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Foreign businesses warm up Vietnamese postal service market   2012-07-11 - Buu Dien

A lot of foreign companies have arrived in Vietnam to explore the market and seek to buy the stakes of domestic postal service companies in the last half a year, since the day Vietnam fully opened its market to foreigners.

Foreigners penetrating Vietnamese market

In the last 20 years, the postal service market has welcomed the world’s biggest service providers, namely Dutch TNT, German DHL and US’ FedEx and UPS.

At first, in early 1990s, they cooperated with domestic businesses, setting up agents that collected and delivered goods. Later, they have been carrying out a lot of activities to implement their plan to make long term investments in Vietnam.

In 1995, TNT joined forces with Viettrans to set up the first joint venture in the postal service market. In 2007, DHL teamed up with VNPT to set up DHL-VNPT joint venture where DHL held 51 percent of stakes. In 2009 and 2010, FedEx and UPS terminated the contract with VietnamPost to implement their own business plans in Vietnam. FedEx then decided to team up with a private company, while UPS cooperated with VnPost Express to set up UPS Vietnam with 51 percent of stakes belonging to UPS.

Domestic postal service providers all have admitted that foreign companies, with powerful finance capability, advanced technologies and experiences, have put a hard competition pressure on them. Especially, foreign companies have been dominating in the international express service market.

The white book on Vietnam’s information technology and communication showed that in 2009 and 2010, the two joint ventures DHL-VNPT and TNT-Vietrans accounted for 26 percent of the market share. In 2008-2010, the market share held by domestic firms were narrowed significantly. VNPost Express, for example, saw its market share drop from 16 percent in 2008 to 12 percent in 2009.

Managers of VietnamPost and ViettelPost, the two big domestic service providers, have admitted that the profits from international freight and forwarding services are much higher than domestic services, but domestic companies cannot squeeze into the market.

Experts have pointed out that one of the biggest problems of domestic firms is that the connection to the world still has been relying on four foreign groups with global networks, including TNT, UPS, DHL and FedEx.

Luong Ngoc Hai, General Director of ViettelPost, believes that not many powerful foreign groups would arrive in Vietnam after January 2012, because the big service providers, interested in the Vietnamese market, have arrived here already.

He has also revealed that some foreign companies have suggested cooperation, or asked to buy ViettelPost’s stakes, but no affair has succeeded. The problem is that the foreign partners want to hold the majority of shares, while ViettelPost does not want this.

Domestic firms struggle to retain clients

Earlier this year, Japanese Yamoto sent its staff to Vietnam to learn about the Vietnamese market. Most recently, at the extraordinary shareholder’s meeting of TTC Express (Tin Thanh), the shareholders approved the plan on transferring 70 percent of stakes of big shareholders to three investors, including Gia Ly Company, Singaporean KLB and Hong Kong’s Kerry Integrated Logistics. Tin Thanh is reportedly following legal procedures to legalize the stake transfer to the strategic shareholders.

When asked if the cooperation of Tin Thanh with the powerful foreign partners would generate a hard pressure on domestic firms, Hai said this would certainly a big challenge for domestic firms. However, he said the challenges would prompt domestic firms to struggle to retain their clients.

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