Vietnam National Shipping Lines has scaled down a plan to expand its fleet, cutting the cost estimate by one-third to VND68 trillion (US$3.26 billion) amid criticism that the state shipper is operating ineffectively.
According to the company, often known as Vinalines, it originally planned to invest VND100 trillion to buy more vessels. But due to negative prospects for the shipping market, it has decided to revise the plan.
The state-owned company also said it will not seek funding from the government budget and finance its purchases with bank loans. The target is to increase the total load capacity of its fleet to 5.6 million by 2020.
Vinalines said its 154-ship fleet with a total load capacity of 3.4 million tons accounted for 45 percent of Vietnam's shipping capacity at the end of last year. The original plan targeted a capacity of 15 million tons by 2015.
The company mostly leases its ships, with Vietnam Ocean Shipping Company being the only subsidiary that handles all shipping services with its own fleet. Analysts said the leasing business is not a stable source of revenue for the company, while also exposes it to liabilities if the leaseholders are caught up in disputes or lawsuits.
Experts also criticized the company for buying many old vessels whose values have dropped sharply.
A Vinalines official who requested annonymity admitted that due to limited financial resources, its subsidiaries had to buy old vessels, breaking a rule that bans local companies from buying ships already in use for more than 15 years.
"When the transport sector was still doing well, prices of old ships increased every month"¦ But during a market downturn, those ships became a burden because their prices dropped and it's not easy to sell them," he said.
Chu Quang Thu, former director of the Vietnam Maritime Administration, said Vinalines needs to be restrutured and make public its financial results first before starting to buy more ships.
It is not practical to invest a large amount of money for expansion unless the company is competitive enough, he said.
Vietnam's shipping market is now dominated by foreign shipping lines. Even though Vinalines reported profits over the past few years, economists have expressed their doubts, calling for a thorough audit of the company to make sure it has not been hiding losses.
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