITMENTS ON LOGISTICS

WTO’S COMMITMENTS ON LOGISTICS

There are many different commitments on services sectors in the Commitment Schedule on Services. In this part, we take a quick look into the transport service sector only.

a) Maritime Transport Services: Vietnam’s commitments on the maritime transport services are considered as more favorable than that of other countries when having joined

WTO before, including China.

Establishment of registered companies for the purpose of operating a fleet under the national flag of Vietnam: after 2 years from the date of accession, foreign investors are

permitted to establish a joint-venture with foreign capital contribution not exceeding 49% of total charter capital. Foreign seafarers may be permitted to work in ships under the

national flag of Vietnam (or registered in Vietnam) owned by joint venture in Vietnam but not exceeding 1/3 of total employees of the ships. The master of first chief executive

must be Vietnamese citizen.

Upon accession, foreign shipping companies can establish a joint venture with 51% foreign ownership. After 5 years from the date of accession, foreign shipping companies can

establish 100% foreign-invested company.

b) Maritime Auxiliary Services:

Container handling services (CPC 7411): A joint venture with foreign capital contribution not exceeding 50% can be established.

Customs Clearance Services: In 2012, foreign investors can set up a 100% foreign owned company.

Container Station and Depot Services: In 2014, foreign investors can set up a 100% foreign owned company.

c) Air Transport Services: The main air transport services committed by Vietnam include marketing and sales of airline-related products services, computer-based reservation

services and aircraft maintenance and repair services (CPC 8868). Before January 11, 2012, a foreign investors can only establish a joint venture to provide aircraft maintenance

and repair services with a cap of 51% of the total charter capital. However, after that a foreign investor will be permitted to set up a 100% foreign invested company. Foreign

investors must use public telecommunication network under the management of Vietnam telecommunication authority to supply the computer-based reservation services.

Foreign airlines are permitted to provide marketing and sales of airline-related products service in Vietnam through their ticketing offices or agents in Vietnam.

d) Internal Waterways Transport and Rail Transport Services: foreign investors are permitted to establish a joint-venture and are entitled to own up to 49% of charter capital of

the joint-venture providing internal waterways transport and rail transport services in Vietnam.

e) Road Transport Services : Given that the local road transport market is at the initial stage of development, Vietnam’s commitments regarding these services are quite limited and

try to protect local business for a long term. According to the Commitment, foreign investors are entitled to own up to 49% of the charter capital of joint ventures. After 3 years

from the date of accession, subject to the market demand, joint ventures with foreign capital contribution not exceeding 51% may be established to provide freight transport

services. One hundred % of joint venture’s drivers shall be Vietnamese citizen.

f) Services Auxiliary to all Modes of Transport: The foreign capital contribution in a joint-venture providing services auxiliary to all modes of transport will be increased gradually.

After January 11, 2014, foreign investors are permitted to set up 100% foreign owned company providing storage and warehouse services (CPC 742) and freight transport agency

services (CPC 748). No limitations will be imposed on foreign capital contribution in a joint venture providing other services auxiliary to all modes of transport, except for

container handling services (CPC 7411).

19

Section 2

MACROECONOMICS OF VIETNAM


MACROECONOMICS OF VIETNAM

6.2%

5.3%

6.8%

5.9%

5.0% 5.2% 5.2%

0

500

1,000

1,500

2,000

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

2008 2009 2010 2011 2012 2013F 2014F

Vietnam – Real GDP Growth Rate & Nominal GDP per capita

Nominal GDP per capita (USD per capita) Real GDP (%)

Source: IMF

8.3%

23.1%

6.7%

12.0% 10.3%

6.5% 5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2007 2008 2009 2010 2011 2012 2013F

Vietnam’s Average Inflation

Source: IMF

-

20

40

60

80

100

120

140

2009 2010 2011 2012

Breakdown of Vietnam’s Export

Others

Machinery, transportequipment

Textiles, clothing, footwear

Wood and paper products

Chemicals, rubber products

Mineral & Fuels

Food

Agricultural products

Seafood & Fishery

US$bn

Source: Vietnam’s General Custom

-

20

40

60

80

100

120

2009 2010 2011 2012

Breakdown of Vietnam’s Import

Others

Manufactures

Garment materials

Wood and paperproducts

Chemicals, rubberproducts

Mineral & Fuels

Food

Seafood & Fishery

US$bn

Economic growth rate: Vietnamese economy had

an average GDP growth rate of 5.8% in the last 5

years. In 2012, Vietnam’s GDP was 5.0%, slower

than 5.9% in 2011 and 6.8% in 2010 as

policymakers struggled to counter soaring inflation.

The outlook remains positive and the economy has

become much more stable since 2013

Inflation rate: along with the price increases in

raw materials and dramatic inflows of foreign

investments, inflation has been a serious issue in

Vietnam with the peak of 23% in 2008. Thereafter,

Vietnamese government has implemented tight

money policy, dropping the inflation rate down to

6.5% in 2012. However, Vietnam’s inflation

landscape still remains highly volatile

After 20 years deficit, Vietnam has enjoyed trade

surplus in 2012. FDI saw high growth of US$72.29

billion in export revenue, accounting for more than

63% of the country’s total figure and an increase by

31.2% over last year, while export value from the

domestic sector was US$42.33 billion, up only

1.32%

Source: Vietnam’s General Custom

20

Section 3

OVERVIEW OF VIETNAM LOGISTICS INDUSTRY


OVERVIEW OF VIETNAM LOGISTIC INDUTRY

Despite of a weak transport infrastructure, Vietnam

is still perceived as one of the major logistics hubs

for ASEAN in the near future

Although still being at an infancy stage, the potential

growth of Vietnam’s logistics market has been

confirmed by many researches of well-known

insitutions, for example, being placed 53rd out of

155 countries in the ranking of the global logistic

sector in 2012 by World Bank, as well as ranked 6th

in the survey undertook by Transport Intelligence to

choose countries would emerge as major logistics

markets in the next 5 years

However, Vietnam should put more effort to

improve its infrastructure and the efficiency of

transport and logistics management to decrease

logistics costs. Currently, Vietnam’s logistics costs

accounts for up to 25% of GDP, much higher than

15% of Thailand, 8% of Singapore or the world

average of 12%

ASEAN LOGISTICS PERFORMANCE INDEX (LPI)

Global Rank

ASEAN Rank

LPI Score

Customs Infrastructure International

shipments Logistics quality & competence

Tracking & tracing

Timeliness

Rank Score Rank Score Rank Score Rank Score Rank Score Rank Score

Singapore 1 1 4.13 1 4.1 2 4.15 2 3.99 6 4.07 6 4.07 1 4.39

Malaysia 29 2 3.49 29 3.28 27 3.43 26 3.4 30 3.45 28 3.54 28 3.86

Thailand 38 3 3.18 42 2.96 44 3.08 35 3.21 49 2.98 45 3.18 39 3.63

Philippines 52 4 3.02 67 2.63 62 2.8 56 2.97 39 3.14 39 3.3 69 3.3

Vietnam 53 5 3.00 63 2.65 72 2.68 39 3.14 82 2.68 47 3.16 38 3.64

Indonesia 59 6 2.94 75 2.53 85 2.54 57 2.97 62 2.85 52 3.12 42 3.61

Cambodia 101 7 2.56 108 2.3 128 2.2 101 2.61 103 2.5 78 2.77 104 2.95

Laos 109 8 2.50 93 2.38 106 2.4 123 2.4 104 2.49 111 2.49 118 2.82

Myanmar 129 9 2.37 122 2.24 133 2.1 116 2.47 110 2.42 129 2.34 140 2.59

Source: World Economic Forum, The Global Competitiveness Report, 2012-2013

China

India

Brazil

Russia

Turkey

Vietnam

UAE

South Africa

Mexico

1

2

3

4

5

6

7

8

9

Perceived major logistics markets for the future in rank order

Source: Transport Intelligence

25%

18%

15%

13%

13%

11%

10%

8%

0% 10% 20% 30%

Vietnam

China

Thailand

India

Malaysia

Japan

US

Singapore

Logistics Cost as % of GDP

World Average of 12% (IMF)

Source: China Business Review 2012

21


OVERVIEW OF VIETNAM LOGISTIC INDUTRY

In Vietnam, the logistics costs make up 25% of

GDP, while transport costs account for 50-60% of

the logistics costs, much higher compared with

the average rate of 15% in the world

Transportation and warehousing continues to be

the most outsourced basic services in Vietnam,

mostly provided by local and state-owned

enterprises, transport agencies, and warehouse

specialists.

Specialized logistics services such as inventory

management, vendor management, climiate

controlled transporation and warehousing services

in contrast are exclusively provided by

multinational 3PL logistics and freight forwarding

companies such as FedEx, Maersk, APL, DHL and

Schenker to multinational end-user companies.

Most of these specialized services are generally not

outsourced as individual services, but as a part of

the complete 3PL package

LOGISTICS INDUSTRY

TRANSPORTATION FORWARDING WAREHOUSING VALUE ADDED SERVICE

RAILWAY AIR WATERWAY ROAD Dry storage Cold storage

55% 31%

14%

Logistics Cost Breakdown

Transportation Warehousing Management

Source: Transport Intelligence, SCM Analysis

0% 20% 40% 60% 80% 100%

Outbound transportation

Outbound warehousing

Inbound transportation

Inbound warehousing

Inventory management

Warehouse management

Order processing

Vendor management

Custom information and support

Reverse logistics

Climate controlled logistics

Logistics Outsourcing Trends

2012

2008

Source: Frost & Sullivan

22


KEY LOGISTICS HUBS

Hanoi, Da Nang, and Ho Chi Minh City are the

current major logistics hubs in Vietnam, in

Northern, Central and Southern regions,

respectively

Hanoi is highlighted by the presence of large

number of consumer goods manufacturers, textile

industries as well as construction activities which

are direct customers for the logistics industry.

Da Nang is also a logistic hub with an important

strategic location in central of Vietnam. It has a big

port, the Da Nang Port, which is a gateway to

central Vietnam. The city is home to agricultural

processing, software, and IT industries and is also a

key location for seafood exports.

Ho Chi Minh City is the biggest logistics hub in

Vietnam, making up 70% of freight transportation

and 60% of overall logistics industry share. The city

is noted by easy access to major seaports, airports,

and national highways as well as the comparatively

developed transport infrastructure in each of these

transportation modal.

23


KEY PLAYERS

70%

30%

Market Share in Vietnam Logistics Industry

Foreign companies

Domestic companies

LIST OF JAPANESE LOGISTICS FIRMS OPERATING IN VIETNAM

No. Company Source: VLA

1 Nippon Express (Vietnam) Co.,Ltd

2 Sagawa Express Vietnam Company Limited

3 Dragon Logistics Co., Ltd

4 Logitem Vietnam

5 Yusen Logistics International (Vietnam) Co., Ltd

6 Konoike Vinatrans Logistics Co., Ltd

7 Japan Logistics Systems Corp

8 Mitsubishi Logistics Corp

9 Nkv Logistics Ltd

10 Joint Venture Sunrise Logisticcs Co., Ltd

THE PRESENT OF TOP 10 GLOBAL LOGISTICS COMPANIES IN VIETNAM

Ranking Company’s Name Established Year Type Number of offices

Employees

Main Customers

1 DHL/Exel Supply Chain 1994 100% 4 100+ Motorola, Proter & Gamble, PMG

2 Kuehne + Nagel 1995 RO 2 100+ IKEA, Harman,Nortel, Siemens

3 Schenker/BAX 1990 JV 6 160 Fujitsu, Metro, Top of World

4 CEVA Logistics/EGL 1995 RO 2 20 Ford, Honda, John Deere, Korg

5 UPS Supply Chain Solutions

1999 JV 2 N.A Abbott, Nestle, Sony Erixsson, Toshiba

6 Panalpina 1992 JV 2 50+ Phillips Electronics, Chevron, Delphi

7 C.H.Robinson Worldwide 2004 RO 1 5 Wal-Mart, Raymour Flanigan, Nationbilt

8 Geodis 1990 RO 5 20 N.A

9 Agility 2002 RO 1 10 N.A

10 Expeditors Int’l of Washington

2004 RO 3 20 Philips, Toyota, Aarons, Largo Intl

TYPICAL LOCAL LOGISTICS COMPANIES IN VIETNAM

Company’s Name Type Warehouse capacity (m²) Main Customers Strategic Partners

Gemadept JSC CFS – 8,828 m² Bonded warehouse - 74,000 m²

Ecom Agroindustrial, Panasonic, Hitachi, Toshiba, Sumitomo

Schenker, Yamato Logistics, Birkart, UTI Worldwide

Transimex-Saigon JSC 12,000 m² N.A N.A

Vietfracht JSC N.A APL Logistics Tân Cảng, APL VietNam

Vinatrans State-owned CFS – 2,500 m² Freezer warehouse- 2,800 m²

N.A Konoike Transportation

Sotrans State-owned CFS + Bonded warehouse – 12,000 m² BAT Vinataba, Cargill Group, Dutch Lady, PEPSI IBC, Procter & Gamble

VOSA Group Public CFS + Other Warehouses – 81,130 m² N.A NYK Logistics, China Shipping

Vinafreight JSC CFS – 3,000 m² Freezer warehouse – 1,500 m²

N.A N.A

Minh Phuong Co Ltd. Private N.A N.A Nice Vina Container Transportation

24

Section 4

VIETNAM TRANSPORTATION SECTOR


Vietnam freight volume has seen a constant

growth during the period of 2005-2011, reaching

nearly 900 million tons of cargo in 2011

Road freight accounts for 74% of total freight

volume in Vietnam, followed by waterway of 25%

However, Vietnam’s infrastructure has not kept

pace with the rapid development of the economy.

