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The establishment of Vietnam’s leading logistics Group

On 14/5/2007, four leading giants in distributing field are Saigon trading Group (Satra), Hapro, Saigon Co-op and Phu Thai Group associated and officially present Vietnam Distribution Network Development and Investment Joint- stock Company (VDA) with total investment capital up to 6.000 million VND.

It is considered as the start for a new era of Vietnam’s distribution with a hope that VDA will become “Vietnamese Wal-Mart”. DDDN had a talk with Mr. Pham Dinh Doan, General Director of Phu Thai Group-one VDA’s founding member.

- How the establishment of VDA means for Vietnam’s distribution industry and the competitiveness of VDA, compared with foreign retailers?

The foundation of VDA is evaluated as a prompt event since according to the Route of WTO integration-there will be a big change in Vietnam’s retailing market at the beginning of 2009. Therefore, Groups and international investors will establish companies with 100% foreign capital instead of asking permissions or joint venting as before. It means that domestic enterprises have to directly face with multinational Groups who have strengths in finance, resources, modern management approach and huge potentials about the market

However, with the establishment of VDA, we believe in our ability of competing with foreign distribution Groups, at the same time, creating the bridge to promote domestic commercial development, ensuring the benefits of consumers. Four founding members separately already got 10-20 years of experience, had customers and market share. In 2006, Total turnover of four members reached over 20.000 billion VND. We have an ambition that VDA will develop like a “Vietnamese Wal-Mart”. VDA is considered as 4+1 model, becoming the motive force of Vietnam’s distribution industry in the near future, since it attracts (converges) all strengths of the members. Saigon Co-op is good at retailing distribution, accounting for 50% market share in Ho Chi Minh City. Hapro and Satra have some ten years of experience, they already set up infrastructure system and market share in Southern and Northern area. Phu Thai Group has the strength of the leading distribution Group with over 100 super markets, 5000 wholesalers, and 50000 retailers in all over Vietnam.

- Carrying out VDA system needs a huge capital resource, so how is the capital mobilized and financing (disbursement) process executed?

Stage 1. VDA will focus on building infrastructure with total investment up to 1.500 billion VND. In the short term, VDA will spend contributed capital from the four founders and concentrate on building infrastructure in the centers of three biggest cities, including Hanoi, Saigon and Danang. We expect to have the first warehouse center and logistic system coming into operation in 2008.

Stage 2. When Vietnam completely opens this market, VDA will focus on building hypermarkets, wholesaling distribution centers, business concession, purchasing-selling and merging companies then invest to outside Vietnam. VDA will build base depots where are the goods’ destination for distribution network in provinces and cities in Vietnam, becoming the bridge which connects manufacturers together. To mobilize a very huge capital, VDA will diversify mobilization channel from enterprises, credit and stock issuance.

- Could you let us know if the establishment of VDA affects the current benefit of founding companies?

VDA will not develop on the direction of being a child of its founding companies but become one leading Group trading in Logistic and Distribution field in Vietnam. The operation of VDA will also not negatively affect to the current operation of the founding members but will focus on the activities and projects at higher levels, which separate one is not able to do. VDA will pay attention to build up and develop shopping center chain, hypermarkets at big city’s centers and neighboring area with different brands and ranks; set up infrastructure for creating good conditions for reorganizing wholesaling, distribution and retailing system aiming at profession, modernity, convenience and reliability. Objectives of the VDA’s members is not only to create a certain skeleton for four founding companies but also make a base for destructing domestic distribution and retailing system.

- Do you think signing contract with Vietnam national shipping lines (Vinalines), Vietnam Association of Seafood Exporters and Producers - VASEP and Bank for Investment and Development of Vietnam (BIDV) is considered as the initial base for VDA’s expanding cooperation on many fields in the future?

That is true. Therefore, with the target of expanding operation to maintain a sustainable development, Vinalines will offer VDA the chance to exploit total harbors as well as warehouse system, promote goods circulation. Vasep will boost distributing fishery products through VDA‘s cold warehouses and broad networks.

- Which challenges is VDA facing?

Apart from efforts from the founding members, VDA really needs the support from Government in policies and the help from local entities, as well as the cooperation with domestic and foreign enterprises, especially the support from crowded consumers. When having convenient positions, VDA will surely bloom in 2009, when Vietnam opens retailing market according to WTO commitment.

- Thank you and good luck for VDA.

VDA development orientation:

- Setting up and developing VDA to become a biggest Group trading in Logistics and commercial technical infrastructure in Vietnam

- Building up, developing shopping centers, hypermarkets in big city’s centers, and neighboring area with different brands and ranks.

- Building base depots and doing warehousing and sending/receiving services.

- Building up agricultural and aquaculture sourcing markets to shorten the distance between manufacturers and consumers

- Setting up open and clear information channel

- Associating in purchasing activities and other business activities to aim at enhancing competitiveness

- Financial activities and joint-venting with domestic and foreign enterprises


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