110321 logistics in vietnam

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AN OVERVIEW ON THE LOGISTICS MARKET IN VIETNAM

January 2011

Copyright Istituto nazionale per il Commercio Estero

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AN OVERVIEW ON THE LOGISTICS MARKET IN VIETNAM

TABLE OF CONTENTS

I. Introduction .......................................................................................................................... 3

II. A general picture on logistics in Vietnam............................................................................ 32.1 Infrastructure, operation and cargo volumes................................................................. 3

2.1.1 Air........................................................................................................................... 32.1.2 River and sea ......................................................................................................... 52.1.3 Road....................................................................................................................... 92.1.4 Rail ....................................................................................................................... 11

2.2. The logistics industry in Viet Nam.............................................................................. 122.2.1 Some considerations about the industry .............................................................. 122.2.2 Some major challenges........................................................................................ 13

III. Vietnams commitment to WTO in logistics...................................................................... 14IV. Leading companies in the market.................................................................................... 14

4.1 Vietnam Airlines .......................................................................................................... 14

4.2.Vinalines ..................................................................................................................... 154.3 Maersk Line ................................................................................................................ 16

VI. Major Shipping Lines and Agency Representation.......................................................... 17

Editorial note

The following report, providing an overview of infrastructure and development of theVietnams logistic sector, has been composed by the Italian Institute for Foreign Trade(ICE, also known as Italian Trade Commission) of Ho Chi Minh City. It has been

prepared by a team composed by Ms. Nguyen Thi Thu Ha, Mrs. Do Nguyen Quynh Anhand Mr. Tran Quang Nam, under the supervision of Mr. Marco Saladini who also editedits final version.

The report is part of the project Distretti e Piattaforme Logistiche allEstero carriedout by the Office for machinery, technology and services of ICE Rome and, for Vietnam,by ICE Ho Chi Minh City.

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I. IntroductionVietnam is located in the south-eastern end of the Indo-Chinese peninsula and occupies aland area of 331,688 square kilometers. With a north-to-south distance of 1,650 kilometers, itis about 50 kilometers wide at the narrowest point. It shares boundaries with Laos,Cambodia on the west and China in the north.

Vietnam has 58 provinces and five big cities. Its geographical topography contains tropical

lowlands, deltas, hills and densely forested highlands. Major geographic regions in thecountry include highlands and the Red River Delta in the north, the Highlands in the centralregion and the coastal lowlands and the Mekong Delta in the south.

Vietnam has a population of more than 85 million with an estimated 63% below the age of30. The Kinh (Viet) ethnic group constitutes the majority of the population (about 86%) andVietnamese is the most commonly spoken language. Literacy level in Vietnam is at around90% of the total population, which is relatively higher than other developing countries.

Vietnam has seen rapid economic growth after adopting economic reforms in 1986, makingthe nation one of the fastest growing economies in Asia. The ongoing efforts of theGovernment towards international economic integration such as the forming of bilateral tradeagreements, attaining memberships of the ASEAN Free Trade Area (AFTA) and, in January2007, accession to the World Trade Organization (WTO), have led to further rapid changesin Vietnams trade and economic regime. Until 2008, the Vietnamese economy has recordeda growth rate of 7% per year. After a slow-down in 2009, when the growth rate was 5,3%, in2010, the gross domestic product (GDP) grew by 6.8% reaching a value of USD 104.6billion. Besides that, favorable government policies for industrial activities and otherimportant factors such as a relatively low cost of labor and a strategic location in a fast-growing region of the world, have led to the growth of Foreign Direct Investment (FDI) flowsinto Vietnam and to the establishment of more privately-owned Vietnamese enterprises. Theinflow, or disbursement, of FDI was reached USD 11 billion in 2010, up 11% as comparedwith the previous year. Vietnams imports and exports have been consistently increasing

with an annual average growth rate of 20%. In 2010, export revenues amounted to USD71.6 billion, 25% higher than in 2009, whereas the import turnover reached USD 84 billion,20% higher.

All these factors have led to an demand for logistics services in Vietnam in recent years,which has met some obstacles in being satisfied at the desired quality and price levels, duealso to some constraints which will be discussed in what follows. This gap between demandand supply of logistics services can also be seen as a business opportunities for companiesinterested in developing their trade in Vietnam. The market is slowly but steadily opening toforeign providers, according to the schedules and the commitments agreed upon in theframework of Vietnams WTO accession.