World Economic Form scored the transport

infrastructure of Vietnam at 3.2, far below the

world average of 4.3

Though road transport is the dominant force in

tonnage terms, road infrastructure in Vietnam

seems to be underdeveloped with the big gap in

quality score, standing at 2.7 as compared to the

global average of 4.0

14%

12%

16%

9% 10%

12% 12%

0%

3%

6%

9%

12%

15%

18%

0

200,000

400,000

600,000

800,000

1,000,000

2005 2006 2007 2008 2009 2010 2011

Volume of Freight in Vietnam (Unit: 1,000 tons)

Source: GSO 2012

74.33%

24.84%

Road Waterway Railway Air

0.0

1.0

2.0

3.0

4.0

5.0

Roads Railroad Port AirTransport

Quality of Vietnam’s freight infrastructure

Vietnam score Worldwide average score

Source: World Economic Forum, The Global Competitiveness Report, 2012-2013

3.2

3.7

4.2

4.9

5.4

6.5

0 2 4 6 8

Vietnam

Indonesia

Cambodia

Thailand

Malaysia

Singapore

Quality of overall infrastructure in South East Asian countries

World average score of 4.3

OVERVIEW OF VIETNAM TRANSPORTATION

25


Network: 250,000km

National highways: 17,000km

7% are 4(+) lane

43% good, 37% average, 20% bad/very bad

Gravel surface: 6%

Provincial highways and local roads

Provincial roads (23,000km): 24% earth or gravel

District roads (55,000km): 86% earth or gravel

Commune roads (141,000km): 79% earth or gravel

Urban roads and others (14,900km): 54% earth or

gravel

Vietnam does not have a modern expressway

linking the northern and southern parts of the

country. Route 1A running the length of the

country is of varying quality, with much of it being

a single lane road of insufficient width

Map of Road System in Vietnam

Road

? National-highway

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

Nat

ion

al h

igh

way

s

Pro

vin

cial

ro

ads

Dis

tric

t ro

ads

Co

mm

un

e ro

ads

Urb

an r

oad

s

Oth

er r

oad

Vietnam’s Road Infrastructure

Asphalt concrete

Cement concrete

DBST

Gravel

Earth

Other

Source: VITRANSS 2

km

Main issues of road infrastructure in Vietnam

Inadequate road hierarchy: unclear functional

classification and corresponding technical

standards

Poor secondary road network

Lack of maintenance

Poor construction quality

Sub-standard long-distance bus and truck

transportation services

Mixture of long distance heavy-vehicle traffic (bus

and truck) and local traffic

Increasing traffice congestions around urban areas

Lack of sustainable funding

Source: Vietnam Road Administration

ROAD FREIGHT INFRASTRUCTURE

26


WATERWAY FREIGHT INFRASTRUCTURE

Vietnam’s dense river and canal network provides

the country with a highly developed inland

waterway system, especially in Mekong River

Delta. Inland waterway transport traditionally

serves the key industries such as cold for power

generation, fertilizer and cemet, building materials

and agricultural products.

Vietnam’s 3,260 km coastline has 127 ports, of

which 25 handle ocean cargo. The five main

locations that receive regular container services in

Vietnam are Ho Chi Minh City (handles 72% of

total cargo throughput), Hai Phong (20%), Cai Lan

(4%), Da Nang (1%), Quy Nhon (1%). Two new big

ports in Ba Ria-Vung Tau province are expected to

show up as well among the major ones, after their

inauguration in 2010.

Waterway cargo handled in Vietnam is mainly via

inland transportation. However, the volume has

decreased significantly 88% from 2008 to 2011,

mainly due to the most common means of river

transport becoming old and unsafe and there was

a lack of specialized bulk cargo ships.

0

400,000

800,000

1,200,000

1,600,000

2005 2006 2007 2008 2009 2010 2011E

Volume of Freight by Waterway (Unit: 1,000 tons)

Freight - River

Freight - Sea

Source: GSO 2012

2005 2006 2007 2008 2009 2010 2011E

0

40,000

80,000

120,000

160,000

200,000

Volume of Freight Traffic by Waterway (Unit: mil tons.km)

Freight trafic -River Freight trafic - Sea

Source: GSO 2012

Map of Port System in Vietnam

27


Vietnam currently has 21 airports including 3

international ones: Noi Bai in Hanoi, Da Nang in

Central Vietnam and Tan Son Nhat in HCMC. Tan

Son Nhat is the largest airport with a capacity of 17

million passengers and 1 million tonnes of cargo

per year

The most significant new airport project under

construction is a Long Thanh international airport

with total capacity of 100 mn passengers and 5

million tonnes of cargo per year

The two principal airlines operating in Vietnam are

Vietnam Airlines and Jetstar Pacific Airlines, both

of them are state-owned

Air cargo handled in Vietnam grew at the average

of 10.8% over 2005-2011, reaching the level of

199,200 tons in 2011. Air freight volume is

expected to continually increase in the coming

years thanks to the government’s policy to attract

manufacturers of electronics and high-tech

industries, which requires more sophisticated

transportation such as air freight

0

20,000

40,000

60,000

80,000

100,000

120,000

No

i Bai

Die

n B

ien

Cat

Bi

Vin

h

Do

ng

Ho

i

Da

Nan

g

Ph

u B

ai

Ch

u L

ai

Cam

Ran

h

Ph

u C

at

Ple

iku

Tuy

Ho

a

Tan

So

n N

hat

Ph

u Q

uo

c

Can

Th

o

Co

n D

ao

Ca

Mau

Rac

h G

ia

Lien

Kh

uo

ng

Bu

on

Ma

Thu

ot

Total Area of Terminals in Vietnam Airport System

m2

Northern

Central

Southern

International airport Domestic airport

0

100

200

300

400

500

0

50

100

150

200

2005 2006 2007 2008 2009 2010 2011E

Volume of Freight & Freight Traffic by Air

Freight Freight trafic

Source: GSO 2012

1,000 tons mil tons.km

Map of Airport System in Vietnam

AIRWAY FREIGHT INFRASTRUCTURE

Source: CAA 2012 28


Vietnam’s rail network totals about 2,600km

(excluding sidings). It comprises 2,169 km of 1,000

mm gauge and 178 km of 1,435 mm gauge tracks,

the latter mostly located in the Northern part of

the country. The principal axis is Hanoi-HCMC

(1,726 km); other lines emanating from Hanoi are

to Hai Phong (102 km), Lao Cai (296 km) and Dong

Dang (162 km)

The rail nework has a sole operator, the Vietnam

Railway Corporation (VRC)

The rail system has been focused on passenger

traffic due to the technical challenges facing the

movement of containers and bulk cargo. During

the period of 2005-2011, rail freight volume in

tonnage had an average growth rate of -3%, and its

prospect for growth is not so optimistics due to

high costs and the poor system

Vietnam’s National Rail System

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

0

1,900

3,800

5,700

7,600

9,500

2005 2006 2007 2008 2009 2010 2011E

Volume of Freight by Railway (Unit: 1,000 tons)

Freight Growth rate

Source: GSO 2012

0

900

1,800

2,700

3,600

4,500

2005 2006 2007 2008 2009 2010 2011E

Volume of Freight Trafic by Railway (Unit: mil tons.km)

Source: GSO 2012

RAILWAY FREIGHT INFRASTRUCTURE

29


The majority of infrastructure investment in

Vietnam was in the transport sphere, accounting

for 68% by the end of 2011

According to BMI, in 2011, 68% of infrastructure

investment in Vietnam was in transportation. This

tendency is expected to continue over the next 10

years, accounting for 65% by the end of 2021.

Therefore, transport infrastructure industry is

expected to grow by an average of 3.5% yoy

between 2012 and 2016

In 2011, transport infrastructure value was VND

52,406 billion, in which 48% for roads, 21% for

raiways, 19% for port harbours & waterways and the

rest of 12% for airports

Infrastructure has always been an priority

investment area of Government, accounting for

32%-33% of total ODA investment during the period

of 2006-2010. MPI forecasts that ODA for

infrastructure would reach VND 2 trillion, in which

transportation accounts for 53%, in period 2011-

2015.

0

500

1,000

1,500

2,000

2,500

Tran

spo

rtat

ion

Elec

tric

ity

Irri

grat

ion

Wat

er s

up

ply

Wat

er d

rain

Edu

cati

on

& t

rain

nin

g

Hea

lth

care

Urb

an, b

ig c

ity

and

ru

ral

IT &

Co

mm

un

icat

ion

Breakdown of ODA in Infrastructure

2011-2015

2016-2020

TRANSPORTATION INFRASTRUCTURE INVESTMENT

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

20

11

20

12

e

20

13

f

20

14

f

20

15

f

20

16

f

Breakdown of Vietnam Transport Infrastructure

Port Harbours & Waterways

Airport

Railway

Roads and Bridges

bvnd

Source: BMI, 2013

Source: MPI 2012

0%

5%

10%

15%

20%

25%

30%

35%

40%

Roads & Bridges Railway Airports Ports Harbours &Waterways

Investment as % of Total Infrastructure

2011 2016f

Source: BMI, 2013

30


0 200,000 400,000 600,000

Rice

Sugarcane/sugar

Wood

Steel

Construction Materials

Cement

Fertilizer

Coal

Petroleum

Industrial Crops

Manufactured Goods

Fishery Products

Animal Meat & Others

Modal shares by commodity, 2008 (ton/day)

Road Rail Inland Waterway Coastal Waterway Air

Source: VITRANSS 2 (2009)

Road accounts for the largest share (88%) of

transportation of manufactured goods and

dominates short distance freight transportation of

less than 100km

A large proportion of manufactured goods (88%) is

transported by roads, while the bulk of heavy raw

materials, such as construction materials (73%) and

coal (79%) are shipped using inland waterways

Road transportation is dominated by short distance

freight transportation. The share of road freight

movements less than 100km trip distance is 73% of

the total road freight movements. Because of

topographical constraints, inland waterway freight

transportation is significantly limited to less than

200km trips

For 400-1,000km freight movements, (domestic)

coastal shipping competes with roads and equally

shares freight movements. However, after 1,000km

distance, coastal shipping dominates roads, in

particular for long-distance (1,400-1,600km) freight

transporation between the North (Hanoi) and the

South (HCMC)

0 200,000 400,000 600,000 800,000

<100

100-200

200-300

300-400

400-500

500-600

600-700

700-800

800-900

900-1,000

1,000-1,200

1,200-1,400

1,400-1,600

1,600-1,800

1,800-2,000

Freight transportation volume (ton/day) by trip distance, 2008

Road Rail Inland Waterway Coastal Waterway Air

MODAL SHARES OF FREIGHT TRANSPORTATION IN VIETNAM

31


MAIN PATTERNS OF DOMESTIC FREIGHT MOVEMENTS IN VIETNAM

Source: World Bank calculation using data from VITRANSS 2, 2009

Distribution of Inter-provincial freight movements, 2008

Around 87% freight transportation in Vietnam is

within 200km trip, mostly driven by the two

dominant internal trade patterns centered around

Hanoi and Ho Chi Minh City (Southeast)

The Northest and Northwest regions are heavily

linked to the neighboring Red River Delta region:

about 76% and 88% of inter-provincial freight

movements go to the Red River Delta region, by

origin and destination respectively

Da Nang in the South Central Coast functions as a

regional growth pole connecting neighboring

regions, as well as the South and the North.

