Đề tài Facts of Vietnam Freight forwarding industry and the role of Vietnam Freight Forwarders Association (VIFFAS) to the industry in international economic integration process

TABLE OF CONTENTS

 

INTRODUCTION

 

CHAPTER 1: FACTS OF VIETNAM FREIGHT FORWARDING INDUSTRY

1.1. Definition of “Freight Forwarder”

1.2. The importance of Freight Forwarding industry

1.2.1. To the national economy

1.2.2. To enterprises

1.3. Facts of the industry

1.3.1. Advantages to the development of the industry

1.3.2. Pressures on Vietnam freight forwarding industry

1.4. Comments on the facts of Vietnam freight forwarding industry

 

CHAPTER 2: VIETNAM FREIGHT FORWARDERS ASSOCIATION (VIFFAS)

2.1. Introduction of VIFFAS

2.1.1. History of VIFFAS

2.1.2. Management Board of VIFFAS

2.1.3. Statues and Standard Trading Conditions of VIFFAS

2.2. Functions & Main Activities of VIFFAS

 

PAGES

 

1

 

3

 

3

3

3

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4

4

7

 

12

 

 

13

 

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14

 

 

2.3. Activities of VIFFAS during the past term 2.3.1. VIFFAS with the role of member’s representatives 2.3.2. External activities

2.3.3. Actions for members’ benefits

2.4. Roles of VIFFAS to Vietnam Freight forwarding industry in international economic integration process

2.4.1. Achievements of VIFFAS

2.4.2. Some weaknesses of the Association in the past terms

 

CHAPTER 3: RECOMMENDATIONS

3.1. Macro scale

3.2. Micro scale

 

CONCLUSION

REFERENCES

 

 

