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logistics in vietnam

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logistics in vietnam

  1. 1. AN OVERVIEW ON THE LOGISTICS MARKET IN VIETNAM January 2011 © Copyright Istituto nazionale per il Commercio Estero 1
  2. 2. AN OVERVIEW ON THE LOGISTICS MARKET IN VIETNAM TABLE OF CONTENTS I. Introduction .......................................................................................................................... 3 II. A general picture on logistics in Vietnam............................................................................ 3 2.1 Infrastructure, operation and cargo volumes................................................................. 3 2.1.1 Air........................................................................................................................... 3 2.1.2 River and sea......................................................................................................... 5 2.1.3 Road....................................................................................................................... 9 2.1.4 Rail....................................................................................................................... 11 2.2. The logistics industry in Viet Nam.............................................................................. 12 2.2.1 Some considerations about the industry.............................................................. 12 2.2.2 Some major challenges........................................................................................ 13 III. Vietnam’s commitment to WTO in logistics...................................................................... 14 IV. Leading companies in the market.................................................................................... 14 4.1 Vietnam Airlines .......................................................................................................... 14 4.2.Vinalines ..................................................................................................................... 15 4.3 Maersk Line ................................................................................................................ 16 VI. Major Shipping Lines and Agency Representation.......................................................... 17 Editorial note The following report, providing an overview of infrastructure and development of the Vietnam’s logistic sector, has been composed by the Italian Institute for Foreign Trade (ICE, also known as Italian Trade Commission) of Ho Chi Minh City. It has been prepared by a team composed by Ms. Nguyen Thi Thu Ha, Mrs. Do Nguyen Quynh Anh and Mr. Tran Quang Nam, under the supervision of Mr. Marco Saladini who also edited its final version. The report is part of the project Distretti e Piattaforme Logistiche all’Estero carried out by the Office for machinery, technology and services of ICE Rome and, for Vietnam, by ICE Ho Chi Minh City. 2
  3. 3. I. Introduction Vietnam is located in the south-eastern end of the Indo-Chinese peninsula and occupies a land area of 331,688 square kilometers. With a north-to-south distance of 1,650 kilometers, it is about 50 kilometers wide at the narrowest point. It shares boundaries with Laos, Cambodia on the west and China in the north. Vietnam has 58 provinces and five big cities. Its geographical topography contains tropical lowlands, deltas, hills and densely forested highlands. Major geographic regions in the country include highlands and the Red River Delta in the north, the Highlands in the central region and the coastal lowlands and the Mekong Delta in the south. Vietnam has a population of more than 85 million with an estimated 63% below the age of 30. The Kinh (Viet) ethnic group constitutes the majority of the population (about 86%) and Vietnamese is the most commonly spoken language. Literacy level in Vietnam is at around 90% of the total population, which is relatively higher than other developing countries. Vietnam has seen rapid economic growth after adopting economic reforms in 1986, making the nation one of the fastest growing economies in Asia. The ongoing efforts of the Government towards international economic integration such as the forming of bilateral trade agreements, attaining memberships of the ASEAN Free Trade Area (AFTA) and, in January 2007, accession to the World Trade Organization (WTO), have led to further rapid changes in Vietnam’s trade and economic regime. Until 2008, the Vietnamese economy has recorded a growth rate of 7% per year. After a slow-down in 2009, when the growth rate was 5,3%, in 2010, the gross domestic product (GDP) grew by 6.8% reaching a value of USD 104.6 billion. Besides that, favorable government policies for industrial activities and other important factors such as a relatively low cost of labor and a strategic location in a fast- growing region of the world, have led to the growth of Foreign Direct Investment (FDI) flows into Vietnam and to the establishment of more privately-owned Vietnamese enterprises. The