With a coastline covering thousands of kilometers long and many international ports, Vietnam has a weak vessel fleet; thus, the freight transport market share is dependent on foreign shipping companies. The shipping industry is facing major investments and solutions are needed to promote the potential and advantages of a maritime nation.
As a businessman with experience in import-export business for decades, Chairman of the Board of Directors of Phuc Sinh Company Phan Minh Thong said that if Vietnam had a strong vessel fleet, Vietnamese businesses could be more proactive in cooperating with their partners. He pointed out that during the Covid-19 epidemic, foreign shipping companies offered very high shipping rates, but Vietnamese export businesses had no choice but to accept it.
Sharing the same opinion, Vice Chairman of the Vietnam Cashew Association Dang Hoang Giang said that if Vietnam has big ships, Vietnamese businesses will have more advantages in transactions. Foreign shipping lines almost only set agents or work via online platforms with Vietnamese export businesses, so when problems occur, resolving them is very complicated and expensive.
Vice Chairman Dang Hoang Giang took transnational trade fraud – a recent suspected scam involving local businesses exporting cashew nuts to Italy – as an example. According to him, if it is a Vietnamese ship, the manufacturing enterprise can notify the Vietnamese authorities to intervene quickly not wait for the authorities of Vietnam and the receiving country to discuss a solution, which is both time-consuming and costly.
Director of International Air Freight Sales, U&I Logistics Joint Stock Company Pham Anh Tuan said because Vietnam has no shipping fleet, domestic seaports have to depend on foreign shipping lines. Worse, the country was forced to collect low landing fees.
From the beginning of the year until now, most shipping businesses have fallen into a situation where profits have plummeted. In the second quarter of 2023, the leader of Vietnam’s shipping industry, Vietnam Shipping Joint Stock Company (Vosco), achieved revenue of more than VND1,042 billion (US$42,889,324), but profit after tax only reached VND1.08 billion. Accumulated from the beginning of the year until now, Vosco’s turnover reached more than VND1,561 billion and its net profit was more than VND 74 billion, down 76.5 percent compared to the same period last year.
Similarly, Vietnam Maritime Corporation (VIMC) achieved a pre-tax profit of VND 1,120 billion in the first 6 months of the year, down 46 percent over the same period. Transimex Joint Stock Company, SAFI Transport Agency Joint Stock Company, Hai An Transport Company, and Southern Logistics Joint Stock Company also reported a sharp decrease in profits over the same period. Some businesses have even suffered losses due to operating below cost.
A representative of the Vietnam Maritime Administration said that the market share of Vietnamese businesses is already small, only making about 5 percent of the country’s exports, but is now even narrower, as transportation demand declines. It is forecast that in the last months of 2023, transportation demand will increase slightly but still not enough to save shipping businesses.
According to the Vietnam Maritime Administration, the biggest limitation of Vietnam’s shipping industry is fleet capacity. Currently, Vietnam has 1,563 ships, with a total capacity of about 7.7 million GT (a unit of measuring ship tonnage) and a total tonnage of about 12.7 million DWT (gross tonnage). Of which, the specialized maritime transport fleet accounts for the majority with 1,043 ships, with a total capacity of about 6.67 million GT and 11.3 million DWT.
However, most of the existing ships are small and medium-sized ships. The number of ships over 30,000 GT has only 13 ships with an average age of about 16.8 years old. In particular, the container ship group only accounts for 4 percent of the total tonnage of the transport fleet with 38 ships.
Deputy Director of the Vietnam Maritime Administration Hoang Hong Giang said that several Vietnamese enterprises have invested in large-tonnage specialized ships. However, Vietnam’s shipping fleet is only suitable for the domestic coastal freight market or short international routes in the region, and cannot compete in the international shipping market.
Hence, although the volume of goods through Vietnamese seaports continues to increase, the transport market share handled by the Vietnamese shipping fleet is increasingly decreasing. Statistically, the import-export transportation market handled by Vietnam’s shipping fleet is continuing to gradually decrease, from 11 percent in 2015 to about 5 percent now. Because of this limited capacity, Vietnam’s shipping fleet has not been able to seize opportunities from the free trade agreements that Vietnam signed with many countries.
General Secretary of the Vietnam Seaports Association Ho Kim Lan fretted because Vietnam’s freight transport market share is dependent on foreign shipping lines and domestic shipping, including delivery. Worse, he said that Vietnam has been forced to reduce seaport infrastructure service prices when receiving goods to foreign shipping.
Meanwhile, more Vietnamese businesses invested in ships with foreign flags, accounting for 25 percent of the tonnage of the national fleet. Vietnamese enterprises invest in fleets of foreign-flagged ships further reduces the size of the domestic fleet and the market share of import-export cargo transport of national-owned fleets. Moreover, the government can’t collect taxes and fees for ships with foreign national flags.
Source: Saigon Giai Phong