II. A general picture on logis tics in Vietnam

2.1 Infrastructure, operation and cargo volumes

2.1.1 Air

InfrastructureThe aviation industry in Vietnam operates under the direct jurisdiction of The Civil AviationAdministration of Vietnam (CAAV). The CAAV currently oversees 22 airports including threeinternational airports: Noi Bai in Hanoi, Danang in Central Vietnam and Tan Son Nhat in HoChi Minh City. The 19 minor airports are for domestic flights to the three larger hubs. Theyare at Hai Phong, Dien Bien, Na San, Gia Lam, Vinh, Phu Bai, Dong Hoi, Phu Cat, Tuy Hoa,

Cam Ranh, Pleiku, Buon ma Thuot, Lien Khuong, Vung Tau, Can Tho, Rach Gia, Ca Mau,Phu Quoc and Con Dao.

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Currently, Ho Chi Minh Citys Tan Son Nhat is the largest airport, serving more than tenmillion domestic and international passengers a year. In 2007, Tan Son Nhat Airport addedan international terminal. The 92,000 square meter facility has a capacity of 10 millioninternational passengers and one million tonnes of cargo per year. The previous terminalwas converted to serve domestic flights with a capacity of 7 million passengers every year.Parking area of the whole airport can accommodate 30 airplanes and about 6,000 cars at atime.

Other airports with significant passenger throughput capacity include Noi Bai Airport in Hanoiwith 7.1 million passengers, Cat Bi airport at Hai Phong with 500,000. Danang Airport with1.4 million and Hues Phu Bai Airport with 520,000 passengers per year.

The most significant new airport project under consideration is the Long Thanh InternationalAirport in Dong Nai Province, 50 km to the northeast of Ho Chi Minh City. The project wassupposed to start in 2007, however it is still in stand-by. Recently, the government haspushed the Ministry of Transport to start the construction in early 2011.

The airport is to be built in two phases, with the USD 5 billion-worth Phase I having adesigned capacity of 20 million passengers per year. The plan for Phase II envisions fourrunways 4,000 meters in length and 60 meters wide, capable of accommodating heavy long-haul planes, including the Airbus A380. The total capacity will be then upgraded 80 to 100million passengers and 5 million tones of cargo per year.

CAAV is in the process of converting existing airports at Cat Bi Island (near Haiphong), ChuLai in central Quang Ngai province, Phu Quoc Island, and Cam Ranh from domestic tointernational airports.

Operation and VolumeThe two principal airlines operating in Vietnam are Vietnam Airlines and Jetstar PacificAirlines. Both of these airlines are state owned, while Jetstar has a stake in the latter one.

Other minor airlines have also obtained a license to operate, but so far only Air Mekong hasstarted flying from its base in Phu Quoc island.

Air cargo handled in Vietnam grew at the average rate of 17 percent per annum during the2000-2007 period. Though the rate has lightly reduced due to the effects of the crisis in2009, air freight volume is expected to continually increase in the coming years, also due tothe emphasis placed by the government on attracting manufacturers of electronics and hightech industries which require more sophisticated transportation, including the increased usedof air freight.

Noi Bai Airports cargo operation in Hanoi are handled by Noi Bai Terminal Services with 19international airlines offering freight services. The company is majority owned by Vietnam

Airline together with several other Vietnamese freight forwarders. Tan Son Nhat CargoServices, a joint-venture between Vietnam Airline and Singapore Airport Terminal Service,handles international cargo operations for 22 airlines and has an annual cargo throughput of100,000 tones (about 80% of total international freight volume).

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Figure 1. Volume of f reight, 2000-2009

Volume of Freight by Air, 2000-2009

0

50

100

150

2000 2003 2005 2007 2009

Year

Volumeoffrieght

(Thous.tons)

Domestic Overseas

Source: General Statistics Office

Figure 2. Volume of Freight Traffi c by Air 2000-2009

0

50

100

150

200

250

300

350

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

year

Vo

lumeofFrieghtTraffic

(Mil.tons.km)


2.1.2 River and sea

Infrastructure

Vietnams dense river and canal network provides the country with a highly developed inlandwaterway system. This is the second-largest sub-sector involved in domestic cargotransport, accounting for 25-30% of total transport volumes. This is particularly true of theMekong River Delta where, in some provinces, it accounts for 60-70% of total transport.

Currently, the inland waterway transport sub-sector is managed by two state corporationsaffiliated to the Ministry of Transport, one state-owned enterprise (SOE) affiliated to theVietnam Inland Waterway Authority, and some enterprises managed by other ministries,operating in support of the power generation, cement, and paper industries. In addition,there are about 230 co-operatives and hundreds of inland waterway transport enterprises inthe country.As the traditional routes serving the key industries such as coal for power generation,

fertiliser and cement, inland waterway transport also handles a large volume of otherbuilding materials and agricultural products.