However, the inter-provincial freight movements as

of 2008 do not show much expected freight

movements around Da Nang. It could be explained

by the fact that the large markets of Hanoi and

HCMC are too far away to draw a significant size of

economic transactions, and neighboring local

markets are too small.

The freight movements from the Mekong Delta

region are equally split between Mekong River

Delta and the Southeast region, about 48% each

A majority (about 60%) of freight movements of

the two economic centers of the Red River Delta

and the Southest are “intra-regional” ones, leads to

the dominance of short distance freight movement

32

Section 5

TRANSPORTATION BY TRUCK


Source: BMI, 2013 & GSO

Source: GSO

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2005 2006 2007 2008 2009 2010

Road Freight in Metropolitan Regions (Unit: ‘000 tonnes)

Hanoi Danang HCMC

Danang CAGR 5.3%

Hanoi CAGR 33.8%

HCMC CAGR 15.6%

Road freight sector is expected to have positive

outlook over the short-term period of 2013-2015

In 2011, road transport accounts for around 74%

market share of domestic cargo, recording average

y-o-y growth of 13% during 2006-2011, equivalent

to the volume of 623 million tonnes. The high

CAGR of 6.57% is predicted by BMI for

transportation by truck over 2013-2015, reaching

809 million tonnes by 2015

In terms of tonnes/kilometres, the road freight

traffic reached 37,000 million tons/km in 2011,

and is forecasted to increase to 48,000 million

tons/km by 2015

Hanoi, HCMC and Danang in total accounts for

23% transportation volume by truck in Vietnam.

Over 2005-2010, road freight in Hanoi has

experienced an impressive CAGR of 33.8%, that

growth rate was 15.6% in HCMC and much lower

of 5.3% in Danang

There are 1,050 registered companies involved in

the road transportation industry in Vietnam. Most

of them are small to medium scale companies with

high tendency of privatization -20%

-10%

0%

10%

20%

30%

40%

50%

60%

0

5,000

10,000

15,000

20,000

25,000

2007 2008 2009 2010 2011

Number of Trucks Sold in Vietnam

Northern

Central

Southern

Growth rate - whole country

Source: VAMA 2012

OVERVIEW OF ROAD FREIGHT IN VIETNAM

0

200,000

400,000

600,000

800,000

1,000,000

20

06

20

07

20

08

20

09

20

10

20

11E

20

12F

20

13F

20

14F

20

15F

Road Freight, ‘000 tonnes

0

10,000

20,000

30,000

40,000

50,000

60,000

20

06

20

07

20

08

20

09

20

10

20

11E

20

12F

20

13F

20

14F

20

15F

Road Freight, mn tonnes/km

Source: BMI, 2013 & GSO

33


ROAD INFRASTRUCTURE

Vietnam’s Ministry of Transport and

Communications has estimated that the country

will require around US$60 bn in the period up to

2020 to fund new road infrastructure projects

There have been several announcements

regarding new road projects being planned or

being developed in Vienam. However, there are

still on-going concerns about the viability of toll

roads in Vietnam, mainly due to high cost of

construction and unattractive toll fees

On 4th July 2012, MOF has approved the toll cut

for trucks using the HCMC-Trung Luong

expressway by 25-30%, due to traffic volumes

falling sharply in this expressway once it required

commuters to pay a toll fee in Feb 2012. Once

implemented, trucks weighing over 18 tonnes and

40-feet container trucks would pay around US$22-

23 per trip for using the 61.9km expressway,

compared with the current fee of US$31

On 11th December 2011, the Vietnam’s Ministry of

Transport and Communcations announced to start

collecting a fee for road maintenance from the

start of 2013, because currently state budget only

meets 40% of the fund needed for road

maintenance

0

5

10

15

20

25

30

Cau Gie-NinhBinh

Ben Luc-LongThanh

HCMC-LongThanh-Dau Giay

HCMC-TrungLuong

US China

Cost to Build Expressway (US$mn/km)

Expressways, Overseas Expressways, Vietnam

Source: Vietnam The Business Times (May 3 2012)

Main factors contributing to high construction cost of toll roads in Vietnam

Lack of project management expertise, resulting in site clearance delays and cost overruns

Corruption, around 30% of a project’s value is pocketed by the contractor in order to pay bribes to relevant

parties

Deficiency in regulations and government institutions that effectively balance the need to safeguard the

public interest with the need for expeditious provision of land for infrastructure development

Lack of specialised government institutions that can mediate between developers and landowners about

compensation

Source: BMI, 2013

34


0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

Hanoi-shortdistance

Hanoi-longdistance

HCMC-shortdistance

HCMC-longdistance

Class 1cities-short

distance

Class 1cities-longdistance

Other lowertier cities-

shortdistance


longdistance

India, 2010 shortdistance

(<100km)

longdistance

(>100km)

South Korea,2007

Japan, 2006 USA, 2007

Transport price by city class and trip distance

Source: World Bank (2011) and Suh et al (2009)

The average trucking unit price charged per ton-

km is lowest in the Central region with VND1.3k,

being much higher in the North region (VND3.6k)

and at VND1.9k in the South

The national average trucking unit price charged

per ton-km is VND 2,800 (~US$0.144), however,

varying significantly across different types of cities.

The ton-km unit price is lowest in class 1 cities (*)

(VND1,500). It is much higher in special cities

including Hanoi and HCMC (VND2,900) as well as

other lower tier cities (VND2,600)

Vietnam’s unit transport cost per ton/km to move

freights domestically is not high compared to

other developed countries of South Korea

(US$0.766), Japan (US$0.383), and the United

States (US$0.259). However, it is still higher than

India (only US$0.057)

About 65% of operating costs are attributable to

fuel costs, followed by salary (16%), maintenance

expenses (5%), official overhead costs of tolls and

road taxes (5%), and route allowances (1%).

Especially, about 8% of total operation costs pay

for informal facilitation payments such as bribes.

The reason is vehicle weight and height limits are

quite low in many corridors because of low

infrastructure quality. Moreover, road traffic rules

and regulations are, in many instances, open to

interpretation by police and other authorities,

leaving the door open for unpredictable stops for

trucks along their routes

US$/ton-km

Source: World Bank (2011) and Suh et al (2009)

International Comparison

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Hanoi-shortdistance

Hanoi-longdistance

HCMC-shortdistance

HCMC-longdistance

Class 1cities-short

distance

Class 1cities-longdistance


shortdistance


longdistance

Operating Cost Structure

Informal facilitation payments (bride)

Offical overhead costs (tolls, road taxes)

Maintenance

Route allowance

Salary

Fuel

ROAD TRANSPORT COST & PRICE STRUCTURE

(*) For criteria for classification of cities, pls see page 38

35


0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

Poor road condition Fuel costs Lack of backload Road accidents Corruption Regulation and licenses

Main obstacles to inter-city trucking operations, by region

North Central South

Source: World Bank’s Trucking Survey, Dec 2010

In the trucking survey conducted by World Bank in

December 2010 regarding the main obstacles to

inter-city trucking operation, the Southern region

(including the Southeast, the Central Highlands,

and the Mekong River Delta) scored the worst for

all five main constraints as listed in the graph. For

truckers in the South, the constraint of

corruption/road blocks scored 4.1 (out of 5),

compared to 3.4 for the North and 3.3 for the

Central region. The severity of poor road

conditions in the South region is 3.4, again higher

than in the North (2.8) and the Central region (2.5),

suggesting that significant improvements are

needed in the South

Class 1 cities perform relatively better than other

classes. For example, truckers in class 1 cities score

(subjectively) the severity of corruption as 3.3 (out

of 5), better than special cities (3.8) and other

lower tier cities (3.7). At the same time, regarding

the severity of poor road condition, class 1 cities

score 2.9, a little better than special cities (3.1) and

others (3.5)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Poor road condition Fuel costs Lack of backload Road accidents Corruption Regulation and licenses

Main obstacles to inter-city trucking operations, by city class

Special cities Class 1 cities Other cities

Ranking

1: no obstacle 5: very severe

MAIN OBSTACLES TO INTER-CITY TRUCKING OPERATIONS

36


By Regions By City Class

By Region North Central South Special cities

Class 1 cities

Other cities

Age of trucks, years 17.1 17.1 15.9 16.5 17.1 17.3

Truck weight, without cargo, ton (a) 5.8 12.0 10.4 7.6 12.9 8.7

Average load, ton (b) 10.8 18.0 19.7 14.0 21.1 13.3

Average overload, ton (c) 6.5 6.1 9.9 8.3 8.5 5.8

Average load/truck weight (b/a) 1.5 1.6 1.9 1.6 1.5 1.8

Average overload/truck weight (c/a) 0.8 0.7 1.1 1.0 0.7 1.0

Number of turnarounds per year 40.6 54.7 55.5 45.0 79.8 65.1

Fraction of empty returns, % 27.1 3.5 31.0 27.3 40.2 28.5

Average trip distance, km 393.8 780.9 643.5 499.4 453.2 392.5

Average trip time, hours 11.0 20.9 17.9 14.1 12.0 9.3

Average speed, km/hr 35.8 39.8 30.8 33.7 35.9 32.1

Yearly mileage, km 22,858 34,424 32,216 26,750 31,338 24,582

Source: World Bank’s Trucking Survey, Dec 2010

Haulage characteristics, by region and city class Haulage characteristics captures the efficiency of

freight movements and indirectly measures the

quality of transport infrastructure

Relatively larger trucks with more cargo capacity

operate in class 1 cities and the Central/South

regions. However, the average loading and

overloading per truck weight are uniform across

different classifications, suggesting a competitive

trucking market structure. The average trip speed

also does not change much across all classifications

and is around 30-35km/hour

Major differences are the empty backhaul rate

(percentage of trips returning without cargo) and

the yearly truck utilization (measured by yearly

mileage). Trucks in class 1 cities have relatively

higher empty backhaul rates (40%, compared to the

national average of 28% and the lowest rate of 3.5%

in Central region)

The average yearly mileage recorded by trucks

operating on each route, as a measure of truck

utilization, show quite distinct patterns. Trucks in

class 1 cities or in the Central/South regions are

used more extensively

HAULAGE CHARACTERISTICS

37


CRITERIA FOR CLASSIFICATION CLASS 1 TO 5 CITIES

Indicators Urban Class

Class 1 Class 2 Class 3 Class 4 Class 5

Population Central government run city

(CG): >1 million

Provincial city: >500

thousand

>300,000

CG: >800 thousand

>150,000 >50,000 >4,000

Ratio of non-agricultural labor

>85% for urban centers >80% for the urban

centers

>70% for urban centers >70% for urban centers >65% for urban centers

Population density CG: 12,000/km2

Provincial city: 10,000/km2

CG: 10,000/km2

Provincial city: 8,000/km2

6,000/km2

4,000/km2

2,000/km2

Socio-economic infrastructure system

Integrated system in place

New factories equipped with

clean technology and old

factories retrofitted with

mitigation devices

System coverage

Urban centers with

infrastructure partially

built for full integration

New factories equipped

with clean technology and

old factories retrofited

with mitigation devices

Individual infrastructure

system in place and

gradually integrated



old


system in place and




old


system in place and




old

Vietnam has two special cities including Hanoi and Ho Chi Minh City Source: World Bank

38

Section 6

VIETNAM WAREHOUSING AND DISTRIBUTION CENTERS


CURRENT MAJOR DISTRIBUTION CENTERS (DC) IN VIETNAM

Ha Noi

Total DC supply of more than 100,000 sqm

Key players include DKSH, Indo-Trans Keppel, Kerry

Logistics, Dragon Logistics, etc.

Bac Ninh (30km away from Hanoi)


Key players include Indo-Trans Keppel, DHL,

Mappletree, etc.

Binh Duong


Key players include DKSH, DHL, Mappletree, Damco,

Gemadept, Transimex, Vinafco, etc.

Da Nang


Key players include Kerry Logistics, Vinafco, etc.

Ho Chi Minh City


Key players include Indo-Trans Keppel, Kerry

Logistics, etc.

