Local shipping firms struggle for a bigger share

Despite the Vietnam Maritime Administration’s (VMA) ruling to limit foreign-flag shipping companies from exploiting domestic routes, Vietnamese peers will still have to struggle to win shippers’ hearts, industry insiders have warned.

Since the beginning of 2013, no more new licences will be granted to foreign container ships to operate on domestic routes for at least three to six months, said Trinh The Cuong, head of Transport and Freight Services at the VMA.

Foreign shipping firms already held a licence would be allowed to operate on some certain domestic routes, he said.

“Without such administrative measures, Vietnamese shipping firms would find it very hard to compete against 20 foreign-flagged container ships of all sizes, with a combined capacity of some 500,000dwt,” said Do Xuan Quynh, general secretary of the Ship-owners Association of Vietnam.

But the VMA’s ruling have sparked concerns from Vietnamese clients over whether domestic shipping companies can reduce costs to the levels offered by foreign firms to ensure their competitiveness.

In early 2012, the Vietnam Timber and Forest Product Association (Vifores) sent a dispatch to the Ministry of Industry and Trade (MIT) and Vietnam Chamber of Commerce and Industry (VCCI), requesting for stopping the VMA’s ruling.

Phan Thong, general secretary of the Goods Owners Association of Vietnam, argued that local shipping companies often did not provide firm commitments on maintaining a stable pricing policy and timely goods delivery.

“They [local shipping firms] also do not have the needed ties with parent ships which are transporting exported goods on international routes,” he said.

The VMA figures show the charges offered by Vietnamese shipping lines are often doubled from what are offered by foreign-flag ships.

A VMA representative also conceded that given the capacity of their fleets, Vietnamese shipping companies were not capable to take on the job of transporting all the goods on domestic routes.
MIT Deputy Minister Tran Tuan Anh also warned that unless local shipping firms could cut cost to reasonable levels, it would be not only the domestic shipping industry, but also the whole economy that would  have to suffer.

“Increased shipping costs [associated with the high charges offered by local firms] on domestic routes would make it even more difficult for Vietnamese goods to compete in term of prices,” he said.

“Then, besides having to address the difficulties for local shipping fleets, the government will have simultaneously to tackle the [new] difficulties facing export and import activities, which involve thousands of businesses,” he added.