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invested more than 10 billions VND to develop Information technology and upgrade Local Area Network (LAN) and Wide Area Network (WAN). Moreover, some enterprises have tried to use “tracking & tracking” network and “booking through the net”. The five advantages above are the keys for Vietnam freight forwarding industry to open the door of development now and in the future. How do they use those keys properly to open the door? It depends on other factors, which include troubles and their own capability. Pressures on Vietnam freight forwarding industry In spite of many advantages to develop freight forwarding services, it still exist many problems, which set obstacles to the industry’s development. Mr. Nguyen Hung, deputy director of Sotransn gave his comment: “Freight Forwarding industry in Vietnam is still small, fragmentary, mugging and always ready to dumping to struggle for customers.” a/ Outside pressure The development of material-distribution modal is the main outside pressure on the industry. It can be divided into 4 kinds: + The change of consumer-demand modal, market and the attitude to the availability and diversity of goods + The pressure of reducing cost + The development of Information technology + The pressure of globalization tendency Those pressures set many hindrances to Vietnam freight forwarding enterprises. Once they cannot make some reform or changes to catch up with the development of the industry, they may be kicked out of the field. b/ Inside pressures Vietnamese businesses in the freight forwarding industry are facing various difficulties now. According to Mr. Nguyen Tham, Deputy President of Vietnam Freight Forwarders Association (VIFFAS), freight-forwarding enterprises are held back by their small size, lack of skilled employees, and minimal cooperation among businesses in the field. General Secretary of VIFFAS, Mr. Vu Xuan Phong also stressed that poor transport infrastructure, small financial scales, unskillful employees, low technological capacity, insufficiency of Government laws & regulations as well as poor understanding of international laws and marine transport procedures & policies and loose co-ordination are the inner problems that Vietnam Freight Forwarding industry needs to get over. The first problem is poor infrastructure. Many ports in Vietnam Port System are very old and out-of-date. They are shallow in draft and their yard & warehousing systems are insufficient for accommodating containers and cargo. Today, there are only a few ports with modern handling facilities and equipment to serve big ships. Accordingly, freight-forwarding activities are conducted mainly in big cities and their suburban areas such as Ho Chi Minh City, Hanoi, Hai Phong, Da Nang, and Qui Nhon. Airports and airlines are also undeveloped. There are about 100 airports throughout Vietnam, but only three serve international routes. Those three international airports are known as Tan Son Nhat, Noi Bai and Da Nang. Moreover, there are only two national airlines, Vietnam Airline (state-owned) and Pacific Airline (joint stock), which are basically passenger carriers. Vietnamese freight forwarders use these two lines for approximately 20% of their cargo volume, whereas the other 80% is contracted to the foreign airlines market. Land transportation system is uncompleted. The road system of Vietnam is about 106,000 km long. Land transport accounts for about 65% of domestic passenger and cargo transport. While pre-export and post-import legs for door-to-door shipments require land transport, roads in Vietnam are still limited in quantity and bad in quality, resulting in traffic congestion and posited negative impact to logistics activities. On the other hand, the railway system in Vietnam with about 2,600 km long is not absolutely exploited. Container transport by rail in Vietnam is still at primitive stage and operated only by the state-owned Vietnamese Railway Company. While land transport is very limited as mentioned above, inland waterway transport is very advantageous in serving transport in the Mekong Delta linking to Cambodia. The total length of the inland waterway (IW) system is about 40,998 km, mainly in the Red River Delta and the Mekong Delta. In the past few years, inland waterway transport accounts for about 30% of the domestic cargo transport volume, but in fact, inland waterway has not been optimized enough to get expected results. The second problem is financial scale. According to official statistics of VIFFAS (Vietnam Freight Forwarder Association), there are more than 800 freight forwarders in Vietnam at present, 18% of them owned by the state, 70% privately owned, 10% non-registered and about 2% made up of foreign logistics companies. Privately owned companies now account for 80% of total logistics companies, most of which are very small with the capital of VND300-500 million (US$18,750-31,250) for each. Several joint stock companies have been set up on the foundation of equities parts of state owned enterprises. These newly set up companies have the total capital of 5 billions VND or 312,500 USD, with which they cannot meet the requirements for joining the world’s logistics companies. With such very small financial scales, Vietnam freight forwarders just have the ability to provide simple logistic services such as customs declaration, trucking, and warehousing. About 80% of them have to outsource warehousing and trucking services. Today, only 10% of Vietnamese freight forwarding enterprises has ability to provide consolidated service at their own warehouses (or their contractors’ warehouses). They issue House B/L but only some of them buy Civil Liability Insurance for transport operators. In addition, many companies have 3-5 staffs only, including managers. With such modest capital and few staffs, the companies just can fulfill simple works for separate clients. In other words, Vietnam still lacks “full-package” or “door to door” logistic providers, who can provide logistics or freight forwarding services sufficiently and completely. Moreover, while logistics are going globally, most Vietnamese logistics companies do not have overseas representative