39


COMPANY HIGHLIGHTS DC/WAREHOUSE INFORMATION

DKSH Vietnam

Since re-entered Vietnam in 1991, DKSH has been a leading player in providing Market

Expansion Services for the consumer goods, healthcare, performance materials, and

technology industries

The Company has 10 distribution centers and logistics support centers nationwide

(Hanoi, Danang, HCMC, Binh Duong, Can Tho and Kien Giang), including:

12,000 sqm Distribution Center in Thach That Quoc Oai Industrial Zone (Hanoi)

with more than 7,000 high rack pallets, serving more than 5,500 healthcare

customers including hospitals, clinics, and pharmacies as well as over 20,000 retail

outlets and manufacturers throughout North Vietnam. Furthermore, the cold

chain storage facility at this DC is the largest one in the region and certified by

Vietnam’s Ministry of Health as Good Storage Practice (GSP) standard. DKSH is also

the first healthcare distributor in the Vietnamese market to obtain ISO 13485

certification

25,000 sqm DC in Vietnam-Singapore Industrial Park in Binh Duong Province,

supplying storehouse for medicine and nutrition products with over 16.000 pallets

space and certified for ISO 9001:2000

Currently, the Company has a strong network of over 200 clients and 83,000 customers

such as Ajinomoto Pharmaceuticals, L’Oréal ,Kraft, etc.

Type Area Location

Distribution

Centers

12,000 sqm Ha Noi

25,000 sqm Binh Duong

KEY FOREIGN PLAYERS

40



Indo-Trans Keppel Logistics

Being established in 1999 as a joint venture between Indo-Trans Logistics (Vietnam)

and Keppel Logistics (Singapore)

The Company’s logistics and distribution center (LDC) network includes Hiep Phuoc LDC

(HCMC, total area of 150,000 sqm, air conditioned storage available); Tan Binh LDC

(HCMC, total area of 32,000 sqm, air conditioned storage available), Tan Binh LDC

new development (HCMC, total area of 200,000 sqm consisting of 4 seperating

facilities, air conditioned storage available), ICD My Dinh LDC (Hanoi, total area of

22,000 sqm), and Tien Son LDC (Bac Ninh, total area of 140,000 sqm, air conditioned

storage is available).

The Company focuses on providing the logistics services to high end products including

dairy, pharmaceutical, electronics, IT and FMCG

Applying advanced Warehouse Management System (WMS)

Some famous customers could be named are Electrolux (total logistics services

including IOR, customs brokerage, warehousing, inventory management and

distribution), Unilever (distribution, forwarding and customs brokerage), Nokia

(warehousing POS and type approval services), Acer (total logistics including

warehousing and distribution), Colgate-Palmolive (total logistics including

warehousing, inventory management and distribution), Nortel (total logistics including

warehouse/distribution and custom brokerage) and IBM (wareshouse distribution)

Type Area Location

Logistics and

Distribution

Centers

382,000 sqm HCMC

22,000 sqm Hanoi

140,000 sqm Bac Ninh

KEY FOREIGN PLAYERS

41



DHL Entering into Vietnam’s market since 1998 and launching DHL Supply Chain in Vietnam since

2001

The Company already has 1 distribution center of 15,000 sqm in Song Than ICD. The second

10,000 sqm DC is underway in Bac Ninh province to meet the needs of customers in the

consumer, retail and technology industries.

The Company has announced a new investment plan worth US$13 million between 2013 and

2015 to widen its warehouse space in Vietnam to more than 141,000 sqm by 2015 and grow

the transportation fleet to more than 100 vehicles in the next two years

All vans, trucks and delivery motorbikes of DHL Vietnam have been supplied and maintained

by GB Vietnam

Type Area Location

Distribution

Centers

10,000 sqm Bac Ninh

15,000 sqm Song Than ICD,

Binh Duong

Other warehouses 76,000 sqm Nationwide

Mapletree Mapletree started its investment in Vietnam since 2005 and has committed a total

investment of US$1 bn in Vietnam

Mapletree’s logistics parks/centers include:

Mapletree Binh Duong Logistics Center is a 32,000 sqm site comprising 5 units of multi-

tenanted single storey warehouses with mezzanine office, completed in 2007

Mapletree Binh Duong Logistics Park is a 680,000 sqm site consisting of ready-built and

built-to-suit bonded and non-bonded warehouses. To date, 8 warehouse blocks (130,000

sqm) have been completed and are 50% occupied

Mapletree Bac Ninh Logistic Park is a 550,000 sqm site located within VSIP Bac Ninh ,

being developed over 5 phases. The 1st completed phase (54,000 sqm) comprises 3 blocks

of modular high quality warehouse spaces, and is already 60% occupied since its

inauguration in 2010. This logistics park is slated to house about 300,000 sqm of ready

built and built-to-suit logistics facilities when fully developed

Well-know tenants include Nippon Express, Loscam, Nitto , Denjo, Cargo Int'l, Nissin, etc.

Logistic Center 23,050 sqm VSIP1,

Binh Duong

Logistic Parks

130,000 sqm VSIP 2,

Binh Duong

54,000 sqm VSIP, Bac Ninh

KEY FOREIGN PLAYERS

42



Damco

Damco, a part of the A.P.Moller-Maersk Group’s logistics activities, provides logistics

solutions to customers from all industries: retail, chemicals, technology, government &

defence, food and beverage, automobile, pharmaceutical, fashion/textiles, etc.

The Company currently has 9 sites equating to 37,000 sqm of warehouse facilities at key

gateways of Vietnam

Damco’s 26,000 sqm distribution center has been opened in 2011, offering all-in-one

logistics solution: CFS , bonded and general warehouse. The distribution center is well-

connected by road transport and allows to serve both Cat Lai (in HCMC) and Cai Mep

ports. The Company also plans to further link the facility to barge infrastructure as a

supplement to truck transport

Type Area Location

Distribution

Center 26,000 sqm Binh Duong

General 37,000 sqm N/A

Kerry Logistics

The Hong Kong-based logistics company offers a full range of logistics services from

customs, shipping to freight forwarding, distribution and a diversified range of value-

added services to customers in various industries including electronics and hi-tech,

fashion and garments, food and beverage, and industrial sectors.

The Company has 3 logistics centers in Hanoi, Danang and HCMC in the total area of

83,000 sqm ; and licenses for bonded warehouse and CFS

Applying advanced warehouse management system

In 2013, Kerry Logistics has acquired majority stake in Tin Thanh Express, one of a

leading express company to offer ‘one-stop-shop’ logistics solutions across the country.

Tin Thanh have 3 major hubs in Hanoi, HCMC and Danang where cargo and packages are

sorted consolidated and delivered by air and road freight. Together with a truck fleet of

more than 160 vehicles, the Company is handling over 10,000 shipments everyday

Logistic Centers

10,700 sqm Ha Noi

10,200 sqm Da Nang

62,100 sqm HCMC

KEY FOREIGN PLAYERS

43


KEY LOCAL PLAYERS


Gemadept

Being established in 2008 as a subsidiary of Gemadept Corporation - a leading company in

shipping, port operation, cargo transportation and logistics

The Company has 3 distribution centers in Binh Duong with total area of 42,000 sqm. These

distribution centers are expected to accommodate up to 60,000 standard pallets, equivalent

to 90,000 CBM.

These centers are designed and built according to international standards such as C-TPAT

Security, TAPA System, FM Global Standards, Standard Green (Green Initiatives), HACCP

dedicated for food group

Having a strong list of customers including Ajinomoto, Vinamilk, Masan, Nestle, P&G, Vinh

Hao, Nissen, Sumitomo, Louis Dreyfus, Ecom, etc.

Net Sales (2012) :VND2,580.46bn; Profit Before Tax (2012): VND114.50bn

Type Area Location

Bonded 37,000 sqm Binh Duong

Domestic 10,000 sqm Binh Duong

Distribution Centers 42,000 sqm

Song Than I Industrial Zone,

Binh Duong

Transimex- Saigon

Being established and operated since 1983

Warehousing system including container freight station (7,000 sqm with over 10,000 pallets

capacity, located next to Hanoi Highway and Saigon Riverside), bonded warehouse (10,000

sqm, located inside ICD Transimex), and cold storage (3,000 sqm with over 5,000 pallets

capacity)

The Company’s distribution center in Binh Duong with total investment capital of VND 80

billion has completed in the middle of April 2013

Main customers include Vissan, CP Vietnam, Nestle, Pepsico, Tan Hiep Phat, Shanghai Electric

Power Generation Group, etc. Moreover, in 2013, Transimex has cooperated with a Japanese

strategic shareholder to develop additional sources of Japanese customers

Sales Revenue(2012) :VND308.94bn; Profit After Tax (2012): VND67.31bn

CFS 7,000 sqm HCMC

Bonded 10,000 sqm HCMC

Frozen/ Chilled 3,000 sqm HCMC

Distribution Center 18,000 sqm

Song Than II

Industrial Zone,

Binh Duong

44



Vinafco JSC

Having a network of more than 350,000 sqm of warehousing strategically located across all main economic areas of

Vietnam such as Thanh Tri, Gia Lam, Hanoi Port (Hanoi), Tien Son Industrial Zone (Bac Ninh), Dinh Vu Industrial Zone

(Hai Phong), Hoa Cam Industrial Zone (Da Nang), Song Than Industrial Zone (Binh Duong), Hau Giang Industrial Park

(Can Tho)

Vinafco JSC has decided to build up distribution centers in Binh Duong, Da Nang and Hau Giang with total

investment capital of VND336.16 bn to provide 3PL logistics (warehousing, value-added services, transport

distribution)

Having applied advanced information technology in professional operations such as Warehouse Management

System (WMS) and Transportation Management System (TMS, GPS)

The Company is investing to have a total of 500 new trucks by 2014, 15-20 container trailers, 10 tank trucks for the

transport of construction materials and powedered cements, and other special trailers for transporting overweight

goods

Having the long-term relationship with many big customers such as Akzo Nobel Paint (ICI Paints), Kimberly-Clark

Vietnam, Honda Vietnam, American Standard Vietnam, Huawei, Vinaphone, GTel , etc.

Net Sales ( 2012): VND 510.65 billion; Profit Before Tax (2012): VND1.52 billion

Type Area Location

Distribution

Center 10,000 sqm

Song Than II

Industrial

Zone, Binh

Duong

Distribution

Center 19,000 sqm

Hoa Cam Industrial

Zone, Danang

Logistics Park 20,000 sqm

Dong Phu Industrial Zone, Hau

Giang

South Logistics

JSC

Being established in 1975 and officially transformed from a State Enterprise into a Joint Stock Company since 2007

Having a nationwide warehousing network of 230,000 sqm

Multi-modal transport capability: 150 TEU/day; bulk transport: 700 – 1,000 tons/day

The Company’s main customers are import-export companies in HCMC, Dong Nai, Binh Duong, BaRia-Vung Tau,

Southeast and Southwest regions. Some major customers are Cargill, Scavi, Scancom, Friesland Campina, Pepsico,

P&G, Uni President, Holcim, Colgate Palmolive, etc.

Net Sales (2012): VND 607.33 bn; Profit before tax ( 2012): VND 24.80 billion

Domestic 60,400 sqm HCMC

Bonded 3,000 sqm HCMC

Rented

warehouses 72,000 sqm

HCMC,

Binh Duong,

Vung Tau

KEY LOCAL PLAYERS

45



Vinatrans

Being established since 1975 as a state-owned company, thus the Company is exposed to

the weakness inherent in state-owned enterprises, such as inefficiency and underfunding

The firm’s warehousing and storage facilities in Vietnam include: a 2,500 sqm Container

Freight Station (CFS) for sea and air cargo; a joint-venture cold storage facility of 2,800

sqm, run by Vinatrans and Konoike Transport Company of Japan; 40,000 sqm of covered

warehousing; and 50,000 sqm of open storage

Several well- known strategic partners are Schneider Electrics, Sharp, Manuchar Viet

Nam, Sojitz Japan, etc.

Net Sales ( 2012): VND 788 .69 billion; Profit Before Tax (2012): VND21.15 billion

Type Area Location

CFS 2,500 sqm N/A

Frozen & Chilled 2,800 sqm N/A

Bonded


4,400 sqm Ha Noi

General 32,600 sqm N/A

Open Storage &

Concrete Yard 50,000 sqm N/A

Dragon Logistic Co., Ltd

Being established in 1996 as a joint venture between Sumitomo Corporation, Suzuyo Co.,

Ltd , Vinafco and Hanel

Total area of self- owned and rented warehouse are 52,200 sqm and 16,150 sqm

respectively.