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Vietnams 3,260 km coastline has 127 ports, of which 25 handle ocean cargo.The five mainlocations that receive regular container services in Vietnam are Ho Chi Minh City (handles72% of total cargo throughput), Hai Phong (20%), Cai Lan (4%), Da Nang (1%), Quy Nhon(1%). Two new big ports in Ba Ria-Vung Tau province are expected to show up as wellamong the major ones, after their inauguration in 2010.

Vietnams seaport network comprises many small- and medium-sized entities, with inefficientdistribution. Most big ports are located far inside rivers, like Hai Phong and Ho Chi Minh City,with limited depth at the entrance. Some ports are located in big cities where road traffic isparticularly congested, making it difficult to forward cargo via other modes of transportation.Except for some new or upgraded ones, most ports have been operating for many years,lack investment and are seriously degraded. The loading and unloading equipment in someports is obsolete, leading to low productivity. This is one of the major reasons why Vietnamis ranked behind its neighbours in both the World Economic Forums Gobal competivenessReport 2009-2010, where it comes 99thout of 133 countries in terms of ports infrastructure,and in the World Banks Logistics Performance Index, where it comes in 53 rdplace, while itsneighbours Singapore and Malaysia are placed second and 29 threspectively.

The government is aware that port congestion is now a critical issue threatening Vietnamsexport growth. Since 2009 it has approved several big seaport projects which are underconstruction.

Concentration of medium ports in Hochiminh cityHo Chi Minh City is a critical gateway, given that 72% of the countrys container throughputpassing through its ports. They serve not only their immediate vicinities but also theneighboring provinces of Binh Duong, Dong Nai, Baria Vung Tau, where a large number ofindustrial and manufacturing plants are based, in addition to the Mekong Delta and theCentral Highlands.

However, all ports are located very near to city centre, limiting the capacity and depth at theentrance and suffering from urban traffic congestion. The only exception is Saigon PremierContainer Terminal since it was built in 2008 at the suburban areas. It has just begun tooperate by a joint-venture between DP World and Tan Thuan Industrial Promotion Company.

Table 1. Facilit ies at the Main ports in Ho Chi Minh CityPortinformation

Cat Lai VICT Saigon Port Ben NghePort

SPTC

No of Berths 6 4 18 4 3Total Berthsof Length

800m 678m 2,667 m 816 m 500m

Depth

alongsideberth

-10.5m -10m -11m -10.5m -14m

Max Sixe ofvessel

30,000DWT 25,000DWT 30,000DWT 30,000DWT 2,200TEU

Land area 60ha 20ha 50 ha 32 ha 23haQuaysideGantrycranes

10 4 2 0 5

VICT- Saigon International Terminals Vietam PortSource: Different sources

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Figure 3. Map of ports in Ho Chi Minh City

Source: SPCT

Ba Ria-Vung Tau, new region of deepwater portsThe new region for deepwater ports is Ba Ria-Vung Tau Province. Tan Can-Cai Mep wasthe first container and deepwater port developed in the province in 2008. Construction of thefirst phase of the project was completed in 2009. The port can accommodate ships up to

80,000 DWT during the fist phase and 110,000 DWT during the second phase which isscheduled to operate in 2011.

SSA Marine from the United States of America signed a joint-venture with Saigon Port andVinalines to build a USD 282 million port on 60 hectares at Cai Mep and Thi Vai rivers Theport includeS 600 meters of berth frontage and can handle a container throughput of up to1.35 million TEU per year. The port, which begun operation in 2009, accommodates ships ofup to 80,000 DWT.

In 2008, Maersk A/S, Saigon Port Company and Vietnam National Shipping Lines(Vinalines), formed a joint venture for Cai Mep International Terminal (SP-SSA), two-wharfcontainer and deepwater port with an investment value of USD 200 million. The project is the

most ever significant development funded by the state budget through Official DevelopingAssistance (ODA). The port has been built from 2008 on 48 hectares, its wharves have atotal berth lengths of 600 meters and it can accommodate a throughput of up to 1.1 millionTEUs per year. The trial is taken in late of 2010, serving to container ship Albert Maersk, 352meters long and 109,000 DWT in weight. The operation of the port is expected to reducecongestion in Ho Chi Minh Citys ports.

Van Phong port, an international transshipment port near Nha Trang, Khach Hoa Province,is to be built by Vinalines to serve as a regional hub similar to those operating in Hong Kongand Singapore. The port will accommodate ships of up to 200,000 DWT. Current plans forthe port include terminals for container ships with loading capacity of 15,000 TEUs and 17bulk cargo piers capable of handling 17 million TEUs a year. The first phase of the Van

Phong project, scheduled to start in 2010 or 2011 and finish in 2015, will see construction oftwo large and five small berths with a quay size of up to 2,260 meters. This would allow the

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facility to handle 9,000 TEU vessels and have a total container throughput capacity of twomillion TEUs per year.