inflow, or disbursement, of FDI was reached USD 11 billion in 2010, up 11% as compared with the previous year. Vietnam’s imports and exports have been consistently increasing with an annual average growth rate of 20%. In 2010, export revenues amounted to USD 71.6 billion, 25% higher than in 2009, whereas the import turnover reached USD 84 billion, 20% higher. All these factors have led to an demand for logistics services in Vietnam in recent years, which has met some obstacles in being satisfied at the desired quality and price levels, due also to some constraints which will be discussed in what follows. This gap between demand and supply of logistics services can also be seen as a business opportunities for companies interested in developing their trade in Vietnam. The market is slowly but steadily opening to foreign providers, according to the schedules and the commitments agreed upon in the framework of Vietnam’s WTO accession. II. A general picture on logistics in Vietnam 2.1 Infrastructure, operation and cargo volumes 2.1.1 Air Infrastructure The aviation industry in Vietnam operates under the direct jurisdiction of The Civil Aviation Administration of Vietnam (CAAV). The CAAV currently oversees 22 airports including three international airports: Noi Bai in Hanoi, Danang in Central Vietnam and Tan Son Nhat in Ho Chi Minh City. The 19 minor airports are for domestic flights to the three larger hubs. They are at Hai Phong, Dien Bien, Na San, Gia Lam, Vinh, Phu Bai, Dong Hoi, Phu Cat, Tuy Hoa, Cam Ranh, Pleiku, Buon ma Thuot, Lien Khuong, Vung Tau, Can Tho, Rach Gia, Ca Mau, Phu Quoc and Con Dao. 3
  4. 4. Currently, Ho Chi Minh City’s Tan Son Nhat is the largest airport, serving more than ten million domestic and international passengers a year. In 2007, Tan Son Nhat Airport added an international terminal. The 92,000 square meter facility has a capacity of 10 million international passengers and one million tonnes of cargo per year. The previous terminal was converted to serve domestic flights with a capacity of 7 million passengers every year. Parking area of the whole airport can accommodate 30 airplanes and about 6,000 cars at a time. Other airports with significant passenger throughput capacity include Noi Bai Airport in Hanoi with 7.1 million passengers, Cat Bi airport at Hai Phong with 500,000. Danang Airport with 1.4 million and Hue’s Phu Bai Airport with 520,000 passengers per year. The most significant new airport project under consideration is the Long Thanh International Airport in Dong Nai Province, 50 km to the northeast of Ho Chi Minh City. The project was supposed to start in 2007, however it is still in stand-by. Recently, the government has pushed the Ministry of Transport to start the construction in early 2011. The airport is to be built in two phases, with the USD 5 billion-worth Phase I having a designed capacity of 20 million passengers per year. The plan for Phase II envisions four runways 4,000 meters in length and 60 meters wide, capable of accommodating heavy long- haul planes, including the Airbus A380. The total capacity will be then upgraded 80 to 100 million passengers and 5 million tones of cargo per year. CAAV is in the process of converting existing airports at Cat Bi Island (near Haiphong), Chu Lai in central Quang Ngai province, Phu Quoc Island, and Cam Ranh from domestic to international airports. Operation and Volume The two principal airlines operating in Vietnam are Vietnam Airlines and Jetstar Pacific Airlines. Both of these airlines are state owned, while Jetstar has a stake in the latter one. Other minor airlines have also obtained a license to operate, but so far only Air Mekong has started flying from its base in Phu Quoc island. Air cargo handled in Vietnam grew at the average rate of 17 percent per annum during the 2000-2007 period. Though the rate has lightly reduced due to the effects of the crisis in 2009, air freight volume is expected to continually increase in the coming years, also due to the emphasis placed by the government on attracting manufacturers of electronics and high tech industries which require more sophisticated transportation, including the increased used of air freight. Noi Bai Airport’s cargo operation in Hanoi are handled by Noi Bai Terminal Services with 19 international airlines offering freight services. The company is majority owned by Vietnam Airline together with several other Vietnamese freight forwarders. Tan Son Nhat Cargo Services, a joint-venture between Vietnam Airline and Singapore Airport Terminal Service, handles international cargo operations for 22 airlines and has an annual cargo throughput of 100,000 tones (about 80% of total international freight volume). 4