Operating Thang Long Logistics Center in Hanoi with total area of 50,000 sqm, of which

15,000 sqm general warehouse, 5,040 sqm bonded warehouse, and 15,000 sqm

container yard; and Thang Long Logistics Center in Dong Nai Province with total area of

20,000 sqm

Owning a facility of over 200 trucks, lorries, and modern loading/unloading equipments

Logistic Centers

50,000 sqm Ha Noi

20,000 sqm Dong Nai

General

warehouses


1,300 sqm Bien Hoa

KEY LOCAL PLAYERS

46

Section 7

TARGET & POTENTIAL CUSTOMERS



Vietnam’s fish production was 5.8 million tonnes

(including 3.2 million tonnes from aquaculture

and 2.6 million tonnes from combined capture of

fisheries from marine and inland wateres),

representing a rapid CAGR of 7.63% over 2005-

2012. It should be noted that the production of

farmed seafood has surpased the caught seafood

since 2007, indicating the trend of increased

production for specialised seafood processing

centers and in turn a promising sign for the growth

of cold storage in Vietnam.

The major export commodity was shrimps, with a

total value of US$2.25 billion as of 2012, showing

a CAGR of 7.39% over the period of 2005-2012.

Pangasius export reached US$1.74 billion in 2012,

representing an impressive CAGR of 14.19% during

the same period.

Vietnam’s seafood has been exported to around

120 countries, in which US accounting for the

largest market share of 19%, following by Japan

(18%), Korean (85) and China (5%)

-10%

0%

10%

20%

30%

40%

50%

0

2

4

6

8

10

12

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13F

20

15F

20

20F

VND bn

Seafood Export Value

Shrimp Pangasius

Other Growth rate

Source: MARD & VASEP

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13F

20

20F

‘000 tons

Seafood Production

Wild catch Aquaculture

Source: MARD & VASEP

19%

18%

8% 5% 3% 3% 2%

38%

Major Importers of Vietnam’s Seafood In Terms of Value

US

Japan

Korea

China

Germany

Australia

Italia

Neitherlands

Spain

Source: MARD

334

151

122

102

98

93

87

83

74

74

0 100 200 300 400

Minh Phu

Vinh Hoan

Hung Vuong

Quoc Viet

Stapimex

Agifish

Fimex VN

Anvifish

Phuong Nam

Cases

Top 10 Vietnam’s Seafood Exporters (2011) Unit: million USD

Source: VASEP

SEAFOOD/FISHERIES

47



Can Tho Port is a key trade facility in the Southern

Mekong Delta. Though the port is near major

agricultural and seafood production areas,

commodities of Mekong Delta region are still

shipped through ports 160km away in HCMC

because Can Tho’s passageway has dried up and

there is a lack of landside connections, including

modern road and rail links. Coastal waterway thus

only accounts for 17.66% of freight transportation

in this Southwest region as of 2009 (TDSI),

resulting in low supply of cold storage here.

Cold storage demand in Mekong Delta region is

estimated to be around 1.1 million tons due to the

existence of a hundred of seafood processing

companies in this area. However, most of cold

storages of these companies are very small,

around 2,000-3,000 tonnes, not much cold

storage reaching the capacity of more than 5,000

tonnes, thus only enough to store goods

temporarily for short-term contracts.

However, when Can Tho Port’s efficiency is

improved, it is expected that there will be an

impressive growth of cold storage’s investment in

this area. Source: RRC Collection

Storage capacity of key players in Vietnam Seafood Industry

Company 2011 2012 Storage Capacity

Location

Volume Value Volume Value

(tonnes) (mn USD) (tonnes) (mn USD) (tonnes)

SHRIMP

Minh Phu Corp. 27,178.20 334.39 32,049.53 369.40 N/A

Stapimex N/A 98.00 N/A 105.00 N/A

Havico 4,607.00 52.70 4,514.00 56.04 10,000 Ba Ria, Vung Tau

Cuulong Seapro 5,552.90 60.83 4,425.00 40.70 1,500 Tra Vinh Province

PANGASIUS

Vinh Hoan N/A 150.79 N/A 154.90 800 Dong Thap Province

Hung Vuong 47,242.04 122.33 N/A 111.90 42,000 Tan Tao IP, HCMC

Agifish 29,333.59 93.20 28,448.00 91.80 10,000 Dong Thap Province

Anvifish 24,807.00 83.00 25,323.00 77.90 40,000 Long Hau IP, Long An

Navico N/A 53.70 N/A 73.00 4,900 An Giang

I.D.I Corp N/A 51.35 N/A 58.20 4,600 Dong Thap

SEAFOOD/FISHERIES

48



Vietnam’s fruit and vegetable production volume

was around 24mn tonnes (including nearly 14 mn

tonnes of vegetables and 10 mn tonnes of fruits) as

of 2012. Around 85-90% of Vietnamese fresh fruit

and vegetables was consumed in the domestic

market, in which there are only 5% of fruit and

vegetables being distributed through supermarkets

while around 80% are sold at traditional markets

In Hanoi, the distribution network of agricultural

products included 8 wholesalers, 402 wet retail

markets, 44 supermarkets and 78 stalls/shop by

2009. These figures in HCMC were 3 agricultural

product wholesale markets ( Thu Duc, Hoc Mon

and Binh Dien), 238 retail markets, 78

supermarkets and hundreds of shops involved in

trading vegetables. However, the HCM City People

Committee has oriented supermarket

development, from 78 in 2009 to 177 by 2015, to

gradually replace the urban markets

Among 3 metropolitan cities of Vietnam including

Hanoi, HCMC and Danang, it is estimated that the

annual fruit and vegetables consumption in Hanoi is

the largest with 950,000 tonnes, followed by HCMC

(750,000 tonnes) and Danang (219,000 tonnnes)

FRUIT/VEGETABLES

Source: MARD

44

8

402

78

3

238

0 200 400 600

Supermarkets

Wholesale Markets

Retail Markets

Vegetables Distribution Network in Hanoi and HCMC (2009)

HCMC Hanoi

Source: Departments of Industry and Trade in Hanoi & HCMC

0

500

1,000

1,500

2,000

0

20

40

60

80

100

120

140

Gra

pe

Man

go

Ora

nge

,m

and

arin

Lon

gan

Litc

hi,

ram

bu

tan

Pin

eap

ple

Ban

ana

Gra

pef

ruit

Cultivation Area & Production Volume of Some Main Fruit Crops

Cultivation area

Production volume

Source: MARD

Thous.ha Thous.ton

782.6 805.5 829.9

12,967

13,417

13,992

12,000

12,500

13,000

13,500

14,000

14,500

750

760

770

780

790

800

810

820

830

840

2010 2011 2012

Cultivation Areas and Production Volume of Vegetables in Vietnam

Cultivation Area Production Volume

‘000 ha ‘000 tons

950,000

750,000

219,000

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

Hanoi HCMC Danang

Annual Fruit & Vegetables Consumption in Hanoi, HCMC and Da Nang

tons

Source: RRC Collection

49



Export portion of Vietnamese fruit and vegetables

accounts for less than 7% of the total production

volume. As of 2012, export turnover of Vietnam

vegetables & fruit recorded at US$ 0.83 billion, and

is expected to achieve the level of US$1 bn by 2013

However, the fresh proportion of fruit and

vegetables export is quite modest as compared to

the processed, frozen and dried ones. One of the

reasons is the fragemented and small-scale

production resulting in the lack of cool chain from

field to pack-house (i.e dedicated cold storage

facilities, refrigerated trucks), causing unnecessary

quality deterioration

It could be seen that post-harvest losses in fruits

and vegetables in Vietnam is pretty high as

compared to other Asian countries. The post-

harvest losses is estimated to be 20%-30% for

vegetables and 25%-40% for fruits

FRUIT/VEGETABLES

396 438 460 623 829 1,000 0%

5%

10%

15%

20%

25%

30%

35%

40%

0

200

400

600

800

1,000

1,200

2008 2009 2010 2011 2012 2013F

Fruit & Vegetables Export Value

US$ mn

Source: Vietnam Customs

218.06

54.65

39.87

28.37

25.65

24.51

22.55

21.61

20.37

19.84

China

Japan

US

Russia

Taiwan

Indonesia

Korea

Holland

Thailand

Singapore

- 100 200 300

Top 10 Importers of Vietnam’s Fruit & Vegetables (2012)

Source: MARD

US$mn

25% 20%

0% 20% 40% 60%

Vietnam

Malaysia

Thailand

Philippines

Indonesia

Post-harvest Losses in Fruits and Vegetables in Selected Asian Countries

Vegetables Fruit

Source: Bautista (2001)

40% 30%

50



Main reasons for tomato post-harvest loss in Vietnam

Reason Collector Wholesaler Retailer

N % N % N %

Hot weather during harvest 9 69 3 15 - -

Humid weather during harvest 6 46 5 25 - -

Diseases 5 38 - - - -

Damage during harvest 3 23 - - - -

Damage during transport 11 85 19 95 - -

Poor packaging 3 23 4 20 5 14

High temperature in storage facility 2 15 6 30 5 14

High humidity in storage facility 2 15 6 30 4 11

Low humidity in storage facility - - 1 5 1 3

Poor hygiene conditions - - - - 3 9

Poor infrastructure facilities - - - - 15 43

Cannot sell all vegetables 2 15 8 40 14 40

Poor quality of purchased vegetable crop - - 1 5 11 31

Other reason of spoilage - - - - 4 11

No loss 2 15 1 5 4 11

Total 13 100 20 100 35 100

Source: Surveys in collaboration between AVRDC and RIFAV, 2005, N=68 observations

0% 20% 40% 60% 80%

Own

Rented storage

Off-site

None

Storage facilities for tomato in Vietnam

Retailer

Wholesaler

Collector


TOMATO CASE STUDY

0% 50% 100%

Bicycle

Motorbike

Mini truck

Refrigeratedtruck

Rented vehicle

Mode of transport of tomato in Vietnam

Retailer

Wholesaler

Collector


51



Measures to prevent loss of tomato along the supply chain in Vietnam

Strategy Farmer Trader Retailer

N % N % N %

Harvest during cool weather 14 38 - - - -

Careful harvest/demand careful harvest 21 57 9 27 - -

Store in cool area 20 54 5 15 7 20

Observe care during transport 19 51 24 73 8 23

Harvest after buyer has been identified 11 30 - - - -

Collect during cool weather - - 9 27 - -

Demand time of harvest - - 2 6 - -

Observe care in packaging - - 11 33 3 9

Low humidity in storage area - - - - 1 3

Good hygiene conditions - - - - 3 9

Not buying more than what is needed - - - - 25 71

Buy high quality vegetable crop - - 6 18 13 37

Do nothing 1 3 2 9 1 3

Other preventive measure of spoilage 3 8 - - - -

Total 37 100 33 100 35 100

Source: Surveys in collaboration between AVRDC and RIFAV, 2005, N=105 observations. Values are multiple responses

TOMATO CASE STUDY

It could be seen that preservation plays an

important role in maintaining the naturally fresh

looking of fruit and vegetables. However, in

Vietnam, most greenery products are kept at the

original state, thus encouraging rapid bacteria

multiplication. Therefore, there is a strong need of

cold storage to complete supporting infrastructure

system for agricultural production, from farmers to

retailers

52



Fruits Temperature

(Celsius Degree) Storage Time

‘Hòa Lộc’ mango 12-13 4-5 weeks

‘Chu’ mango 12-13 3-4 weeks

‘Tiêu da bò’ longan 6-8 25-30 days

‘Xuồng cơm vàng’ longan

5 4-5 weeks

‘Chợ Gạo’ dragon fruit 5 3-4 weeks

‘Năm roi’ pomelo 12 3-3.5 months

‘Da xanh’ pomelo 12 3-3.5 months

‘Sành’ orange 8 8-9 weeks

‘Hồng’ mandarin 5 7-8 weeks

‘Đường’ mandarin 8 5-6 weeks

‘Java’ rambutan 12 2 weeks

‘Rongrien’ rambutan 12 2 weeks

‘Chín Hóa’ durian 15 2 weeks

‘Ri 6’ durian 15 2 weeks

‘Lò Rèn’ star apple 15 15 days

Mangosteen 10 2 weeks

Cayenne pineapple 10 3 weeks

Queen pineapple 15-20 2 weeks

‘Già’ banana 18-20 2 weeks

‘Cau’ banana 15 3 weeks

OPTIMUM TEMPERATURE OF SOME FRUITS IN MEKONG DELTA RIVER

Jan Feb Mar Apr May June Jul Aug Sep Oct Nov Dec

Avocado

Banana

Dragon Fruit

Durian

Grape

Guava

Jackfruit

Lime

Longan

Mango

Mangosteen

Orange

Papaya

Persimon

Pineapple

Plum

Pomelo

Rambutan

Mandarin

FRUIT SEASON CHART

53



Jan Feb Mar Apr May June Jul Aug Sep Oct Nov Dec

Tomato

Eggplant

Chilli

Hot pepper

Sweet pepper

Radish

Carrot

Muskmelon

Squash

Pumpkin

Chayote

Lettuce

Onion

Water morning glory

Cabbage

Cauliflower

Bamboo shoot

Common bean

China bean

Ginger

Straw mushroom

VEGETABLES SEASON CHART

54


COMPANY HIGHLIGHTS WAREHOUSE INFORMATION

Metro Cash & Carry Vietnam

Starting operation since 2002

A leading modernized wholesaler in Vietnamese market with 19 stores from North to South

and more than 1,000 suppliers

Currently owned 4 METRO Distribution Centers (DC) throughout Vietnam and in charge of

dozens of delivery vehicles from DCs.