The Ministry of Transport has assigned Vinalines to develop a deep water port at LachHuyen, in northern Vietnam near Haiphong. The port will be the largest transshipment port innorthern Vietnam, accommodating ships of 60,000 80,000 DWT. The port will include fourcontainer terminals, two bulk cargo terminals, and five terminals for food and other

goods.Total capacity would be 35 million tonnes of goods per year. Its construction isexpected to begin in 2011.

Operation and VolumeThe largest local operator is the Vietnam National Shipping Lines (Vinalines). This state-owned companies is also the main developer of almost all port construction projects in thecountry.

Until 2005, the volume of freight traffic by river has stably grown. In the following yearsexpansion became more difficult for the sector since almost all barges, the most commonmeans of river transport in the country, were becoming old and unsafe and there was a lackof specialized bulk cargo ships.

Figure 4. New Port Development Map

Source: Vietnam Infrastructure Report ICE Hochiminh

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Figure 5. Volume of Freight Traffic by River, 2000-2009

0

5.000

10.000

15.000

20.000

25.000

30.000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Year

VolumeofFreightTraffic

(ton/kmM

ln.)


In terms of freight by sea, the data shows a firm growth trend from 2000 to 2010. Withrespect to the throughput of the port system, Hochiminh Citys ports report that the demandis usually higher than their capacity. APL Shipping line expects demand for containershipment in the south to increase by an average of 20-25% per year from 2011 to 2015.

The volume of freight traffic by sea increased on average by 19.6% per year, lifting the totalvolume to 13.5billion ton km in 2009.

Figure 6. Volume freight traffic by sea, 2000-2009

0

20.000

40.000

60.000

80.000

100.000

120.000

140.000

160.000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Year

V

olumefreighttrafficbysea

(ton/kmM

ln.)


2.1.3 Road

Infrastructure

The statistic of 2007 shows that Vietnam has about 210,000 km of road,17,300 km nationalhighway. Roughly 85% of the national roads are paved, while only 54% of the provincialroads, and 20% of the district roads are paved. Only of the road network has more than one

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lane and major constraints include narrow widths, poorly designed junctions and restrictivevehicle weight limits.

Vietnam does not have a modern expressway linking the northern and southern parts of thecountry. Route 1A running the length of the country is of varying quality, with much of itbeing a single lane road of insufficient width.

To address road infrastructure constraints, the Ministry of Transportation and MPI havedeveloped plans for a series of road upgrades. The government has approved an estimated2,160 km of new highway projects as part of the national Transport Master plan. The tablebelow summarizes approved highway projects in Vietnam to 2020.

Beside the lack of highway system, the inefficiency of urban roads is also a challenge tocontainer transfer towards or inside major cities. The traffic congestion seriously increasestime of forwarding. The problem, moreover, seems not so easy to be solved in the shortterm.

Table 2. Summary of approved highway projects in Vietnam to 2020

Source: VEC- Vietnam Expressway Corporation, 2008

Operation and VolumeIn 2009 there were over 1,050 enterprises registered in the road transport business, whichincluded 16 state-owned enterprises, 233 limited liability companies, 350 private companiesand 450 joint stock companies. Very few foreign invested companies are present. Most roadtransport companies are of small and medium scale. Each company owns about 50 vehicles,on average.

Road transport accounts for around 60% market share of domestic cargo. There has been a

16% yearly growth, on average, in the volume of freight road transport over the last 10years. The total freight traffic reached 30 ton/km Bln. in 2009. It is assumed that the datashould be higher when adding the freight forwarded by tens of thousands of individual

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household business which operate informally in the sector and are thus are not accountedfor in the national statistics.

Table 3. Volume of freight by Road, 2000-2009

YearVolume of freight

(Thoun.ton)Volume of freighttraffic (Mil.ton.km) Rate of grow (%)

2000 144571,8 7969.92001 164013,7 9184.9 15

2002 192322,0 10667.6 16

2003 225296,7 12338 16

2004 264761,6 14938.8 21

2005 298051,3 17668.3 18

2006 338623,3 20537.1 16

2007 403361,8 24646.9 20

2008 455898,4 27968 13

2009 494649,8 30261.4 8


2.1.4 Rail

InfrastructureVietnams rail network totals about 2,600km (excluding sidings). It comprises 2,169 km of1,000 mm gauge and 178 km of 1,435 mm gauge tracks, the latter mostly located in the

Northern part of the country. The network has 1,790 bridges totaling 45 km and 11.5 km oftunnels. The principal axis is Hanoi-Ho Chi Minh City (1,726 km). Other lines emanating fromHanoi are to Hai Phong (102 km), Lao Cai (296 km) and Dong Dang (162 km).Trains have amaximum speed of 70 km/hour but frequently have to slow to under 30 km/hour along oldersections of track or when crossing aged bridges.