  5. 5. Figure 1. Volume of freight, 2000-2009 Volume of Freight by Air, 2000-2009 0 50 100 150 2000 2003 2005 2007 2009 Year Volumeoffrieght (Thous.tons) Domestic Overseas Source: General Statistics Office Figure 2. Volume of Freight Traffic by Air 2000-2009 0 50 100 150 200 250 300 350 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 year VolumeofFrieghtTraffic (Mil.tons.km) Source: General Statistics Office 2.1.2 River and sea Infrastructure Vietnam’s dense river and canal network provides the country with a highly developed inland waterway system. This is the second-largest sub-sector involved in domestic cargo transport, accounting for 25-30% of total transport volumes. This is particularly true of the Mekong River Delta where, in some provinces, it accounts for 60-70% of total transport. Currently, the inland waterway transport sub-sector is managed by two state corporations affiliated to the Ministry of Transport, one state-owned enterprise (SOE) affiliated to the Vietnam Inland Waterway Authority, and some enterprises managed by other ministries, operating in support of the power generation, cement, and paper industries. In addition, there are about 230 co-operatives and hundreds of inland waterway transport enterprises in the country. As the traditional routes serving the key industries such as coal for power generation, fertiliser and cement, inland waterway transport also handles a large volume of other building materials and agricultural products. 5
  6. 6. 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. Vietnam’s seaport network comprises many small- and medium-sized entities, with inefficient distribution. Most big ports are located far inside rivers, like Hai Phong and Ho Chi Minh City, with limited depth at the entrance. Some ports are located in big cities where road traffic is particularly congested, making it difficult to forward cargo via other modes of transportation. Except for some new or upgraded ones, most ports have been operating for many years, lack investment and are seriously degraded. The loading and unloading equipment in some ports is obsolete, leading to low productivity. This is one of the major reasons why Vietnam is ranked behind its neighbours in both the World Economic Forum’s Gobal competiveness Report 2009-2010, where it comes 99th out of 133 countries in terms of ports infrastructure, and in the World Bank’s Logistics Performance Index, where it comes in 53rd place, while its neighbours Singapore and Malaysia are placed second and 29th respectively. The government is aware that port congestion is now a critical issue threatening Vietnam’s export growth. Since 2009 it has approved several big seaport projects which are under construction. Concentration of medium ports in Hochiminh city Ho Chi Minh City is a critical gateway, given that 72% of the country’s container throughput passing through its ports. They serve not only their immediate vicinities but also the neighboring provinces of Binh Duong, Dong Nai, Baria – Vung Tau, where a large number of industrial and manufacturing plants are based, in addition to the Mekong Delta and the Central Highlands. However, all ports are located very near to city centre, limiting the capacity and depth at the entrance and suffering from urban traffic congestion. The only exception is Saigon Premier Container Terminal since it was built in 2008 at the suburban areas. It has just begun to operate by a joint-venture between DP World and Tan Thuan Industrial Promotion Company. Table 1. Facilities at the Main ports in Ho Chi Minh City Port information Cat Lai VICT Saigon Port Ben Nghe Port SPTC No of Berths 6 4 18 4 3 Total Berths of Length 800m 678m 2,667 m 816 m 500m Depth alongside berth -10.5m -10m -11m -10.5m -14m Max Sixe of vessel 30,000DWT 25,000DWT 30,000DWT 30,000DWT 2,200 TEU Land area 60ha 20ha 50 ha 32 ha 23ha Quayside Gantry cranes 10 4 2 0 5 VICT- Saigon International Terminals Vietam Port Source: Different sources 6
  7. 7. Figure 3. Map of ports in Ho Chi Minh City Source: SPCT Ba Ria-Vung Tau, new region of deepwater ports The new region for deepwater ports is Ba Ria-Vung Tau Province. Tan Can-Cai Mep was the first container and deepwater port developed in the province in 2008. Construction of the first phase of the project was completed in 2009. The port can accommodate ships up to 80,000 DWT during the fist phase and 110,000 DWT during the second phase which is scheduled to operate in 2011. SSA Marine from the United States of America signed a joint-venture with Saigon Port and Vinalines to build a USD 282 million port on 60 hectares at Cai Mep and Thi Vai rivers The port includeS 600 meters of berth frontage and can handle a container throughput of up to 1.35 million TEU per year. The port, which begun operation in 2009, accommodates ships of up to 80,000 DWT. In 2008, Maersk A/S, Saigon Port Company and Vietnam National Shipping Lines (Vinalines), formed a joint venture for Cai Mep International Terminal (SP-SSA), two-wharf container and deepwater port with an investment value of USD 200 million. The project is the most ever significant development funded by the state budget through Official Developing Assistance (ODA). The port has been built from 2008 on 48 hectares, its wharves have a total berth lengths of 600 meters and it can accommodate a throughput of up to 1.1 million TEUs per year. The trial is taken in late of 2010, serving to container ship Albert Maersk, 