Market share of Vietnam shipping lines sinking steadily: report

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Foreign firms control sea transportation from Vietnam to the US and Europe, while Vietnamese businesses, which have a market share of 15-20 percent, mainly operate in the ASEAN and China markets, according to the Vietnam Competition Authority

Vietnam's sea logistics sector is heavily dominated by foreign shipping companies because local firms lack the former's expertise and financial strength, but dubious pricing practices are loading the dice against the latter, a new report says.

The report, prepared by the Vietnam Competition Authority under the Ministry of Industry and Trade on ten major economic sectors, says that as of 2011, foreign shipping companies accounted for 80-85 percent of Vietnam's sea transportation market share.

In fact, it is telling that in Vietnam, where over 80 percent of goods are transported by sea locally and internationally, the market shares of local shipping lines halved in 2011 from 33 percent five years earlier, the report says.

Foreign firms have a total hold over sea transportation to America and Europe, while Vietnamese businesses with the market shares of 15-20 percent mainly operate in ASEAN and China markets, the report says.

It says most Vietnamese vessels are designed for local routes and their efficiencies are therefore low when operating on international routes.

Moreover, many local lines are currently sub-contracted by foreign shipping companies as part of the logistics process, like collecting and transferring containers.

Foreign competitors dominate in-country shipping routes as well, even though Vietnam's laws give local firms an advantage, the report says, citing a regulation which stipulates that local companies should receive priority for in-country transportation. 

Handicapped by their poor capabilities, Vietnamese companies have given up significant chunks of the local shipping business, the report says, noting that 14 foreign companies have been licensed for shipping goods locally.

Pricing tricks

The report alleges that foreign shipping companies are possibly using price fixing tricks to offer low prices for international transportation to Vietnamese businesses in a bid to crush local competition.

It says the prices they offer sometimes are even lower than domestic shipping charges.

For instance, foreign shipping firms charge shipping US$30-50, or even $10 to ship a 40-feet container from Vietnam to Singapore, while shipping the same volume container from Hai Phong to HCMC costs VND1.3 million ($61.79), despite the shorter distance for the latter route.

However, foreign lines would ask for many additional surcharges later, including "unreasonable" fees like repairs of container lids, even though these should be included in depreciation costs of the transporters, the report says.

Furthermore, Vietnamese businesses usually buy and sell goods under CIF (cost, insurance, and freight) and FOB (free on board) agreements respectively; and in both cases, transportation choices are made by foreign partners.

So, local companies have no choice but to pay surcharges demanded by transporters to get their goods shipped at the earliest possible, the report says.

However, authorities cannot detect pricing violations by foreign transporters easily because, by law, price fixing is only prohibited when involved companies hold a total of more than 30 percent of the market share. It is not "an easy task" for authorities to identify the market shares of foreign companies, the report says.

On the other hand, local transporters do fail to offer competitive prices, they add.

The Vietnam Ship Owners Association says local businesses currently charge the same prices as other countries in Southeast Asia for bulk cargo transportation, but for shipping containers, their prices are between 20 and 30 percent higher.

For example, shipping a container from the northern city of Hai Phong and Ho Chi Minh City to the US would cost more than that from Thailand, by $450-500 each if they are dry cargo, and by up to $750 each if they are frozen cargo.

Explaining the high prices, the association said it was because no port in Vietnam can allow big capacity vessels to dock and receive containers directly.

All Vietnamese imports and exports to the US and the Europe, therefore, have to be routed through Hong Kong, Singapore, Malaysia or even Thailand where the cargo can be loaded onto big vessels.

In the end, local businesses have to pay more fees to feeders ships that collect and transport containers to the foreign transfer ports, according to the association, and they have to pay loading and storage fees as well.

Statistics from the Vietnam Maritime Administration show that as of 2011, Vietnam had 1,691 ships whose total weight ranked 60th out of 152 countries in the world, and fourth out of ten ASEAN countries that have national flag carrying fleets.

But, only 450 Vietnamese ships with a total weight of nearly two million tons operate on international routes, the administration said.

Vietnamese ships transported some 96 million tons of cargo last year, an increase of eight percent, of which international transportation accounted were more than 66 million tons, up 6.15 percent year on year, according to the administration.

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