Figure 7. National Rail System

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The Hanoi-Ho Chi Minh City line connects the prime economic zones in the north and south.Since most of the economic activity is concentrated around these regions, this line serves asthe most important link in Vietnams rail network. The network connects to Chinas railwaysat two gateways in Lao Cai and Dong Dang.

Operation and VolumeThe rail network has a sole operator, the Vietnam Railway Corporation (VRC). The policyand regulation functions fall under the Vietnam Railway Administration, a department of theMinistry of Transport. Apart from operating the railway infrastructure, VRC also buys andmaintains locomotives and invests in maintenance facilities. However, due to a lack ofinvestment and old infrastructure, the railway face strong competition from maritime, inlandwaterway and road transportation modes.

The system has been focused on passenger traffic due to the technical challenges facing themovement of containers and bulk cargo. Traffic density is low, around 2.3 million trafficunits/route/km per year, which includes both freight and passenger.

The volume in tonnage kilometer equivalent from 2000 to 2009 had an average growth rateof 7,2% per year with a somewhat high volatility. The current growth of the freight trafficthrough rail is not so fast because of the high costs and the poor efficiency of the systemrather than due the lack of demand.

Table 4. Volume of freight by rail, 2000-2009

YearVolume of freight

(ton. 000)Volume of freight

traffic (ton/km Mln.)Rate of growth offreight t raffic (%)

2000 6258,2 1955.0

2001 6456,7 2054.4 5

2002 7051,9 2391.5 16

2003 8385,0 2725.4 14

2004 8873,6 2745.3 1

2005 8786,6 2949.3 7

2006 9153,2 3446.6 17

2007 9050,0 3882.5 13

2008 8481,1 4170.9 7

2009 8068,1 3805.1 -9


2.2. The logistics industry in Viet Nam

2.2.1 Some considerations about the industry

The logistics industry in Vietnam is still in its infancy and the process of procurement ofgoods and materials, transportation, storage and delivery are not commonly carried out in anintegrated manner. The competitive structure of logistics companies in Vietnam is defined bythe level of service offerings, integration of those services and their overall quality and cost.

The logistics market in Vietnam can be segmented based on the functions served or theextent of outsourcing.

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The functional segmentation includes 3 main categories i.e. transportation, freight forwardingand warehousing. The transportation function accounts for a major portion of logistics activityfollowed by freight forwarding and trading services. Demand for transportation and freightforwarding services is strong due to high volumes of materials and finished goods that needto be transported. However, the transportation service sector as a whole in Vietnam isrelatively weak. Despite having the most extensive transportation system in the Indochina

region, Vietnams road and rail network is under-developed, while both ocean and airtransportation are characterized by higher costs and longer transit times as compared tomany of its neighbor countries.

Moreover, the Vietnam shipping industry is dominated by international carriers who are ableto provide global coverage of services. The local carriers are largely focused on domesticand regional shipping services within South East Asia. Ho Chi Minh city, through which morethan 70 percent of Vietnams container throughput passes, is a critical gateway for bothimports and exports.

Particularly, the demand for warehousing and other value-added logistics services is alsoincreasing; nevertheless, a large portion of these services is operated in-house, so it willtake time before outsourcing becomes more prevalent. The distribution system is currentlyfragmented and consists of a network of state-owned and private firms, import-export firmsand wholesalers, independent agents and distributors, and retail outlets including smallfamily-run shops, modern distribution outlets and state-owned stores.

2.2.2 Some major challenges

Inconsistent regulation poses a challenge for service providersThe regulatory and legislative standards concerning areas such as customs clearance,ground handling, and terminal operations are highly complex. The multiple layers ofregulations and administrations in charge of enforcing them makes the documentation

process highly complex and leads to subsequent increases in both lead times and the costof processing freight. Logistics costs in Vietnam are estimated to be nearly double the cost inindustrialized nations and a major portion of this cost can be attributed to high inventoryholdings. Consequently, the lack of clarity on multi-modal rules governing customs and thetransportation regime, as well as the complexity of documentation procedures, are mainimpediments to smooth logistics operations.

Lack of clarity on roles and responsibilities slows industry growthIn Vietnam, the boundaries between the operations of various businesses such as freightforwarders, warehouse operators, fleet operators and integrated logistics companies are notwell defined. Such businesses are often fragmented and do not generally complement eachothers service offerings, which can lead to duplication of efforts and higher costs. Many

seaports and airports also lack supporting logistics distribution centers, which can result inincreased inventory and idle time for trucks, ships and planes. The logistics companies,freight forwarders and shipping lines need to work together for optimal utilization ofresources instead of working as contractors in discrete activities to offer competitive servicesat lower rates.