352 meters long and 109,000 DWT in weight. The operation of the port is expected to reduce congestion in Ho Chi Minh City’s ports. Van Phong port, an international transshipment port near Nha Trang, Khach Hoa Province, is to be built by Vinalines to serve as a regional hub similar to those operating in Hong Kong and Singapore. The port will accommodate ships of up to 200,000 DWT. Current plans for the port include terminals for container ships with loading capacity of 15,000 TEUs and 17 bulk cargo piers capable of handling 17 million TEUs a year. The first phase of the Van Phong project, scheduled to start in 2010 or 2011 and finish in 2015, will see construction of two large and five small berths with a quay size of up to 2,260 meters. This would allow the 7
  8. 8. facility to handle 9,000 TEU vessels and have a total container throughput capacity of two million TEUs per year. The Ministry of Transport has assigned Vinalines to develop a deep water port at Lach Huyen, in northern Vietnam near Haiphong. The port will be the largest transshipment port in northern Vietnam, accommodating ships of 60,000 – 80,000 DWT. The port will include four container terminals, two bulk cargo terminals, and five terminals for food and other goods.Total capacity would be 35 million tonnes of goods per year. Its construction is expected to begin in 2011. Operation and Volume The largest local operator is the Vietnam National Shipping Lines (Vinalines). This state- owned companies is also the main developer of almost all port construction projects in the country. Until 2005, the volume of freight traffic by river has stably grown. In the following years expansion became more difficult for the sector since almost all barges, the most common means of river transport in the country, were becoming old and unsafe and there was a lack of specialized bulk cargo ships. Figure 4. New Port Development Map Source: Vietnam Infrastructure Report – ICE Hochiminh 8
  9. 9. Figure 5. Volume of Freight Traffic by River, 2000-2009 0 5.000 10.000 15.000 20.000 25.000 30.000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Year VolumeofFreightTraffic (ton/kmMln.) Source: General Statistics Office In terms of freight by sea, the data shows a firm growth trend from 2000 to 2010. With respect to the throughput of the port system, Hochiminh City’s ports report that the demand is usually higher than their capacity. APL Shipping line expects demand for container shipment in the south to increase by an average of 20-25% per year from 2011 to 2015. The volume of freight traffic by sea increased on average by 19.6% per year, lifting the total volume to 13.5billion ton km in 2009. Figure 6. Volume freight traffic by sea, 2000-2009 0 20.000 40.000 60.000 80.000 100.000 120.000 140.000 160.000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Year Volumefreighttrafficbysea (ton/kmMln.) Source: General Statistics Office 2.1.3 Road Infrastructure The statistic of 2007 shows that Vietnam has about 210,000 km of road,17,300 km national highway. Roughly 85% of the national roads are paved, while only 54% of the provincial roads, and 20% of the district roads are paved. Only ¼ of the road network has more than one 9
  10. 10. lane and major constraints include narrow widths, poorly designed junctions and restrictive vehicle weight limits. 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. To address road infrastructure constraints, the Ministry of Transportation and MPI have developed plans for a series of road upgrades. The government has approved an estimated 2,160 km of new highway projects as part of the national Transport Master plan. The table below summarizes approved highway projects in Vietnam to 2020. Beside the lack of highway system, the inefficiency of urban roads is also a challenge to container transfer towards or inside major cities. The traffic congestion seriously increases time of forwarding. The problem, moreover, seems not so easy to be solved in the short term. Table 2. Summary of approved highway projects in Vietnam to 2020 Source: VEC- Vietnam Expressway Corporation, 2008 Operation and Volume In 2009 there were over 1,050 enterprises registered in the road transport business, which included 16 state-owned enterprises, 233 limited liability companies, 350 private companies and 450 joint stock companies. Very few foreign invested companies are present. Most road transport companies are of small and medium scale. Each company owns about 50 vehicles, on average. Road transport accounts for around 60% market share of domestic cargo. There has been a 16% yearly growth, on average, in the volume of freight road transport over the last 10 years. The total freight traffic reached 30 ton/km Bln. in 2009. It is assumed that the data should be higher when adding the freight forwarded by tens of thousands of individual 10
