Need for a fleet adequate for sea economic potentials
The 13th National Party Congress’s Resolution set out the goal by 2045 our country will become “a developed, highincome country” and “arouse the aspiration to develop a prosperous and happy country”. To achieve these goals, economic sectors and enterprises have to set out and carry out strategic breakthrough tasks. The Vietnam Logistics Business Associations (VLA) has had efforts to develop the logistics sectors by reducing logistics costs and improving competition abilities of our economy in general and trade in particular in the progress of economic integration. One of the association’s proposals is to develop a large container fleet for sea transport of import-export goods.
The Resolution 09-NQ/ TW dated February 9, 2007 of the 10th Party Central Committee’s Congress on Vietnam’s sea strategy identified breakthroughs in sea economy, including plans to develop Vietnam’s sea fleet. The Decision no.221/QD-TTg dated February 22, 2021 on “Amending and supplementing the Decision no.200/QD-TTg dated February 14, 2021 on approving the Action Plan to Improve Competition Abilities and Developing Vietnam Logistics Services to 2025” set out the task (18) of “improving maritime transport ability”.
Vietnam has an important geopolitical position, and is located on the important maritime transport route of the East-West hemisphere, accounting for over 80% of the global freight volume. Around 90% of Vietnam’s import-export volume has been transported by sea. The growth rate of cargo through Vietnam’s ports increases 13% – 15% pa in average. For example, in 2020 – a difficult year due to impacts from the pandemic of COVID-19, container cargo through seaports reached 22,143,000 TEUs, out of 690m tons of cargo. However, Vietnam’s fleet held only around 7% of the transport market share, the rest is in the hands of foreign shipping lines. Vietnam’s container ships mainly operates on short routes within intra-Asia.
Currently, the shortage of empty containers and soaring sea freight rates have severely affected import-export activities and competition abilities. 100% of freight by long-distance container shipping goes to pockets of foreign shipping lines’ owners and the State has to spend a huge amount of foreign currency annually. A strong container fleet not only limits the pressure in terms of freight rates and surcharges from shipping lines but also become a long-term measure to ensure the country’s economic security and to well implement FTAs signed with the EU, the U.S, Korea and Japan… To build and develop the national container fleet, it is not possible to calculate short-term profit and loss but it is necessary to have a long-term vision (the entire huge freight amount of 90% of the volume transported by sea should be retained) and it should be considered an important measure of lowering national logistics costs and improving national competition abilities. This is also a measure that ensures the country’s economic development as well.
Solutions
The situation requires Vietnam to have quick development of a fleet of large tonnage shipping containers to become a country with a fleet adequate to its sea economic potentials when comparing to that of regional smaller countries as Taiwan and Singapore.
Developing a fleet of large tonnage vessels is divided into phases. Phase 1 (2021 – 2025): having 2 – 4 large container vessels, newlybuilt or buying used ships with the capacity of 50,000DWT – 100,000DWT, enabling to carry 4,000TEUs – 8,000TEUs. The quantity of vessels will be increased later to maintain weekly service. It is difficult to compete without having enough vessels to maintain liner service- fixed sailing day. The number of vessels will be a multiple of 7 for weekly service. And it also depends on itineraries and routes. However, at least 5 vessels x 7 are able to maintain services to the West Coast of the U.S and 6 vessels x 7 are able to maintain services to main ports in Europe.
Capital sources for development: Capital from private enterprises in combination with investment capital from the Government or loan capital; calling for private corporations to joint exploitation of the container fleet or forming joint ventures… In the logistics service sector, it is possible to call for Gemadept, Saigon Newport, and Vinalines/ VIMC and other large shipper enterprises as well for participation. Vietnam has had many private enterprises having investment in modern fleets of airplanes, seaports, airports and express ways with huge amount of capital.
Mechanisms and policies: A special mechanism and a number of policies and guidelines with specific application to relevant subjects should be proposed to the Government as procurement issues, appointment of contractors, tax reduction and exemption, financial support in early stages of the fleet development. There should be incentive policies to attract Vietnam’s crew members to work on board for a particular time, policies to hire foreign crew members when necessary and policies for hiring foreign officers to work in combination with Vietnamese crewmembers…
We have specific lessons in the 1970s – 1980s when Vietnam was under embargo. We borrowed a loan of over USD 45 million to procure a fleet of 19 vessels flying convenience flags of up to 169,562 DWT on the basis of loan and hire purchase under the State Bank’s guarantee.
There should be cooperation from large shippers in fields of textiles, footwear, furniture and aqua-products that ensures combinations of import-export in large volume for the fleet. Import-export enterprises with retaining freight cargo will receive certain incentives. The role of the Ministry of Industry-Trade is important in ensuring import-export cargo source, especially in full implementation of new-generation FTAs. Enterprises providing logistics services should have tight cooperation in freight retaining- one of the conditions to make the project successful.
The association will have active discussions on the above proposal with the Vietnam Maritime Administration, Vietnam’s management agencies, and large corporation as the nucleus to organize the deployment. Although it is of great difficulty, it is not impossible. And it is the best time now. The prerequisite is that the Government and Prime Minister should have approval on particular projects on specific mechanism and determined guidance for implementation.