Shortage of Skilled ManpowerThe Vietnamese logistics industry lacks experienced logistics professionals. This is a majorchallenge for local as well as multinational companies since they find it difficult to hire theright talent. Lack of sufficient training and education in the field of logistics is also a majorcontributor to the paucity of skilled personnel.

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III. Vietnams commitment to WTO in logistics

According to commitment to WTO, Vietnam has committed to opening up following sectors: Container loading and unloading service Warehouse service Freight agency service

Foreign investors may provide container loading and unloading, warehousing

services in Vietnam under what forms and what conditions?+ Container loading and unloading service

Under the WTO commitments, foreign investors who want to invest in this service in Vietnammust establish a joint venture with Vietnamese partners with some restrictions- Restriction on the rate of capital contribution: in the joint venture, the proportion of theforeign capital contribution can not exceed 50%.- Restriction on activities: Vietnam can not allow these joint ventures to provide this serviceat airports.+ Warehouse serviceUnder the WTO commitments, foreign investors who would like to invest in this service mustestablish a joint venture with Vietnamese partners and the ratio of foreign capital can notexceed 51%.Since 11/01/2014, foreign investors can establish a joint venture with Vietnamese partnerswithout restriction on the foreign capital in that venture or they can even establish 100%foreign owned capital company.Foreign investors may provide freight agency service in Vietnam under what formsand what conditions?According to WTO commitments, foreign investors who want to provide this service inVietnam have to set up a joint venture with Vietnamese partners. In the joint venture, theproportion of foreign capital can not exceed 51%.From the date of 11/01/2014, foreign investors can establish a joint venture with Vietnamesepartners without restriction on the foreign capital in that venture or they can even establish100% foreign owned capital company.

Foreign investors may provide other services?Besides the services mentioned above, foreign investors can participate in following serviceson behalf of cargo owners.- Checking bills of lading- Checking goods- Sampling and weight determination- Receiving and accepting goods- Preparing transport documentsIn order to do those services, foreign investors must establish a joint venture withVietnamese partners. In the joint venture, the proportion of foreign capital cannot exceed49%. From the date of 11/01/2010, limitation of foreign capital in the joint venture will be51%. From the date of 11/01/2014, foreign investors can establish a joint venture with

Vietnamese partners without restriction on the foreign capital in that joint venture.

IV. Leading companies in the market

4.1 Vietnam Airlines

Company overviewVietnam Airlines was established as a state-owned airline in 1989 and merged with anumber of service companies in 1996 to give it its present form. The governments statedgoal is to further integrate the company into the global market and establish itself as aregional player. In 2006, it was officially accepted as a full member of the International Air

Transport Association. In June 2010, Vietnam Airlines became a member of the SkyTeamAlliance joining other major airlines

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The Vietnamese carrier provides passenger air services to 25 destinations in 15 countriesincluding in South East Asia, Australia, Russia, France, Germany and the United States ofAmerica. Until 2009, tts fleet of 50 modern aircrafts has carried more than 9mn passengers.The company has a number of code share operations with foreign companies, in particularthe February 2004 agreement with Air France to share 11 non-stop scheduled flightsbetween Ho Chi Minh City and Paris. Vietnam Airlines cargo operations serve 20destinations in Asia, the Middle East, Australia and Europe, with partner networks serving

other destinations. The cargo division operates Tan Son Nhat Cargo Services, a joint-venture with Singapore Airport Terminal Service, which has an annual cargo throughput of100,000 tonnes.

Financial PerformanceThe national flag carrier Vietnam Airlines expected to see a total revenue of VND32trn(USD1.78bn) in 2010, up 30% against in 2009 in the context of the global economicrecovery. To realize the turnover, the carrier estimated that it would have to transport morethan 11mn passengers in 2010.

In 2010, positive targets are based on its good performance in 2009 which was in markedcontrast to many airlines globally facing bankruptcy, losses and laying-off of staff. The carriernotched up its turnover in 2009 to VND 24.5trn (USD 1.36bn), netting a profit of VND150bn(USD8.3mn). The results mainly stemmed from its focus on the domestic market.It operated a series of new routes last year, including Hanoi-Can Tho, Hanoi-Quy Nhon, HoChi Minh City-Dong Hoi, Hanoi-Tuy Hoa and Hanoi-Pleiku. Vietnam Airlines transportedabout 9.3mn passengers in 2009, a 6.6% increase from 2008, with Vietnamese clientsaccounting for up to nearly 6.2mn, a y-o-y increase of 17.6%. It also handled around131,220 tonnes of cargo, up 2.3% from 2008. Of the total, 87,000 tonnes of cargo wastransported on domestic routes, a rise of nearly 13%.