offices. That creates the risk of losing international market share and being lagged behind. One more problem to freight forwarding enterprises is human resource, whose poor quality and professional skills do not satisfy the demand of logistic activities. Professional training in logistics/freight forwarding business is unavailable in Vietnam, and employees who are working in this field have to get their training with simple theories and unfulfilled reality. As a result, most of them do their work basing on experiences without total knowledge and skills. Lacking of modern technology is also a big trouble for Vietnam freight forwarders. Applying modern technology in freight forwarding activities is one of efficient measure to reduce inconvenient procedures and minimize cost for enterprises. However, many of them do not pay much attention to this problem. Some Vietnam freight forwarding enterprises have cooperated with foreign MTOs (Multimodal Transport Operators) at ports of discharge under a sub-contract to arrange transport to the final destination by a single B/L, but that is just “a grain of sand on the seaside” while inadequate of information technology, international networks as well as information and experience in logistics; local logistics companies still hold back enterprises from entering wider and deeper into international market. For this reason, they will let big foreign companies with global networks share most of this market. Insufficiency of Government laws & regulations and poor understanding of international laws as well as marine transport procedures & policies are also obstacles to Vietnam freight forwarding enterprises on the way of international economic integration process. For example, Decrees on Logistics have not been given into Commercial Law system yet. Maritime law, Investment law or competition law are in the same situation. Financial, custom clearance, custom procedures at airport and seaport are not unified and thus making troubles to logistic actions. Due to lack of regulations and an incomplete legal framework on activities of freight forwarders, the quality of services has not met the requirements of the industry's development yet. A lack of decrees stipulating activities of air and inland waterway freight forwarding services has put obstacles and created gaps for enterprises to take advantages, resulting in negative impacts in business activities. While the National Assembly discussed anti-monopoly and anti-dumping draft laws, only TSC Company has power to do business in warehouse services in the Tan Son Nhat international airport. Cases of unfair competition have occurred and the irresponsibility of some enterprises has opened up smuggling opportunities. Moreover, companies do not have necessary understanding of international laws and the laws of the nations that Vietnam’s freight forwarding services may concern. Misunderstanding of international laws and cases may put Vietnam freight forwarding enterprises into troubles. Those problems need to be overcome so that enterprises can follow up the development of logistic industry. Finally, the willingness to cooperate with each other is something that Vietnam freight forwarding enterprises lack and they even compete unhealthily with each other, making them less competitive in the eyes of international partners and clients. It can be easily seen that the port management system in Vietnam is much diversified. VINAMARINE, which is under the direct control and management of the Ministry of Transport, manages three ports - Nghe Tinh Port, Qui Nhon Port and Nha Trang Port. VINALINES (Vietnam National Shipping Lines), which is also under the direct control and management of the Ministry of Transport, is the state-owned company responsible for shipping activities in Vietnam. It manages Hai Phong Port and Quang Ninh Port in the north, Da Nang Port in central Vietnam, and Sai Gon Port and Can Tho Port in the south. Local governments, such as cities and provinces, also take part in port management. For instance, Ben Nghe Port is directly under the supervision and management of the Department of Transport and Public Works of Ho Chi Minh City. State-owned corporations under other central government ministries are also another type of port management body in Vietnam. Some state-owned corporations, which are under control of provinces and cities, also manage ports. For example, Hon Khoi Port is managed by a salt company under the control of the People’s Committee of Khanh Hoa province. The participation of the private sector in port management in Vietnam is still very limited. There are only two ports with private sector participation so far. It is the discrimination in the industry that must be removed to create healthy business environment for all enterprises. The problem can partly create gaps among enterprises, especially in today’s violent competition. The separation should be replaced by the co-ordination, because it is the key to gather all sources of the industry to compete against foreign companies, who are experienced in delivering high quality service at the most competitive price and opening offices next door. Most foreign companies with large amount of capital have reach to that point after starting out relatively small and growing, learning and expanding. With their experiences, they have learned the value of offering quality services. In the way of growing, they have also open branches to establish a worldwide presence. These companies are reliable and reasonably priced and naturally, they get lots of business. As a result, Vietnamese freight forwarding enterprises could even lose their Vietnamese customers if they do not associate with each other in enhancing and expanding their business. Comments on the fact of Vietnam freight forwarding industry Now that Vietnam is a WTO (World Trade Organization) member, Vietnamese enterprises, including freight forwarders, will have the opportunity to expanding their business oversea. However, poor infrastructure, small size, undeveloped Information technology, improper laws & policies and minimal cooperation between businesses are keeping logistic businesses from growing well. For this reason, Vietnamese freight