  11. 11. household business which operate informally in the sector and are thus are not accounted for in the national statistics. Table 3. Volume of freight by Road, 2000-2009 Year Volume of freight (Thoun.ton) Volume of freight traffic (Mil.ton.km) Rate of grow (%) 2000 144571,8 7969.9 2001 164013,7 9184.9 15 2002 192322,0 10667.6 16 2003 225296,7 12338 16 2004 264761,6 14938.8 21 2005 298051,3 17668.3 18 2006 338623,3 20537.1 16 2007 403361,8 24646.9 20 2008 455898,4 27968 13 2009 494649,8 30261.4 8 Source: General Statistics Office 2.1.4 Rail Infrastructure 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 network has 1,790 bridges totaling 45 km and 11.5 km of tunnels. The principal axis is Hanoi-Ho Chi Minh City (1,726 km). Other lines emanating from Hanoi are to Hai Phong (102 km), Lao Cai (296 km) and Dong Dang (162 km).Trains have a maximum speed of 70 km/hour but frequently have to slow to under 30 km/hour along older sections of track or when crossing aged bridges. Figure 7. National Rail System 11
  12. 12. The Hanoi-Ho Chi Minh City line connects the prime economic zones in the north and south. Since most of the economic activity is concentrated around these regions, this line serves as the most important link in Vietnam’s rail network. The network connects to China’s railways at two gateways in Lao Cai and Dong Dang. Operation and Volume The rail network has a sole operator, the Vietnam Railway Corporation (VRC). The policy and regulation functions fall under the Vietnam Railway Administration, a department of the Ministry of Transport. Apart from operating the railway infrastructure, VRC also buys and maintains locomotives and invests in maintenance facilities. However, due to a lack of investment and old infrastructure, the railway face strong competition from maritime, inland waterway and road transportation modes. The system has been focused on passenger traffic due to the technical challenges facing the movement of containers and bulk cargo. Traffic density is low, around 2.3 million traffic units/route/km per year, which includes both freight and passenger. The volume in tonnage kilometer equivalent from 2000 to 2009 had an average growth rate of 7,2% per year with a somewhat high volatility. The current growth of the freight traffic through rail is not so fast because of the high costs and the poor efficiency of the system rather than due the lack of demand. Table 4. Volume of freight by rail, 2000-2009 Year Volume of freight (ton. ‘000) Volume of freight traffic (ton/km Mln.) Rate of growth of freight traffic (%) 2000 6258,2 1955.0 2001 6456,7 2054.4 5 2002 7051,9 2391.5 16 2003 8385,0 2725.4 14 2004 8873,6 2745.3 1 2005 8786,6 2949.3 7 2006 9153,2 3446.6 17 2007 9050,0 3882.5 13 2008 8481,1 4170.9 7 2009 8068,1 3805.1 -9 Source: General Statistics Office 2.2. The logistics industry in Viet Nam 2.2.1 Some considerations about the industry The logistics industry in Vietnam is still in its infancy and the process of procurement of goods and materials, transportation, storage and delivery are not commonly carried out in an integrated manner. The competitive structure of logistics companies in Vietnam is defined by the level of service offerings, integration of those services and their overall quality and cost. The logistics market in Vietnam can be segmented based on the functions served or the extent of outsourcing. 12
  13. 13. The functional segmentation includes 3 main categories i.e. transportation, freight forwarding and warehousing. The transportation function accounts for a major portion of logistics activity followed by freight forwarding and trading services. Demand for transportation and freight forwarding services is strong due to high volumes of materials and finished goods that need to be transported. However, the transportation service sector as a whole in Vietnam is relatively weak. Despite having the most extensive transportation system in the Indochina region, Vietnam’s road and rail network is under-developed, while both ocean and air transportation are characterized by higher costs and longer transit times as compared to many of its neighbor countries. Moreover, the Vietnam shipping industry is dominated by international carriers who are able to provide global coverage of services. The local carriers are largely focused on domestic and regional shipping services within South East Asia. Ho Chi Minh city, through which more than 70 percent of Vietnam’s container throughput passes, is a critical gateway for both imports and exports. Particularly, the demand for warehousing and other value-added logistics services is also increasing; nevertheless, a large portion of these services is operated in-house, so it will take time before outsourcing becomes more prevalent. The distribution system is currently fragmented and consists of a network of state-owned and private firms, import-export firms and wholesalers, independent agents and distributors, and retail outlets including small family-run shops, modern distribution outlets and state-owned stores. 