Long-term Strategy, Right Investment Needed to Increase Shipping Market Share

With a coastline of more than 3,260 km, Vietnam has huge potential for shipping development and this field has achieved important results in the past time. However, shipping is forecast to confront numerous challenges in 2012 because of the economic slowdown.

“To overcome difficulties and grasp every opportunity, in addition to urgent measures in 2012, the Government and concerned businesses themselves need to continue with long-term development strategies in pursuit of sustainable development for the maritime transport sector,” said Secretary General of Vietnam Freight Forwarders Association (VIFFAS) Tran Huy Hien in an interview with the Vietnam Business Forum.

At present, the Vietnamese seaport system is mainly constituted of general ports and specialised ports. Container terminals play a minor role, while containerised cargo transportation is becoming more common. What do you think about this?

The designed capacity is higher than the demand, especially in the Port 5 complex, where Cai Mep – Thi Vai Port area is the centre. By the end of 2010, the container terminal capacity in Ho Chi Minh City and the Cai Mep – Thi Vai area far exceeded the demand. Arguably, the story of shortage and surplus still continues when seaport development planning remains disconnected from reality. This shortcoming needs to be removed in seaport development plans in Vietnam.

Although the potential capacity of Vietnamese seaports is huge, inconsistent planning and development hinders effective port operations. Locally, some regions lack container ports rather than general ones. But, removing this “bottleneck” requires a long-term, carefully calculated strategy. If container port investment is not designed based on detailed study of goods flows, demand and expected development, it will lead to ineffective operation.

Would you mind talking about some achievements of the Vietnamese shipping industry? What are the weaknesses that need to be addressed for further development?

With local geographical advantages, the shipping industry has the strongest development among industrial transportation sectors in Vietnam, contributing significantly to the cause of industrialisation and modernisation. For years, cargo throughput at Vietnamese ports has grown 15 percent annually. In 2011, the volume of cargoes handled at Vietnamese seaports reached approximately 290 million tonnes. The volume is forecast to reach 500 – 600 million tonnes in 2015, 900 – 1,100 million tonnes in 2020, and 1,600 – 2,100 million tonnes in 2030.

However, in international shipping, Vietnamese shipping companies serve only 20 percent of the demand while the remaining 80 percent belongs to foreigners. This reality forces the Government and Vietnamese shipping companies to apply long-term, sound development strategies to grasp more market share.

At present, many freight forwarders complain about hardships related to lack of information about multimodal transport registration procedures, slow e-customs, high traffic tolls and parking fees. What needs to be done to resolve these issues?

To be fair, these weaknesses have been much improved in recent years. Information related to multimodal transport registration procedures is more transparent. All the terms and condition are not that difficult to satisfy.

E-customs declaration and clearance have received special attention from the Government, the Ministry of Finance and General Department of Customs, especially investment for equipment modernisation, high-quality human resource training and administrative reform. These efforts help improve the smooth completion of import and export procedures. Simpler and quicker completion of procedures facilitates logistics and shipping business development. But, to keep up with customs in developed countries in the region requires the entire Vietnamese customs sector and logistics companies to make a greater effort.

As an expert, would you mind telling us the challenges facing the shipping market in 2012? And, how has VIFFAS supported forwarders, especially its members?

In 2012, shipping companies are forecast to make lower profits and face thorny difficulties due to slowing global trade and shipping demand. Many heavily indebted companies are facing the risk of bankruptcy. Meanwhile, shipping companies are at a disadvantage against companies in other sectors, as they are not included in the group of companies receiving government-backed soft loans.

Another challenge for the Vietnamese logistics industry in 2012 is very high total logistics costs. Shipping costs account for 50-60 percent of logistics costs. Hence, the current urgent requirement is how to reduce logistics costs to lower prices of Vietnamese goods and sharpen their competitiveness on global markets.

Before these difficulties, with its function of representing member companies and safeguarding the rights and interests of logistics companies, VIFFAS will further promote its bridging roles, actively analyse difficulties and challenges facing logistics companies and propose proper solutions to the Government. Besides, it is involved in the process of drafting and compiling policies and informs member companies of new logistics policies. It also works for a better business environment for logistics companies.

My Chau reports.