The carrier also reported a seat occupancy rate of roughly 74% for both local andinternational flights. To raise net profits, Vietnam Airlines implemented a wide range of

solutions to cut fees, thus saving more than VND400bn (USD22.2mn) last year, byeconomizing fuel and rescheduling flights, it said.

The airline took full advantage of the global economic crisis to negotiate with partners to buyand lease more new planes to improve its fleet and remodel infrastructure to capitalize onopportunities that are opening up due to the recovery of the local and international economy.

Besides success in the domestic market, Vietnam Airlines saw certain achievementsoverseas. The airline also co-operated with the Cambodia Government to jointly operateNational Cambodia Angkor Air from July 2009. In addition to opening the Hanoi-Fukuokaroute last October it took over from Japan Airlines the Hanoi-Kansai route in January withfive flights a week.

Contact informationVietnam Airlines200 Nguyen Son Street, Bo De Ward, Long Bien District Hanoi, VietnamTel: (+84 4) 38320320;Fax: (+84 4) 38722375Website: www.vietnamair.com.vn4.2.Vinalines

Company overviewVinalines is Vietnams largest state-owned group of companies. Its numerous subsidiaries

are active in maritime transportation and brokerage, ship repairs, import-export, containerservices, terminal operation, freight forwarding, warehousing, and crew manning. Thecompany also has 50% or majority stakes in a number of international joint ventures,

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including Gemartrans (with Frances CGM, 51%), Vijaco (Vietnam/Japan), Phili Orient(Vietnam/Singapore, 50%), Transvina (Vietnam/Japan, 75%), Cosfi (Vietnam/Singapore,51%) and Ahlers-Inlaco (Vietnam/Austria, 51%). Vinalines also has port operations in Ninh,Hai Phong, Nghe An, Da Nang, Quy Nhon, Nha Trang, Sai Gon, and Can Tho.

The company has undergone a series of fleet expansions, modernization and developmentprojects over the past years. By the end of 2010, it has 139 vessels with total capacity of 2,8

million ton, holding 45% total capacity of the country.

Recent developmentIn 2007, Vinalines has been assigned by the government to mobilize funds to develop VanPhong port and Lach Huyen port and new port in Ba Ria- Vung Tau.

In August of that year, Swiss bank Credit Suisse signed a memorandum with Vinalines toprovide loans worth USD700mn. As part of the Financial Service Memorandum, CreditSuisse provided Vinalines with ratings advisory, fund raising, and risk management services.

In the same year, the government has instructed state giants Vinalines and PetroVietnam tostrictly adhere to the schedule approved for building a new port complex in the southernprovince of Ba Ria-Vung Tau, 90 km south east of Ho Chi Minh City. Vinalines andPetroVietnam, the investors, have held talks with domestic and foreign banks like CitiGroup ,Credit Suisse, Deutsch Bank, and Mizuho to secure credit. In 2008, Vinalines has signed acontract with China Merchants Group (CMG), a leading Chinese conglomerate, establishinga joint venture to build the port. Has estimated to costUSD1bn, the port would be able tohandle 100,000-DWT vessels. In 2010, the company submited to the govement the fasibilitystudy of the port, expecting the contruction will start in 2011.

In 2008, Maersk A/S, Saigon Port Company and Vinalines formed a joint venture for CaiMep International Terminal (SP-SSA), two-wharf container and deepwater port with aninvestment value of USD 200 million. The port has the fist trial operation in the begin of 2010

and has officially being operating from August 2010.

In 2009 Mai Van Phuc, CEO of Vinalines said the corporation will continue to invest in keyprojects, despite the effects of the economic crisis both domestically and globally. It will get aVND15 trillion (USD 862 million) loan from the Bank for Investment and Development ofVietnam to meet the demand for capital. The loan would be put towards the building of shipsand upgrading seaport and logistics services planned for 2010, Phuc said. He added thatVinalines' key task in the future would be to build a new yard for repairing ships with acapacity of more than 10,000 tonnes. The corporation would also need to upgrade its currentshipyards to become more competitive.

Vinaliness revenue in 2010 was VND20.93 trillion ($1.2 billion), 16% per cent higher than

the previous year. It profit gained VND 1.241 trillion, increasing 40%.