2.2.2 Some major challenges Inconsistent regulation poses a challenge for service providers The regulatory and legislative standards concerning areas such as customs clearance, ground handling, and terminal operations are highly complex. The multiple layers of regulations and administrations in charge of enforcing them makes the documentation process highly complex and leads to subsequent increases in both lead times and the cost of processing freight. Logistics costs in Vietnam are estimated to be nearly double the cost in industrialized nations and a major portion of this cost can be attributed to high inventory holdings. Consequently, the lack of clarity on multi-modal rules governing customs and the transportation regime, as well as the complexity of documentation procedures, are main impediments to smooth logistics operations. Lack of clarity on roles and responsibilities slows industry growth In Vietnam, the boundaries between the operations of various businesses such as freight forwarders, warehouse operators, fleet operators and integrated logistics companies are not well defined. Such businesses are often fragmented and do not generally complement each others’ service offerings, which can lead to duplication of efforts and higher costs. Many seaports and airports also lack supporting logistics distribution centers, which can result in increased inventory and idle time for trucks, ships and planes. The logistics companies, freight forwarders and shipping lines need to work together for optimal utilization of resources instead of working as contractors in discrete activities to offer competitive services at lower rates. Shortage of Skilled Manpower The Vietnamese logistics industry lacks experienced logistics professionals. This is a major challenge for local as well as multinational companies since they find it difficult to hire the right talent. Lack of sufficient training and education in the field of logistics is also a major contributor to the paucity of skilled personnel. 13
  14. 14. III. Vietnam’s commitment to WTO in logistics According to commitment to WTO, Vietnam has committed to opening up following sectors: · Container loading and unloading service · Warehouse service · Freight agency service Foreign investors may provide container loading and unloading, warehousing services in Vietnam under what forms and what conditions? + Container loading and unloading service Under the WTO commitments, foreign investors who want to invest in this service in Vietnam must establish a joint venture with Vietnamese partners with some restrictions - Restriction on the rate of capital contribution: in the joint venture, the proportion of the foreign capital contribution can not exceed 50%. - Restriction on activities: Vietnam can not allow these joint ventures to provide this service at airports. + Warehouse service Under the WTO commitments, foreign investors who would like to invest in this service must establish a joint venture with Vietnamese partners and the ratio of foreign capital can not exceed 51%. Since 11/01/2014, foreign investors can establish a joint venture with Vietnamese partners without restriction on the foreign capital in that venture or they can even establish 100% foreign owned capital company. Foreign investors may provide freight agency service in Vietnam under what forms and what conditions? According to WTO commitments, foreign investors who want to provide this service in Vietnam have to set up a joint venture with Vietnamese partners. In the joint venture, the proportion of foreign capital can not exceed 51%. From the date of 11/01/2014, foreign investors can establish a joint venture with Vietnamese partners without restriction on the foreign capital in that venture or they can even establish 100% foreign owned capital company. Foreign investors may provide other services? Besides the services mentioned above, foreign investors can participate in following services on behalf of cargo owners. - Checking bills of lading - Checking goods - Sampling and weight determination - Receiving and accepting goods - Preparing transport documents In order to do those services, foreign investors must establish a joint venture with Vietnamese partners. In the joint venture, the proportion of foreign capital cannot exceed 49%. From the date of 11/01/2010, limitation of foreign capital in the joint venture will be 51%. From the date of 11/01/2014, foreign investors can establish a joint venture with Vietnamese partners without restriction on the foreign capital in that joint venture. IV. Leading companies in the market 4.1 Vietnam Airlines Company overview Vietnam Airlines was established as a state-owned airline in 1989 and merged with a number of service companies in 1996 to give it its present form. The government’s stated goal is to further integrate the company into the global market and establish itself as a regional player. In 2006, it was officially accepted as a full member of the International Air Transport Association. In June 2010, Vietnam Airlines became a member of the SkyTeam Alliance joining other major airlines 14
