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Freight & forwarding market opening puts pressure on domestic businesses   2012-05-17 - TBKTSG

Vietnamese freight and forwarding enterprises, which are smaller, less experienced and less known than foreign companies, have been facing big challenges since Vietnam has opened its market since January 2012.

 

According to Do Ngoc Binh, General Director of VNPost, in the past, when Vietnam did not open its market to foreigners, foreign firms had to cooperate with domestic enterprises, if they wanted to do business in Vietnam. However, as Vietnam opened its market since January 11, 2012, foreigners would set up 100 percent foreign legal entities in Vietnam.



Nearly all freight & forwarding firms with global networks have been present in Vietnam already, under the modes of joint ventures or joint stock companies. Three out of the four big guys, who have been doing business in Vietnam, teamed up with domestic partners to set up companies.



TNT, for example, teamed up with Vietrans to form up a joint venture, DHL joined forces with the Vietnam Post and Telecommunication Group, while UPS and P&T Express set up a joint stock company.



Only Fedex still has been operating under the mode of BCC (business cooperation contract), cooperating with domestic companies. Recently, Fedex has stopped the financial contract with VNPost to joint forces with private businesses.



Meanwhile, according to Binh, though there are many domestic freight and forwarding firms, the firms remain weak if compared with the experience and economic potentials of foreign firms. Therefore, the hard pressure on domestic firms in the market opening period has been anticipated.



Also according to Binh, domestic firms would be competitive in terms of domestic deliveries, but they would inferior with foreign groups which have the networks reaching out to many places in the world.



However, Binh has warned that Vietnamese firms should look out for foreigners in the domestic delivery market segment. At present, foreigners still have not paid much attention to the domestic market because of the low profits. However, they may be interested in the market segment as well some days. If so, the pressure on domestic firms would be even harder.



Experts have also said that Vietnamese companies should gather strength to heighten their competitiveness, while focusing on some certain customer segments.



“Most of the clients now belong to B2C (business to customer) segment. This is the segment which can develop strongly and should be the target for Vietnamese firms,” Binh said.



Besides, the rapid development of e-commerce environment has also opened new ways of doing business for domestic firms – providing the services of carrying cargoes, products for online sale channels.



Luong Ngoc Hai, General Director of Viettel Post, has affirmed that domestic firms need to combine efforts to overcome the difficult period together. He said the cooperation would not only allow reducing the investment capital, but also to enlarge the post networks and increase the carrying frequency.



However, Hai has admitted that barriers have been existing to prevent enterprises from cooperating with each other.



“Big enterprises may think that small businesses live off big enterprises. Meanwhile, small businesses would rely on big businesses and do not want to make investment to expand networks,” Hai said.



Nevertheless, there has been no sign showing that foreign firms would set up 100 percent foreign owned legal entities in Vietnam right now.



A representative of DHL, a partner in the DHL-VNPT Express), has said that the joint venture contract lasts 10 years, and the two partners have gone a half way of five years. In principle, they would go together in the other five-year path.



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