forwarders are recommended to cooperate with each other to create a big joint strength to enhance their competition. Obviously, they need a common association, which takes charge of managing actions, assisting and giving the way for the development of all members, and Vietnam Freight Forwarder Association (VIFFAS) was established to satisfy the demand of improving Vietnam freight forwarding industry. CHAPTER 2: VIETNAM FREIGHT FORWARDERS ASSOCIATION (VIFFAS) 2.1. Introduction of VIFFAS 2.1.1. History of VIFFAS VIFFAS (Vietnam Freight Forwarders Association) was founded in Hanoi, Vietnam by the Government Decision No. 5874/KTN on November 18, 1993. This is the national freight forwarding industry’s trade association, a non-governmental organization presenting an industry covering nearly hundred Vietnamese leading forwarding firms. Management Board of VIFFAS Mr. Bui Ngoc Loan - Chairman Mr. Nguyen Tham - Vice Chairman Mr. Vu Xuan Phong - General Secretary Mrs. Le Thi Thanh Xuan - Standing member Mr. Hoang Dang Doanh - Standing member Mr. Do Xuan Quang - Standing member Mr. Nguyen Giang Tien - Standing member 2.1.3. Statues and Standard Trading Conditions of VIFFAS Like other associations, VIFFAS also has its own statues, which have been strictly implemented by all the members during the past years. The principles are considered as frameworks, which support guidelines to all the members to perform their action correctly and effectively.   The Standard Trading Conditions referred to as TSTC shall be applied to all services provided, handled, performed or rendered by the company acting as Freight Forwarder, even in case when the company procures a Bill of Lading or other similar document evidencing a contract of carriage between a person other than the company and the customer or owner.   Functions & Main Activities of VIFFAS VIFFAS has the function of socio-professional associated organization of the enterprises, irrespective of economic sectors and expert operating in freight forwarding, warehousing and transportation of import and export goods. The aims concentrate on co-operating, co-associating and helping members in developing professional skills, improving business efficiency and protecting the legal interest of the members in the import-export goods freight forwarding activities of the S.R. of Vietnam, and on this basis to integrate with such professional colleagues on the world. The Association has the role of coordinating the activities of the members in order to protect the interests of the members and improve the position of Vietnam in the international freight forwarding industry. Namely, VIFFAS establish the co-operative, associative and assisting relationship among its members; contribute to improve the transaction standards and the quality of business activities for enhancing the efficiency of export and import activities, expanding the external economic relations and co-operate with other country in accordance with Vietnamese laws. VIFFAS also presents the interest of Vietnamese business community in freight-forwarding field in the international co-operation and business relations. The Association’s members are divided into two categories: Ordinary members and Associate members. However, in the fourth General Congress held in Ho Chi Minh City on May 28, 2004, the Association has presented for approval by the relevant authority with following three categories of membership: a/ Ordinary members shall include enterprises with 100% Vietnamese capital who have registered to operate in Forwarding as its main business and has registered capital not less than the liability limitation of a Freight Forwarders as stipulated in the Standard Trading conditions, Article 35 (a) (iii). b/ Associate members: enterprises with foreign invested capital registering to operate in Forwarding in Vietnam under the Law on foreign shareholders who have capabilities to contribute to the development of the Association and accept its Statue may be considered to become associate members. c/ Honorary members: Vietnamese experts involving in Freight Forwarding and having high professional skills and abilities to contribute to the realization of the objectives and duties of the Association, may be invited to join the Association as Honorary members. In general, this stipulation on the membership in the Statue of the Association has paved the wider way for foreign parties to join in freight forwarding activities in Vietnam and quite in accordance with our Government’s open policy. 2.3. Activities of VIFFAS during the past term 2.3.1. VIFFAS with the role of member’s representatives Acting as the bridge between enterprises and the Government, the Association has gathered member’s ideas & expectations then submit to Government’s offices to solve troubles in freight forwarding activity and create healthy environments for enterprises. 2.3.2. External activities Keeps constant relationship with International Federation of Freight Forwarders Associations (FIATA) and implements fully duties of National Member to FIATA. Takes part in periodical meetings of Asean Freight Forwarders Association (AFFA) with the role of official member. Contact and exchange information & experiences to: + Singapore Logistics Association + JETRO’s logistics researchers from Japan + Japan International Freight forwarders Association + Port Sale representatives from Guangyang – Korea + Representatives of Singapore International Enterprises + Representatives of Australia consulate Signed the memorandum of Co-ordinate and exchange information & experiences with TIFFA and Freight forwarding Associations of GMS countries 2.3.4. Actions for members’ benefits Together with Marine Department of Thailand and Vietnam Maritime Administration, VIFFAS organized a course to train lecturers teaching multi-modal and logistic management on October 31 2005 in Hanoi. VIFFAS also gives introduction and advices about professional knowledge and legal procedures to members. The website of VIFFAS has been upgraded and connected to other websites of the Government & International Organizations with the aim of introducing about the Association and its activities. VIFFAS’s members are usually supplied with new legal documents and information about freight-forwarding and logistic issues and international conferences. 