  15. 15. The Vietnamese carrier provides passenger air services to 25 destinations in 15 countries including in South East Asia, Australia, Russia, France, Germany and the United States of America. Until 2009, tts fleet of 50 modern aircrafts has carried more than 9mn passengers. The company has a number of code share operations with foreign companies, in particular the February 2004 agreement with Air France to share 11 non-stop scheduled flights between Ho Chi Minh City and Paris. Vietnam Airlines’ cargo operations serve 20 destinations in Asia, the Middle East, Australia and Europe, with partner networks serving other destinations. The cargo division operates Tan Son Nhat Cargo Services, a joint- venture with Singapore Airport Terminal Service, which has an annual cargo throughput of 100,000 tonnes. Financial Performance The national flag carrier Vietnam Airlines expected to see a total revenue of VND32trn (USD1.78bn) in 2010, up 30% against in 2009 in the context of the global economic recovery. To realize the turnover, the carrier estimated that it would have to transport more than 11mn passengers in 2010. In 2010, positive targets are based on its good performance in 2009 which was in marked contrast to many airlines globally facing bankruptcy, losses and laying-off of staff. The carrier notched up its turnover in 2009 to VND 24.5trn (USD 1.36bn), netting a profit of VND150bn (USD8.3mn). The results mainly stemmed from its focus on the domestic market. It operated a series of new routes last year, including Hanoi-Can Tho, Hanoi-Quy Nhon, Ho Chi Minh City-Dong Hoi, Hanoi-Tuy Hoa and Hanoi-Pleiku. Vietnam Airlines transported about 9.3mn passengers in 2009, a 6.6% increase from 2008, with Vietnamese clients accounting for up to nearly 6.2mn, a y-o-y increase of 17.6%. It also handled around 131,220 tonnes of cargo, up 2.3% from 2008. Of the total, 87,000 tonnes of cargo was transported on domestic routes, a rise of nearly 13%. The carrier also reported a seat occupancy rate of roughly 74% for both local and international flights. To raise net profits, Vietnam Airlines implemented a wide range of solutions to cut fees, thus saving more than VND400bn (USD22.2mn) last year, by economizing fuel and rescheduling flights, it said. The airline took full advantage of the global economic crisis to negotiate with partners to buy and lease more new planes to improve its fleet and remodel infrastructure to capitalize on opportunities that are opening up due to the recovery of the local and international economy. Besides success in the domestic market, Vietnam Airlines saw certain achievements overseas. The airline also co-operated with the Cambodia Government to jointly operate National Cambodia Angkor Air from July 2009. In addition to opening the Hanoi-Fukuoka route last October it took over from Japan Airlines the Hanoi-Kansai route in January with five flights a week. Contact information Vietnam Airlines 200 Nguyen Son Street, Bo De Ward, Long Bien District – Hanoi, Vietnam Tel: (+84 4) 38320320; Fax: (+84 4) 38722375 Website: www.vietnamair.com.vn 4.2.Vinalines Company overview Vinalines is Vietnam’s largest state-owned group of companies. Its numerous subsidiaries are active in maritime transportation and brokerage, ship repairs, import-export, container services, terminal operation, freight forwarding, warehousing, and crew manning. The company also has 50% or majority stakes in a number of international joint ventures, 15
  16. 16. including Gemartrans (with France’s CGM, 51%), Vijaco (Vietnam/Japan), Phili Orient (Vietnam/Singapore, 50%), Transvina (Vietnam/Japan, 75%), Cosfi (Vietnam/Singapore, 51%) and Ahlers-Inlaco (Vietnam/Austria, 51%). Vinalines also has port operations in Ninh, Hai Phong, Nghe An, Da Nang, Quy Nhon, Nha Trang, Sai Gon, and Can Tho. The company has undergone a series of fleet expansions, modernization and development projects over the past years. By the end of 2010, it has 139 vessels with total capacity of 2,8 million ton, holding 45% total capacity of the country. Recent development In 2007, Vinalines has been assigned by the government to mobilize funds to develop Van Phong port and Lach Huyen port and new port in Ba Ria- Vung Tau. In August of that year, Swiss bank Credit Suisse signed a memorandum with Vinalines to provide loans worth USD700mn. As part of the Financial Service Memorandum, Credit Suisse provided Vinalines with ratings advisory, fund raising, and risk management services. In the same year, the government has instructed state giants Vinalines and PetroVietnam to strictly adhere to the schedule approved for building a new port complex in the southern province of Ba Ria-Vung Tau, 90 km south east of Ho Chi Minh City. Vinalines and PetroVietnam, the investors, have held talks with domestic and foreign banks like CitiGroup, Credit Suisse, Deutsch Bank, and Mizuho to secure credit. In 2008, Vinalines has signed a contract with China Merchants Group (CMG), a leading Chinese conglomerate, establishing a joint venture to build the port. Has estimated to costUSD1bn, the port would be able to handle 100,000-DWT vessels. In 2010, the company submited to the govement the fasibility study of the port, expecting the contruction will start in 2011. In 2008, Maersk A/S, Saigon Port Company and