Type Area Location

Fruit & Vegetables

DC N/A Lam Dong

Fresh DC N/A Binh Duong

Dry DC N/A HCMC

Dry & Non food

products DC N/A Ha Noi

Co.op Mart

Being established since 1989 and operated by Saigon Union of Trading Cooperatives

Up to 2011, Co.opMart chain has 59 supermarkets throughout Vietnam and is well positioned

for strong performance during periods of low consumer confidence thanks to low-cost

strategy and increasing private lable goods

Since 2005, Co.opmart has opened a distribution center located in Song Than Industrial Park,

Binh Duong province with the total area of 8,000 sqm

In 2013, Co.opmart has cooperated with NTUC Fair Price to established a joint venture

company to develop a chain of hypermarkets in Vietnam

Distribution


Satra

Being established since 1995, SATRA Group has developed aggressively from a state-owned

enterprise into a holding company with over 60 subsidiaries, affiliates and joint-ventures

Developing modern retail trade system including convenience stores (SatraFoods), trade

centers (SatraMart).

Some major suppliers are Vissan, Cau Tre, APT, Cofidec, AGREX Saigon, Nhabexim (food

processing products); Binh Dien wholesale market (fresh fruit, vegetables, meat, poultry and

sea foods), etc.

The Company has started to construct a distribution center since 2013

Cold storage

27,768 sqm

HCMC


55



Retail sales volume of Vietnam’s packaged food

recorded at nearly 457,000 tons as of 2012,

showing an impressive CAGR of 8% during 2007-

2012. Over the forecast period of 2013-207,

packaged food is expected to grow in line with

increasing tendency of urbanization and better

economics conditions, reaching 545,000 tons by

2017.

Chilled processed food is gaining more popularity

in Vietnam’s community because of the greater

exposure to the Western culture. In 2012, selling

volume of this type of foodstuff was 4,758 tonnes,

equivalent to the value of VND620bn. Chilled

processed food is forecasted to record a volume

CAGR of 10% over 2013-2017 as there is still space

for improvement and innovation.

In addition, busy lifestyles and urbanization has

also driven the growth of frozen processed food in

Vietnam. This segment of packaged food has

achieved the sales volume of 25,502 tonnes in

2012, bringing retail value of VND2,560bn. Sales

volume of frozen processed food is expected to see

a constant CAGR of 8% of over 2013-2017.

PACKAGED FOOD

Chilled Processed Food Frozen Processed Food

Company % share Company % share

Vissan 37.4% Vissan 23.1%

Hien Thanh 11.5% Halong 21.6%

San Miguel 10.0% Cautre 12.5%

Halong 9.8% Agifish 11.0%

Duc Viet 7.9% Cholimex 6.7%

Source: Euromonitor 2013

Market shares of key players

0

100,000

200,000

300,000

400,000

500,000

600,000

20

07

20

08

20

09

20

10

20

11

20

12

20

13F

20

14F

20

15F

20

16F

20

17F

Sales of Packaged Food by Volume


0

200

400

600

800

1,000

1,200

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

20

07

20

08

20

09

20

10

20

11

20

12

20

13F

20

14F

20

15F

20

16F

20

17F

Sales of Chilled Processed Food

Volume Value bn VND



0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

20

07

20

08

20

09

20

10

20

11

20

12

20

13F

20

14F

20

15F

20

16F

20

17F

Sales of Frozen Processed Food

Volume Valuetons bn VND

tons

56



In terms of distribution format for chilled/frozen

packaged food, Euromonitor forecasts that modern

retailing will gradually take over traditional

retailers’ share in the near future. Currently

modern channels account for 34% of chilled

processed food’s retail sales value and 31% of

frozen processed food

As supermarkets/hypermarkets aiming at

providing good quality products to the customers

with the lowest possible price, thus indicating the

potential growth for distribution center as well as

cold chain management

Besides, it can be seen that cold storage capacity

of some key players in Vietnam’s packaged food is

quite low as compared to their production

capacity, thus there is undoubted demand for cold

storage outsourcing in this industry

PACKAGED FOOD

27% 28% 29% 34% 32% 34%

0%

20%

40%

60%

80%

100%

2007 2008 2009 2010 2011 2012

Sales of Chilled Processed Food by Distribution Format

23% 25% 26% 31% 31% 31%

0%

20%

40%

60%

80%

100%

2007 2008 2009 2010 2011 2012

Sales of Frozen Processed Food by Distribution Format

Source: Euromonitor, 2013

Source: RRC Collection

Highlights of some key players in Vietnam’s Packaged Food Industry

Name of company Sales Value Storage Capacity

( tonnes) Distribution Network

Vissan Co. Ltd.

2011: VND4,374 bn 2,000

100 distributors, 11 direct stores, more than 600 retailing points at key wholesale markets, and 100 product showrooms in HCMC. Besides, the Company also distributes its products in popular supermarkets, hypermarkets and independent small grocers

Ha Long Canfoco Foods 2011: VND828 bn 250 N/A

Cau Tre Export Goods Processing JSC

2011: VND745 bn N/A

86 distributors and 38 agents including 29 supermarket systems (~280 supermarket units) and more than 1,000 retailers. Cau Tre’s products are more available in modern channels rather than small neighbourhood stores

San Miguel Pure Foods N/A 1,500- 2,000 N/A

Cholimex Food JSC 2011: VND488 bn 1,000 60 distributors

Duc Viet Food JSC

2009: VND145 bn N/A

Wide distribution network mainly in Hanoi and other big cities including HCMC, Da Nang, Hai Phong, etc. Their products are distributed in supermarkets (Metro, Big C), beer stores, hotels, food stores (over 1,500), schools, hospitals (over 300)

57



Domestic dairy industry posted a growth rate of

24% from a year earlier to reach sales value of

VND52,100 billion as of 2012. The figure is

expected to continue increasing in the future as

Vietnam‘s milk consumption per capita of 5.8 liters

is still fairly low compared to others Asian countries

such as Indonesia (12 liters), China (20 liters),

Thailand (30 liters) and Malaysia (44 liters)

Vinamilk dominates the market with 45.5% market

shares. Together with Friesland Campina Vietnam

and Nestle Vietnam, those companies have already

taken approximately 75% total market share

Vinamilk has a warehousing and transportation

subsidiary company, operating in Hanoi and HCMC

with the fleet of 300 trucks. Moreover, the

Company is investing in a totally-automatic

warehouse of 30,000 pallet (~30,000 tons of milk)

in the area of 5,000 sqm in My Phuoc Industrial

Park. The Company now has about 250 distributors,

60 outlets and nearly 200,000 retail points. The

Company is going to increase the number of its

outlet to 500 in the next 5 years

-

300

600

900

1,200

1,500

1,800

2,100

2,400

2,700

3,000

3,300

3,600

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

220,000

240,000

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

mn liters VND bn

Sales Value & Sales Volume of Dairy Products

Value Volume

Source: GSO, MARD, Nielsen, Tetra Pak

23%

16%

13%

10%

7 %

6%

5,890 7,452

9,634 12,300

15,600 18,900

22,800

1,204 1,413

1,667

1,938

2,326

2,791

3,349

1,154 1,745

2,770

3,873

5,422

8,133

12,199

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2008 2009 2010 2011 2012 2013 2014

Sales Value of Vietnam Dairy by Products Unit: VND billion

Sweetened Condensed Milk Milk Powder

Liquid Milk Drinking Yoghurt

Eating Yoghurt

Source: GSO, MARD, Nielsen, Tetra Pak

DAIRY PRODUCTS

45.5%

20.4%

7.4%

3.7%

3.3%

19.7%

Market share by retail value in 2012

Friesland Campina Vietnam

Nestle VN

Hanoi Milk JSC

Mead Johnson Nutrition

Others (small enterprises and import)


Vinamilk

4% 8% 10%

14% 14% 15%

33% 35%

38% 41% 41% 41%

0%

10%

20%

30%

40%

50%

2007 2008 2009 2010 2011 2012

% Sales Value of Dairy Products Through Supermarkets/Hypermarkets & Convenience

Stores

Drinking Milk Yoghurt & Sour Milk


58



COSMETIC PRODUCTS

Vietnam has experienced a steady increase in

cosmetics consumption, reaching a record of

US$410 million in 2011 from US$ 337 million in

2008. A robust growth continues to be expected for

the coming years which was attributed to Vietnam’s

young population, higher disposable income and

untapped markets in rural areas

There are only a few major distributors of beauty

and personal care products in Vietnam.

Multinational corporations such as Unilever, P&G,

Beiersdorf usually distribute their own products.

Smaller distributors normally perform better in the

regions that they are based in

Cosmetic products are distributed under different

methods, including wholesaling, setting up stands

in the supermarkets, department store or individual

shops. Modern retail channels including

supermarkets and hypermarkets seem to

outperform the traditional channels such as

independent small grocers and outdoor markets

due to their easy accessibility, wide range of

products and reliable product origins

4% 4%

38%

4%

38%

12%

Breakdown of Vietnam’s Cosmetics Revenue

Perfumes

Makeup

Skin care& BodycareNail

Hair care

Toiletries

Sales Value (2011) = US$410 mn

Source: GSO

0

10

20

30

40

50

60

70

80

90

2009 2010 2011

Import value of Different Cosmetic Segments

Perfumes

Hair care

Skin care

Toiletries

Color cosmetics

Source: Vietnam’s General Department of Customs

US$ mn

Channel 2009 2010 2011

Modern trade (supermarkets, modern markets) 537 642 811

Traditional grocery stores 89,584 91,515 97,221

Personal store 4,082 3,779 3,785

Market stall – mix business 3,378 3,138 3,207

Market stall – health & personal care 3,672 3,223 2,986

Cosmetic store 577 1,045 1,230

Pharmacy 9,010 10.114 11,119

Maternity & Baby shop 1,791 1,997 2,376

Retail Structure – Number of stores

Source: Vietnam Pocket Reference Guide 2012 - Nielsen

59


COMPANY HIGHLIGHTS WAREHOUSE INFORMATION

Unilever

Unilever was one of the earliest multinational companies to be

established in Viet Nam.