Contact informationVietnam National Shipping Lines (Vinalines)201 Kham Thien Street, Hanoi, VietnamTel: +84 4 851 7750Fax: +84 4 511 3039Web: www.vinalines.com.vn4.3 Maersk Line

Maersk Line is one of the leading liner shipping companies in the world, serving customers

all over the globe. Maersk Line is a division of the A.P. Moller - Maersk Group and shares itssame values and business principle, i.e. to be a world-class, known and highly respected

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group. The Maersk Line fleet comprises of more than 500 vessels and a number ofcontainers corresponding to more than 1,900,000 TEU.

Maersk Line established its first representative office in Ho Chi Minh City in 1991, followedby a branch representative office in Ha Noi two years later. Since then, together with theimpressive development of trade in Vietnam, further offices have been opened in Hai Phong,Da Nang, Quy Nhon, Nha Trang, Vung Tau and Can Tho.

Maersk Line in Vietnam offers weekly feeder departures to the main hub ports in Asia suchas Tanjung Pelepas, Singapore, and Kaohsiung. Kaohsiung acts as the connecting pointproviding access to the companys worldwide network.

In addition to Maersk Line, A.P. Moller holds a 75% stake in APM-Saigon Shipping Company(APM-Saigon) having its own dedicated staff in all major ports in Vietnam, ensuring spaceprotection and favorable treatment to Maersk Lines customers in case of problems. The jointventure has a staff of 180 and operates 20 vessels, forming what it claims is the countrysmost comprehensive domestic shipping network.

Contact informationMaersk Line26 Phung Khac Khoan Street, district 1 HCMCTel: (+84) 08 3824 3252Customer service:Tel: (+84) 08 238 566Fax: (+84) 08 238 583

VI. Major Shipping Lines and Agency Representation

Shipping Line Agency Agency Status Joint Venture Partner/Agency

Af fi liationAPL APL-NOLVietnam

Fully foreign-owned

Not Applicable

CMA-CGM CMA-CGMVietnam

Joint Venture(51%)

Golden Lotus ( Private)

CNC Vietfracht 3rdParty Agent VietfrachtCosco Cosfi Joint Venture

(49%)Safi ( Vinalines)

CSAV - Norasia Ben Line 3rdParty Agent Ben Line AgenciesCSCL China Shipping

VietnamJoint Venture(49%)

Vosa ( Vinalines)

CT Navigation Integrity Shipping 3rdParty Agent Private Company

Dongnama Safi 3rdParty Agent Safi ( Vinalines)Evergreen Evergreen


Phuoc Vinh Son ( Private)

Hamburg Sud Ben Line 3rdParty Agent Ben Line AgenciesHanjin Hanjin Vietnam Joint Venture

(49%)SGN Logistics ( Private)

Hapag Lloyd Hapag LloydVietnam

Joint Venture(49%)

Vinatrans

Heung - A Vietfracht 3rdParty Agent VietfrachtHyundaiMerchant

Marine

Huu NghiShipping

3rdParty Agent Gemadept

IRISL SGN Logistics 3rdParty Agent Private Company

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K-Line K Line Vietnam Joint Venture

(51%)Hai Minh ( Private)

KMTC Gemartrans 3rdParty Agent VinalinesMaersk Maerks Vietnam Fully foreign-

ownedNot Applicable

MISC Gemartrans 3rdParty Agent VinalinesMOL MOL Vietnam Fully foreign-

ownedNot Applicable

MSC MSC Vietnam Joint Venture(49%)

Viconship ( Vinalines)

New Econ Line Galaxy 3rdParty Agent GemadeptNYK NYK Line


Vosa ( Vinalines)

OOCL OOCL Vietnam Joint Venture(49%)

Gemadept

PDZ Safi 3rdParty Agent Safi - VinalinesPIL/ACL ITL Joint Venture

(49%)

ITL Shipping ( Private)

RCL RCL Vietnam Joint Venture(49%)

Vinatrans

Samudera PAL 3rdParty Agent Private CompanySiam Paetra SGN Logistics 3rdParty Agent Private CompanySinokor Sinokor Vietnam Joint Venture

(49%)Gemadept

STX Pan-Ocean

MACS Shipping 3rdParty Agent Private Company

SYMS Ben Line 3rdParty Agent Ben Line AgenciesTS Lines TS Lines

Vietnam3rdParty Agent Viconship

UASC Vinafreight 3rdParty Agent Jardine ShippingWan Hai Lines Phoenix 3rdParty Agent Private CompanyYang Ming Yang Ming


Continental ( Private)

Zim/Gold StarLine

Star Shipping Joint Venture(49%)

Jardine Shipping

Source: APL

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110321 logistics in vietnam

Documents

logistics market

logistics industry

vietnam airlines

overview of infrastructure

ice ho chi minh city

square kilometers

nguyen thi

italian institute