Vinalines formed a joint venture for Cai Mep International Terminal (SP-SSA), two-wharf container and deepwater port with an investment value of USD 200 million. The port has the fist trial operation in the begin of 2010 and has officially being operating from August 2010. In 2009 Mai Van Phuc, CEO of Vinalines said the corporation will continue to invest in key projects, despite the effects of the economic crisis both domestically and globally. It will get a VND15 trillion (USD 862 million) loan from the Bank for Investment and Development of Vietnam to meet the demand for capital. The loan would be put towards the building of ships and upgrading seaport and logistics services planned for 2010, Phuc said. He added that Vinalines' key task in the future would be to build a new yard for repairing ships with a capacity of more than 10,000 tonnes. The corporation would also need to upgrade its current shipyards to become more competitive. Vinalines’s revenue in 2010 was VND20.93 trillion ($1.2 billion), 16% per cent higher than the previous year. It profit gained VND 1.241 trillion, increasing 40%. Contact information Vietnam National Shipping Lines (Vinalines) 201 Kham Thien Street, Hanoi, Vietnam Tel: +84 4 851 7750 Fax: +84 4 511 3039 Web: www.vinalines.com.vn 4.3 Maersk Line Maersk Line is one of the leading liner shipping companies in the world, serving customers all over the globe. Maersk Line is a division of the A.P. Moller - Maersk Group and shares its same values and business principle, i.e. to be a world-class, known and highly respected 16
  17. 17. group. The Maersk Line fleet comprises of more than 500 vessels and a number of containers corresponding to more than 1,900,000 TEU. Maersk Line established its first representative office in Ho Chi Minh City in 1991, followed by a branch representative office in Ha Noi two years later. Since then, together with the impressive development of trade in Vietnam, further offices have been opened in Hai Phong, Da Nang, Quy Nhon, Nha Trang, Vung Tau and Can Tho. Maersk Line in Vietnam offers weekly feeder departures to the main hub ports in Asia such as Tanjung Pelepas, Singapore, and Kaohsiung. Kaohsiung acts as the connecting point providing access to the company’s worldwide network. In addition to Maersk Line, A.P. Moller holds a 75% stake in APM-Saigon Shipping Company (APM-Saigon) having its own dedicated staff in all major ports in Vietnam, ensuring space protection and favorable treatment to Maersk Line’s customers in case of problems. The joint venture has a staff of 180 and operates 20 vessels, forming what it claims is the country’s most comprehensive domestic shipping network. Contact information Maersk Line 26 Phung Khac Khoan Street, district 1 HCMC Tel: (+84) 08 3824 3252 Customer service: Tel: (+84) 08 238 566 Fax: (+84) 08 238 583 VI. Major Shipping Lines and Agency Representation Shipping Line Agency Agency Status Joint Venture Partner/Agency Affiliation APL APL-NOL Vietnam Fully foreign- owned Not Applicable CMA-CGM CMA-CGM Vietnam Joint Venture (51%) Golden Lotus ( Private) CNC Vietfracht 3rd Party Agent Vietfracht Cosco Cosfi Joint Venture (49%) Safi ( Vinalines) CSAV - Norasia Ben Line 3rd Party Agent Ben Line Agencies CSCL China Shipping Vietnam Joint Venture (49%) Vosa ( Vinalines) CT Navigation Integrity Shipping 3rd Party Agent Private Company Dongnama Safi 3rd Party Agent Safi ( Vinalines) Evergreen Evergreen Vietnam Joint Venture (49%) Phuoc Vinh Son ( Private) Hamburg Sud Ben Line 3rd Party Agent Ben Line Agencies Hanjin Hanjin Vietnam Joint Venture (49%) SGN Logistics ( Private) Hapag Lloyd Hapag Lloyd Vietnam Joint Venture (49%) Vinatrans Heung - A Vietfracht 3rd Party Agent Vietfracht Hyundai Merchant Marine Huu Nghi Shipping 3rd Party Agent Gemadept IRISL SGN Logistics 3rd Party Agent Private Company 17
  18. 18. K-Line “K” Line Vietnam Joint Venture (51%) Hai Minh ( Private) KMTC Gemartrans 3rd Party Agent Vinalines Maersk Maerks Vietnam Fully foreign- owned Not Applicable MISC Gemartrans 3rd Party Agent Vinalines MOL MOL Vietnam Fully foreign- owned Not Applicable MSC MSC Vietnam Joint Venture (49%) Viconship ( Vinalines) New Econ Line Galaxy 3rd Party Agent Gemadept NYK NYK Line Vietnam Joint Venture (51%) Vosa ( Vinalines) OOCL OOCL Vietnam Joint Venture (49%) Gemadept PDZ Safi 3rd Party Agent Safi - Vinalines PIL/ACL ITL Joint Venture (49%) ITL Shipping ( Private) RCL RCL Vietnam Joint Venture (49%) Vinatrans Samudera PAL 3rd Party Agent Private Company Siam Paetra SGN Logistics 3rd Party Agent Private Company Sinokor Sinokor Vietnam Joint Venture (49%) Gemadept STX Pan- Ocean MACS Shipping 3rd Party Agent Private Company SYMS Ben Line 3rd Party Agent Ben Line Agencies TS Lines TS Lines Vietnam 3rd Party Agent Viconship UASC Vinafreight 3rd Party Agent Jardine Shipping Wan Hai Lines Phoenix 3rd Party Agent Private Company Yang Ming Yang Ming Vietnam Joint Venture (49%) Continental ( Private) Zim/Gold Star Line Star Shipping Joint Venture (49%) Jardine Shipping Source: APL 18

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