In 2007, Unilever Vietnam has opened its largest distribution

center in Vietnam Singapore Industrial Park , Binh Duong Province,

with total investment of US$ 20 million. This 65,000 sqm center

comprises of 51 goods-delivering gates and 12 goods-receiving

gates, which are managed by Australia-based Linfox Logistics

The DC aims to meet the growing development of Unilever ‘s

logistics in the next 5 years and Unilever’s service in product

distribution to southern customers, stocks for Unilever Vietnam’s

secondary distribution centers and to 18 countries in the world

Type Area Location

Distribution



60



MAJOR COMPANIES WITH LARGE IMPORT VALUE IN COSMETIC SECTOR

PERFUMES

Brands Import value (USD, 2011)

Brands Import value (USD, 2011)

Chanel 2,398,671 Armani 247,784

Bvlgari 1,034,700 Burberry 210,669

Christian Dior 832,471 Givenchy 171,244

Lancome 426,008 Versace 151,510

Gucci 248,265 CK 142,684


HAIRCARES

Importers Brands Import value (USD, 2011)

Procter & Gamble Vietnam Pantene, Head&Shoulder 6,748,027

Nature Creative Group Davines 2,157,858

F.C.Co., Ltd Bigen 1,357,076

Nam Dao Co., Ltd Wella 1,323,546

Unilever Vietnam Clear, Sunsilk, Dove 1,267,075

An Thinh Phat Trading Co., Ltd Artego, Livegain 1,143,301

SKINCARES


Beiersdorf Vietnam Nivea 17,960,457

Procter&Gamble Vietnam Olay 7,212,398

AA Pharmaceutical Co., Ltd Clear&Clear 4,917,630

LG Vina Co., Ltd Ohui 3,300,671

L’Oreal Vietnam Co., Ltd Maybelline 2,748,293

Unilever Vietnam Hazeline 2,563,906

Phytopharma Co., Ltd Cetafil 2,122,570

Johnson&Johnson Vietnam Johnson &Johnson (baby) 2,025,024

Shiseido Vietnam Co., Ltd Shiseido 1,732,864

Thuong Xuan Cosmetics Oriflame 1,117,847

Viet Lotus Co., Ltd The Face Shop 1,100,962

TOILETRY


Beiersdorf Vietnam Nivea 22,770,165

AA Pharmaceutical Co., Ltd Johnson & Johnson 4,976,079

Johnson&Johnson Vietnam Johnson&Johnson for baby 4,638,992

Unilever Vietnam Rexona, Axe 2,176,072

Vietnam Australia Trading Co., Ltd Babycare 1,892,874

SC Johnson&Johnson Vietnam Glade 1,453,920

Nhan Loc Trading & Manufacturing Leivy 1,443,425

Procter&Gamble Vietnam Amby, Gilette 1,284,506

Song Hang Trading Co., Ltd Dial 1,234,364

Kim Lien Trading Co., Ltd Monsavon 757,018

61



LIST OF MAJOR IMPORTERS AND DISTRIBUTORS OF COSMETICS IN VIETNAM


Name of importers/distributors

Address Contact Details

An Thinh Phat Trading Co., Ltd

ATP Building, 56/1 Tran Quang Dieu, O Cho Dua Ward, Dong Da District, Hanoi Tel: (84-4) 3766 5129 – 3766 5169 Fax: (84-4) 3766 5216 Email: [email protected]

Mr. Hoang Thanh Son Title: General Director Email: [email protected] Phone: +84 903 226 281

Salonzo Cosmetics Company

192 Mai Anh Tuan, Ba Dinh District, Hanoi Tel: (84-4) 3519 0242 Fax: (84-4) 3519 0243 Email: [email protected]

Mr. Tran Hoan Sinh Title: Director Email: [email protected] Phone: +84 914 383 846

Gobal Idea Company Ltd.

16/8 117 Lane, Thai Ha Street, Dong Da District, Hanoi Tel: (84-4) 3537 6626 Fax: (84-4) 3537 6625 Email: [email protected] Website: www.inebrya.it

Mrs. Vu Ngoc Quyen Title: Director Email: [email protected] Phone: +84 912 018 688

Perfect Beauty Company Ltd.

Ngoi Sao Xanh Building, 57 Xa Dan 2 Street, Dong Da District, Hanoi Tel: (84-4) 2246 6407 Fax: (84-4) 3719 1092 Email: [email protected] Website: www.perfectbeauty.com.vn

Mr. Tran Binh (Eric) Title: Business Director Phone: +84 903 455 571

Mirato Vietnam JSC

57 Tue Tinh Street, Hai Ba Trung District, Hanoi Tel: (84-4) 6282 7676 Fax: (84-4) 6282 7711 Email: [email protected] Website: www.mirato.vn

Mr. Vu Huu Hung Title: Vice General Director Email: [email protected] Phone: +84 942 827 676

S-Net Vietnam JSC

169B Nguyen Thai Hoc Street, Ba Dinh District, Hanoi Tel: (84-4) 3734 7502 Fax: (84-4) 3734 7501 Email: [email protected] Website: www.cosmart.com.vn

Ms. Nguyen Huong Title: Assistant to Director Email: [email protected]

62

mailto:[email protected]



















http://www.inebrya.it/













http://www.perfectbeauty.com.vn/










http://www.mirato.vn/













http://www.cosmart.com.vn/


















Tititi Cosmetics Co., Ltd

66 Hoa Cuc, Ward 7, Phu Nhuan District, HCMC Tel: (84-8) 3517 2259 Email: [email protected] Website: www.affinage.com

Mr Le Trong An Title: Director Email: [email protected] Mobile: +84 916 006 006

Nam Tran Pharma Trading Co., Ltd

21 Ha Huy Tap, Phu My Hung Town, Tan Phong Ward, District 7, HCMC Tel: (84-8) 5412 1664 Fax: (84-8) 5412 1665 Email: [email protected] Website: www.namtranpharma.com

Mr Pham Tam Hoang Title: General Director

Creative Nature Group

10A1 Ly Nam De, Hoan Kiem District, Hanoi Tel: (84-4) 3747 4179 Fax: (84-4) 3747 4178 Email: [email protected] Website: www.davines.com

Mr. Pham Trong Title: Operation Director Email: [email protected]

Nam Dao Company Ltd.

777 Le Hong Phong Street, Ward 12, District 10, HCMC Tel: (84-4) 3862 6288 Fax: (84-8) 3862 9898 Email: [email protected] Website: www.namdao.com.vn

Mrs. Nguyen Thuy Lieu Title: General Director

Four Seasons Co., Ltd.

182A Nguyen Van Troi, Ward 8, Phu Nhuan District, HCMC Tel: (84-8) 3997 9926 Fax: (84-8) 3997 9889 Email: [email protected] Website: http://fourseasons.com.vn

Ms Quach Kim Mai Title: Director

Natural JSC

234 Ngo Tat To, Ward 22, Binh Thanh District, HCMC Tel: (84-8) 3514 2882 Fax: (84-8) 3514 2883 Email: www.spasvietnam.com Website: www.spasvietnam.com

Mrs Nguyen Ngoc Lan Title: Managing Director Email: [email protected]

63






http://www.affinage.com/













http://www.namtranpharma.com/










http://www.davinces.com/















http://www.namdao.com.vn/












http://fourseasons.com.vn/







http://www.spasvietnam.com/



















Phu Thanh Cosmetics Trading Production Co., Ltd

282/48 Bui Huu Nghia, Ward 2, Binh Thanh District, HCMC Tel: (84-8) 2247 9947 Fax: (84-8) 3551 0540 Email: [email protected] Website: www.phuthanhdistributor.com

Mr. Tran Huu Chan Title: Director Phone: +84 903 996 818

Viet Lotus Co., Ltd

294-296 Hai Ba Trung, Tan Dinh Ward, District 1, HCMC Tel: (84-8) 3829 3105 Fax: (84-8) 3820 9873 Email: [email protected] Website: www.thefaceshop.com

Ms Huynh Thanh My Title: Managing Director Phone: +84 909 193 922

Vinh Hanh Co., Ltd

11 Street 55A, Quarter 9, Tan Tao Ward, Binh Tan District, HCMC Tel: (84-8) 3754 5259 Fax: (84-8) 3754 5258 Email: [email protected]

Mr Nguyen Tang Vinh Title: Director Email: [email protected] Phone: +84 903 316 678

Ky Phong Import-Export & Trading Co., Ltd

1/24/14A Road No. 2, Go Vap District, HCMC Tel: (84-8) 5427 3110 Fax: (84-8) 5427 3110 Email: [email protected] Website: www.lanopearl.com.au

Mr Tu Thanh Phong Title: Executive Director Phone: +84 122 475 2812

Daicata International Co., Ltd

88 Ba Thang Hai Street, District 10, HCMC Tel: (84-8) 3868 2994 Fax: (84-8) 3868 2997 Email: [email protected] Website: www.daicata.com

Mrs Pham Phong Lan Title: Vice Director Phone: +84 918 907 336

Thuy Duong Trading Co., Ltd

240Ter Tran Hung Dao Street, Nguyen Cong Tru Ward, District 1, HCMC Tel: (84-8) 3838 5017 Fax: (84-8) 3838 5018 Email: [email protected]

Ms. Duong Hong Bich Thuy Title: General Director

64




http://www.phuthanhdistributor.com/










http://www.thefaceshop.com/
















http://www.lanopearl.com.au/












http://www.daicata.com/
















Thuy Loc Trading Co., Ltd

Floor 8, Saigon Paragon Building, 3 Nguyen Luong Bang, District 7, HCMC Tel: (84-8) 5410 2102 Fax: (84-8) 5416 0360 Email: [email protected] Website: www.thuyloc.com.vn

Mrs. Le Hoai Anh Title: General Director

C.T.Group

Floor 2, 139 Pasteur, District 1, HCMC Tel: (84-8) 2242 8253 Fax: (84-4) 6297 2000 Email: [email protected] Website: www.ctgroupvietnam.com

Mr Nguyen Quang Hoang Long Title: Assistant to General Director Phone: +84 989 309 080

Lyna Trading Co., Ltd

324 Tran Hung Dao Street, Nguyen Cu Trinh Ward, District 1, HCMC Tel: (84-8) 3914 0669 Fax: (84-4) 3920 3667 Email: [email protected] Website: www.lyna-azim.com

Mr Nguyen Minh Hai Title: Vice Director Email: [email protected] Phone: +84 938 006 990

Khuong And Le Investment Trading Co., Ltd

Floor 8th, VMT Building, Lot A1F, Industrial Zone, Dich Vong, Cau Giay, Hanoi Tel: (84-4) 3795 1701 Fax: (84-4) 3795 1703 Email: [email protected] Website: www.menard-cosmetic.com

Mr Khuong Anh Van Title: President – CEO Email: [email protected] Phone: +84 989 746 666

65






http://www.thuyloc.com.vn/










http://www.ctgroupvietnam.com/










http://www.lyna-azim.com/















http://www.menard-cosmetic.com/











395 475 600 715 931 919 1,100 1,200

650 710 810

923

1,170 1,252

1,500 1,750

Import Domestic Production

817 956 1,136 1,425 1,696 1,913 2,400 2,600

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2005 2006 2007 2008 2009 2010 2011 2012

Vietnam’s Pharmaceutical Sector

Domestic Consumption

US$ mn


Vietnam’s pharmaceutical domestic consumption

has posted an impressive CAGR of 18% over the

last 5 years to reach US$2.6 billion as of 2012.

However, domestic production only meet around

46% of total medical demand, thus Vietnam’s

pharmaceutical industry still depends heavily on

import

A positive outlook continues to be expected for

pharmaceutical sector due to higher disposable

income and living standards of Vietnamese

people, as well as Vietnam’s health expenditure

per capita still being pretty low compared to

other Asian countries such as Thailand (US$2012)

and Malaysia (US$346)

Hau Giang Pharma is the biggest player in this

sector with revenues and net profit being

VND2,932 bn and VND491 bn as of 2012, followed

by Traphaco, Domesco and Mekophar

Source: DAV

2,932

1,401

1,261

1,101

818

739

684

677

645

612

0 2,000 4,000

Hau Giang Pharma

Traphaco

Domesco

Mekophar

Imexpharm

Namha Pharma

HD Pharma

Ha Tay Pharma

Meedipharco-Tenamy

Cuu Long Pharma

Top 10 Pharma Companies have largest revenues in 2012

Source: cafef.vn

PHARMACEUTICAL

23

51

95

95

202

278

346

1,616

2,286

0 500 1,000 1,500 2,000 2,500

Myanmar

Cambodia

Vietnam

Indonesia

Thailand

China

Malaysia

Korea

Singapore

Average Health Expenditure Per Capita 2008-2012

USD VND bn

66

Section 8

FINANCIAL FEASIBILITY STUDY



TRANSPORTATION BUSINESS

Unit of Work in Vietnam 2014 2015 2016 2017 2018 Unit Truck value 25,000 25,000 25,000 25,000 25,000 Annual Cost 5,000 5,000 5,000 5,000 5,000 VND/USD 21,500 22,000 22,500 23,000 23,500 Cost 1 L / Diesel / VND 20,000 20,600 21,200 21,800 22,400 Liter Diesel consumption 1 KM / Truck 0.10 0.10 0.10 0.10 0.10 DIESEL COST /KM 0.09 0.09 0.09 0.09 0.10

Operating day / year 365 365 365 365 365 Nbr KM / Day 100 100 100 100 100 Km / truck / year 36,500 36,500 36,500 36,500 36,500

TIRE COST / KM 0.02 0.02 0.02 0.02 0.02

REPAIR & MAINTENANCE 0.05 0.05 0.05 0.05 0.05

TOLL FEE + MISCELLANEOUS + Toll: US$2/100km + Misc: 300kVND/3 times a month/truck

0.03 0.03 0.03 0.03 0.03

UNIT OF WORK /KILOMETER (CK) 0.20 0.20 0.20 0.20 0.20

Driver salary 279 287 296 305 314 Drivers (Social benefit) 74 76 79 81 83 DRIVER COST 353 364 375 386 398 UNIT OF WORK / Hour (CC/H) 2.01 2.07 2.13 2.19 2.26