2.4. Role of VIFFAS to Vietnam Freight forwarding industry in international economic integration process 2.4.1. Achievements of VIFFAS Evaluating the achievements recorded by VIFFAS, president of VIFFAS, Mr. Bui Ngoc Loan stressed that Vietnam freight forwarding had seen a rapid development in quality, which has improved its status and contributed to Vietnam's transportation activities. This is thanks to the Prime Minister and State management agencies that have created favorable conditions for business associations, as well implemented strategies on developing and increasing the quality of trade services of the Ministry of Trade and the Ministry of Transport. Being the intermediary between enterprises and Government’s offices, VIFFAS has always made great efforts to catch the business needs and troubles and therefore create favorable conditions for activities of enterprises. The association has proposed the Ministry of Finance to delay the application of a tax rate of five per cent on export transportation fees of foreign transportation enterprises via Vietnam's agents. The association has also proposed the Government not to dabble maritime service charges. In international relations, VIFFAS joins periodical conferences to exchange experience in management. It successfully hosted the 10th meeting of the ASEAN Freight Forwarders Association (AFFA) in Hanoi in November 2000. This event has raised the position of VIFFAS on the international scene. Since its foundation until now, VIFFAS has recorded some considerable results in its activities: It has made recommendation to the State, concerned agencies and local authorities on issuing directions, policies, methods regarding the development and improvement of quality of Freight Forwarding services in order to stimulate the commodity exchange with foreign countries. For examples: VIFFAS has given recommendation in drafting Commercial Law (Chapter II section 10: Freight Forwarding services) which was officially passed by the National Assembly on May 1997 and in force and effect from January 1, 1998. Now VIFFAS continuing commend to revise this Chapter as LOGISTICS SERVICES and this recommendation is under consideration by the relevant authorities. VIFFAS experts also successful in giving Ministry of transport and VINAMRINE some legal opinions in drafting ASEAN Framework Agreement on Multimodal Transport and the report of Vietnam Delegation participating in the UNCTAD – IMO Conference in Geneva March 1999 to approve the final text of the International Convention on arrest of ships – 1999. VIFFAS experts have recommended Ministry of transport in revision of Vietnam Maritime Code and other by – law documents. VIFFAS has had recommendation on promulgating Decree No. 10/2001/ND - CP of March 19, 2001 regarding business conditions for maritime service provision and Decree No. 125/2003/ND – CP of October 29, 2003 on International Multimodal Transportation, and both are effective now. VIFFAS has successfully recommended Ministry of Finance so far not to collect a tax of 5% on Freight for outwards cargo transportation from Vietnam to overseas destinations organized by local Foreign Forwarders Agents. In close co-operation with VCCI, VIFFAS has initially succeeded in recommending foreign shipping lines not to impose THC in Vietnam. VIFFAS keep close contact with AFFA and FIATA by participating periodical meetings, exchanges experiences in profession operation as well as in managements. It successfully hosted the 10th meeting of the ASEAN Freight Forwarders Association (AFFA) in Hanoi in November 2000. In supporting members: VIFFAS has done its best to create the conditions for promoting and fostering the ability of the members: collect and provide them with information on related international organizations and inform timely recommendations, information, documents, contract forms and international treaties, which have been circulated and disseminated widely in the world in order to meet the requirements of domestic and foreign customers. VIFFAS backs up the members in training fields by advising the members to send their staffs for short course training at home and abroad. VIFFAS and Shipping & Transport college/ International Maritime Transport Academy (STC/ IMTA) of the Netherlands co-organized an International Training Course on Multimodal Transport and Logistics Management in Hanoi and Ho Chi Minh City in October 2002. This training course appreciated by the members. After reviewing its achievements and shortfalls, VIFFAS has proposed the Ministry of Trade and the Vietnam Chamber of Commerce and Industry (VCCI) to promote the establishment of an association of goods owners as a partner for negotiations with IADA to remove obstacles and boost cooperation with foreign partners. Moreover, for further rapid and sustainable development, VIFFAS will set up a freight forwarding information, training and consultancy centre. Training courses on EDI (electronic data interchange) system application in freight forwarding will be held for members in the near future. The number of VIFFAS has increased from 7 enterprises in the first tenure to 82 enterprises. Among 82 members, 62 are Ordinary and the remaining of 21 are Associate members. Moreover, 52 out of 62 Ordinary members are the members of FIATA (International Federation of Freight Forwarders Associations). The increase of members attending into the Association can be seen in the figure below: 1st General Congress May 15, 1994 7 members 2nd General Congress May 27, 1997 18 members 3rd General Congress May 04, 2000 41 members 4th General Congress May 28, 2004 82 members This figure shows the great development of VIFFAS. The association hopes that alongside the removal of obstacles and perfection of legal documents by State management agencies, it will make great contributions to Vietnam's economic development. 2.4.2. Some weaknesses of the Association in the past terms In spite of many achievements that VIFFAS has made during the past years, there still remain some problems it need

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