Depreciation 5,000 5,000 5,000 5,000 5,000 Loan (over 5 Y) - calculation base 25,000 20,000 15,000 10,000 5,000 Residual Value 20,000 15,000 10,000 5,000 - Residual Loan Value 1,000,000 800,000 600,000 400,000 200,000 - Finance Cost 1,000 800 600 400 200 Insurance cost 1,500 1,560 1,560 1,560 1,560 Total VEHICLE COST 7,500 7,360 7,160 6,960 6,760 TOTAL VEHICLE COST / Day (CV) 21 20 20 19 19 Vehicle cost 255,000 264,960 272,080 271,440 270,400 Structurue cost 94,238 100,077 105,718 108,607 111,527 HEAD OFFICE COST (CS) 8 8 8 8 8

UNIT OF WORK / Daily 28 28 27 27 26

67



TRANSPORTATION BUSINESS

Benchmark Europe Assessment Vietnam

2014 2015 2016 2017 2018

Unit of work

Unit of KM USD 0.20 0.20 0.20 0.20 0.20

Unit of Hour USD 2.01 2.07 2.13 2.19 2.26

Unit of Day USD 28.14 27.78 27.24 26.70 26.16

Trip Distance (KM) KM 50 50 50 50 50

Truck Capacity Ton 2 2 2 2 2

Average load Ton 1.00 1.01 1.02 1.03 1.05

Rate of load Percent 66% 66% 66% 66% 66%

Average speed KM/H 30 30 30 30 30

Stoppover Time (load/unload Timing) Hour 1.33 1.33 1.33 1.33 1.33

Number of hours / Per Day / Truck operate

Hour 9 9 9 9 9

Rate of margin Percent 20% 20% 20% 20% 20%

Cost of a truck tour

Nbr of KM / Tour KM 50 50 50 50 50

Time to complete a Tour Hour 3.00 3.00 3.00 3.00 3.00

Time to complete a tour day 0.33 0.33 0.33 0.33 0.33

KM term cost USD 10 10 10 10 10

Hour term cost USD 6 6 6 7 7

Daily term cost USD 9 9 9 9 9

Total Cost USD 25 25 25 25 25

Selling Price

Unit cost/ton USD 25.19 25.01 24.79 24.57 24.37

Margin USD 6.30 6.25 6.20 6.14 6.09

Selling Price / Ton USD 31.49 31.27 30.99 30.72 30.46

68



INCOME STATEMENT FOR TRANSPORTATION BUSINESS

Income Statement - Transportation 2014 2015 2016 2017 2018

Net Sales 1,177,975 1,250,968 1,321,481 1,357,593 1,394,087

Ton Transported 37,411 40,007 42,648 44,199 45,773

Selling Price Per ton 31.49 31.27 30.99 30.72

30.46

Direct Cost / as % of KM 368,967 391,255 413,579 425,041 436,506

Direct cost / Periodic 224,175 244,483 265,807 280,986 296,836

Insurance Cost 51,000 56,160 59,280 60,840

62,400

General & Admin 94,238 100,077 105,718 108,607 111,527

EBIDTA 439,595 458,994 477,096 482,119 486,817

Depreciation 170,000 180,000 190,000 195,000 200,000

Interest 34,000 28,800 22,800 15,600

8,000

Gross Profit 235,595 250,194 264,296 271,519 278,817

Tax (25%) 58,898.77 62,548.42 66,074.05 67,879.63 69,704.37

Net Profit 176,696 187,645 198,222 203,639 209,113

Operation Hypothesis

Number of operating day 365 365 365 365 365

Nbr of Truck Tour/Year 1,095 1,095 1,095 1,095 1,095

Truck in service 34 36 38 39 40

69



WAREHOUSING BUSINESS

Revenues Assumptions 2014 2015 2016 2017 2018

Storage Revenue 1,175,332 1,257,435 1,343,459 1,433,528 1,419,326

Storage rate / ton / day 0.81 0.82 0.84 0.85 0.86

Occupational space 7,050 5,288 5,429 5,570 5,711 5,640

Utilise Capaciy 75% 77% 79% 81% 80%

Operating Day 365 365 365 365 365

Handling Revenue 270,316 284,925 299,919 315,297 307,560

Handling fee / Ton / Day 0.75 0.75 0.75 0.75 0.75

Cost Assumptions Cost breakdown/Storage Industries Cost

% Benchmark Europe % Assumption VN Assumption VN

Rent/Depre 22% 32% 373,549.60

Maintenance 10% 15% 169,795.27

Equipement 4% 6% 67,918.11

Loading charge 4% 6% 67,918.11

Labour cost 40% 12% 135,836.22

Consumable 5% 7% 84,897.64

GA - indirect 5% 7% 84,897.64

Labor head office /head office 4% 6% 67,918.11

Others 6% 9% 101,877.16

100% 100% 1,154,607.86

Loan Y 1 Y2 Y 3 Y 4 Y 5 Y 6 Y 7

(2 MUSD/ 7 y) 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000

Anuity 285,714.29 285,714.29 285,714.29 285,714.29 285,714.29 285,714.29 285,714.29

Acumulated 285,714.29 571,428.57 857,142.86 1,142,857.14 1,428,571.43 1,714,285.71 2,000,000.00

Residual 1,714,285.71 1,428,571.43 1,142,857.14 857,142.86 571,428.57 285,714.29 -

interest 100,000.00 85,714.29 71,428.57 57,142.86 42,857.14 28,571.43 14,285.71

Interest PA 5%

70



INCOME STATEMENT FOR WAREHOUSING BUSINESS

Income Statement – Warehousing Business 2014 2015 2016 2017 2018

Net Sales 1,445,648 1,542,360 1,643,377 1,748,825 1,726,886

Storage Sales 1,175,332 1,257,434.88 1,343,458.57 1,433,527.98 1,419,325.98

Handling Sales

270,316 284,925.36 299,918.90 315,296.89 307,559.84

Direct Cost

412,603 440,205.10 469,036.43 499,132.18 492,870.56

G&A

152,816 154,344 155,887 157,446 159,021

EBITDA

880,230 947,811 1,018,454 1,092,246 1,074,995

Amortisation

441,468 443,675 445,893 448,123 450,364

Interest

100,000 85,714 71,429 57,143 42,857

Gross Profit

338,762 418,422 501,132 586,981 581,774

Tax (28%) 94,853 117,158 140,317 164,355 162,897

Net Profit

243,909 301,264 360,815 422,626 418,877

Rate of Gross Profit 23% 27% 30% 34% 34%

71



INCOME STATEMENT FOR LOGISTICS VALUE-ADDED SERVICES

Income Statement – Logistics VAS 2014 2015 2016 2017 2018

Net Sales Logistique sevices / (% of Storage Revenue ) 5% 72,282.4 77,118.0 82,168.9 87,441.2 86,344.3

Direct Cost / (% of Storage Revenue ) 40% 28,913.0 30,847.2 32,867.5 34,976.5 34,537.7

G&A / (% of Storage Revenue ) 20% 14,456.5 15,423.6 16,433.8 17,488.2 17,268.9

Gross Profit 28,912.96 30,847.20 32,867.55 34,976.50 34,537.72

Tax (28%) 8,095.63 8,637.22 9,202.91 9,793.42 9,670.56

Net Profit 20,817 22,210 23,665 25,183 24,867


72



CONSOLIDATED INCOME STATEMENT

Consolidated Income Statement 2014 2015 2016 2017 2018

Net Sales 2,695,906 2,870,447 3,047,027 3,193,859 3,207,317

Direct cost 1,085,658 1,162,950 1,240,570 1,300,975 1,323,151

General & Admin 261,510 269,845 278,040 283,542 287,817

EBIDTA 1,348,738 1,437,652 1,528,417 1,609,341 1,596,350

Depreciation 611,468 623,675 635,893 643,123 650,364

Interest 134,000 114,514 94,229 72,743 50,857

Gross Profit 603,270 699,463 798,295 893,476 895,129

Tax (28%) 161,848 188,344 215,594 242,028 242,272

Net Profit 441,422 511,119 582,702 651,448 652,857


Rate of Net Profit 16% 18% 19% 20% 20%

73



CONSOLIDATED BALANCE SHEET

Consolidated Balance Sheet 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018

Fixed Assets (Gross Book Value) 3,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000

Depreciation 611,468 623,675 635,893 643,123 650,364

Accumulated Depreciation 611,468 1,235,143 1,871,036 2,514,159 3,164,523

Net Book Value 3,388,532 2,764,857 2,128,964 1,485,841 835,477

Total Fixed Assets 3,388,532 2,764,857 2,128,964 1,485,841 835,477

Inventory 0 0 0 0 0

Account Receivable 449,318 478,408 507,838 532,310 534,553

Cash 1,000,000 1,230,188 1,857,450 2,568,258 3,358,761 4,174,585

Total Assets 4,000,000 5,068,038 5,100,715 5,205,060 5,376,911 5,544,615

Capital 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000

Profit 441,422 511,119 582,702 651,448 652,857

Retained earnings - 441,422 952,541 1,535,243 2,186,691

Equity 2,000,000 2,441,422 2,952,541 3,535,243 4,186,691 4,839,549

LT loan 3,000,000 2,514,286 2,028,571 1,542,857 1,057,143 571,429

Account Payable 112,329 119,602 126,959 133,077 133,638

Liabilities 3,000,000 2,626,615 2,148,173 1,669,817 1,190,220 705,067

Total Liability + Equity 5,000,000 5,068,038 5,100,715 5,205,060 5,376,911 5,544,615

74



CONSOLIDATED CASH FLOW STATEMENT

Consolidated Cash Flow 2014 2015 2016 2017 2018

Cash beginning of the year 1,000,000 1,230,188 1,857,450 2,568,258 3,358,761

Cash from operation

Net Profit 441,422 511,119 582,702 651,448 652,857

Depreciation 611,468 623,675 635,893 643,123 650,364

(+) Var Account Payable 112,329 7,273 7,358 6,118 561

(-) Var Account Receivable (449,318) (29,090) (29,430) (24,472) (2,243)

Cash generated from operation 715,902 1,112,976 1,196,522 1,276,217 1,301,539

Cash from financing

Loan Repayment (485,714) (485,714) (485,714) (485,714) (485,714)

Borrowing - - - - -

Cash generated form Financing (485,714) (485,714) (485,714) (485,714) (485,714)

Cash from Investment

Investment - - - - -

Capital increase - - - - -

Cash generated from Investment - - - - -

Cash end of the year 1,230,188 1,857,450 2,568,258 3,358,761 4,174,585

75



FINANCIAL DATA

Financial Data 2014 2015 2016 2017 2018

Net Profit 441,422.45 511,119.01 582,701.62 651,448.09 652,857.49

Depreciation 611,467.71 623,675.05 635,893.42 643,122.89 650,363.51

(+) Var Account Payable 112,329.42 7,272.53 7,357.53 6,117.97 560.78

(-) Var Account Receivable (449,317.67) (29,090.11) (29,430.12) (24,471.88) (2,243.13)

Cash generated from ops 717,915.91 1,114,991.48 1,198,538.45 1,278,234.07 1,303,556.66

Loan Repayment (485,714.29) (485,714.29) (485,714.29) (485,714.29) (485,714.29)

Free Cash Flow 232,201.62 629,277.20 712,824.16 792,519.78 817,842.37

Terminal Value 6,815,353.09

FCF 232,201.62 629,277.20 712,824.16 792,519.78 7,633,195.46

Present value factor 1.00 0.87 0.76 0.66 0.57

Present value 232,202 547,198 538,997 521,095 4,364,304

Net Present Value 6,203,796

IRR 46%

Return desire 15% TBA

Timing ground 0

Cap rate on term value 12% TBA

IRR (2,000,000.00)

232,201.62

629,277.20

712,824.16

792,519.78

7,633,195.46

76


DISCLAIMER

Rock River Capital Ltd. has performed certain feasibility review procedure solely to assit the internal decision making process of Toda Industries, in relation to their contemplated logistics business in Vietnam.

Our work is based on publicly available information and the expected results of the unforeseen future business operation. Accordingly, we do not express any opinion or assurance on any of the information contained in our report, and there is no any compensation directly and indirectly relate to the investment decision making based on the content of the report.

Our report is solely for the purpose of assisting Toda Industries for the feasibility analysis of logistics business in Vietnam. In addition, this report should not be used, circulated, quoted, or otherwise referred to, for any other purposes, nor should it be made available to any parties without our prior consent in writing.

67

feasibility study

Documents

charter capital g

logistic services

transport agency services

railway transport services

maritime transport services

air transport services

storage services

subsidiary services