Vietnam – Transport and Logistics – 2015

1. Vietnam - Transport and Logistics - 2015
Overview
The Transportation and Logistics Sector in Vietnam consists of shipping Lines, air lines,
freight forwarders, Logistics' service providers, air express operators, port operators,
warehouse operators, ground handling agents, customs’ clearance agents, trucking companies
and stevedoring services.
For any country, this industry is the life-line for trade, travel and commerce, both nationally
and internationally; Vietnam is no exception to this fact. With the existence of an efficient,
secure and reliable transport and logistics infrastructure, the competitive advantages for
exporters and importers to trade within Vietnam and within the global market increase
exponentially.
The distances between Vietnam and the main consumption areas of Europe are the longest of
all major markets and therefore the need for that efficient network becomes increasingly
important for exporters to those countries. Equally and for the same reason, the need for an
integrated transport and logistics sector is of paramount importance for the importers of
goods from Europe.
Conversely, without the existence of such an efficient and integrated network, this will
adversely and directly affect all businesses in Vietnam, whether trading with Europe or
elsewhere in the world. If Vietnam is to be able to compete at the international highest level
with other countries and particularly with those in the Southeast Asian region, the need exists
also for the functioning of efficient airports, capable with sufficient capacity.
Over the past decade, the transportation infrastructure of Vietnam has been significantly
expanded, gradually answering socio-economic development needs. Over the past five years,
the total investment within the transport and logistics sector between the Vietnamese
Government and Foreign Direct Investment (FDI) is already well in excess of USD 2 billion,
most of which has been spent on the deep sea terminals of the Cai Mep Thi Vai area. It is
disappointing that despite so much money being invested in the hard infrastructure and
superstructure, the current occupancy of those terminals is no more than 30%, resulting in a
very low return on investment.
There are only four out of the seven container terminals that have managed to attract
container vessel customers in Cai Mep Thi Vai. If the environment were to change and
demand were to increase, the immediate positive effect would be the creation of thousands
more jobs, all directly associated with the port industry, and at least the same number of jobs
indirectly associated with the Industry.
Lessons should be learnt from the country’s experience of the South to ensure the same is not
repeated in the North. This means that above all, a realistic estimation of volume throughput

2. is made. The total terminal capacity must not be built too fast, and too far ahead of that
growth.
Due to Vietnam’s geographical location, every mainline vessel sailing to Europe from Japan,
South Korea and China, passes within a few nautical miles of Vietnam’s coastline. This is
significant because it creates a massive opportunity for shipping lines to call directly to South
Vietnam (optimum location in Vietnam) 'en-route’ to Europe, thus reducing bunker (fuel)
costs in the overall transport chain. In reducing overall fuel costs, all exporters will benefit
from such calls. In addition, being central to the Asian region (Japan to the North, Indonesia
to the South Thailand to the West and Philippines to the East), Vietnam sits on the
opportunity to create an intra-Asia hub. Whilst developing such a hub in the fastest growing
market of the world is not directly associated with Europe, it creates critical mass (volumes of
containers), which in turn reduces the overall unit costs for European cargo.
At present, core elements of the infrastructure network should be brought up to international
standards, such as highways, bridges and flyovers, roundabouts, inland waterways/rivers,
maritime services (e.g. towage for vessels), maritime needs (e.g. adequate dredging for
deeper drafted vessels), inland waterways and barges, or river inland container depots. Focus
should still be given to the creation of an international and domestic container hub port in Cai
Mep, as well as of the Long Thanh airport. In the longer term, developing railways/rail
infrastructures (such as signalling, tunnel, bridges), and road tunnels will be important.
The development of an efficient network is not only related to the hard infrastructure
constructions, but also strongly relates to the adaptation of regulations, systems and
procedures that surround all modes of transport and travel. In this regard, particular areas of
interest include customs’ procedures, anti-corruption regulation and enforcement,
transparency of information, port dues charges, the Cabotage Law, and the closing down of
inner city terminals in Ho Chi Minh City. The latter issue was created with the publication in
2005 of an early Port Master Plan, followed by calls for the closing down of inner city
terminals in order to match shipping lines’ needs, as their vessels become bigger and bigger.
The plans for closures have not been implemented as planned, and this has hampered the
development of the Cai Mep Thi Vai deep sea terminal investments.
Sea Port Infrastructures
Relevant Ministries: Ministry of Transport (MOT), Ministry of Finance (MOF)
Issue description
1. Reducing port dues
The Government seems to be acting upon the call to reduce the port dues for certain vessel
classes and within certain maritime regions. Circular 41 introduced preferential fees,
including a discount of 40% on navigation and tonnage charges and 50% on pilotage dues
applied to large ships (> 50,000 DWT) docking at the Cai Mep port. We welcomes this action
and would like to stress that, in line with the development of an international hub, it is critical
that port dues are reduced for certain vessel classes.

3. However, the port dues that are applied for other types of vessels calling at Cai Mep Thi Vai,
are still high and they reduce the attractiveness of the ports.
A draft Joint Circular related to Circular 41 and Decision 98 (signed by both the MoF and
MoT) summarised a range of adjustments to the charges which would greatly enhance the
international competiveness of the deep sea container terminals in the Cai Mep region. The
adjustments in the draft Joint Circular recommended an implementation date of 1 January
2015. However, in the second dialogue conference with sea ports and carriers held on 8
October 2014, the MoT has disappointingly suspended the document for further analysis.
2. Relaxing the Cabotage Laws
Whilst there has been little progress in terms of action and outcome, there does seem to be a
recognition that the relaxation of the laws on cabotage would improve the efficiency of
transporting goods from the North of Vietnam to the South and vice versa via the East Sea.
In line with the development of an international hub and in order to create an efficient feeder
network linking North and South Vietnam, it is important to relax the cabotage laws, in order
to improve the service and reduce the cost to the consignees.
The deep sea container liner business is keen to enter this market so that an efficient and cost
effective service can be provided. The current service offering is deemed to lack efficiency
and reliability, and to be over-priced.
It is also worth noting that if the local providers are indeed able to provide an efficient service
offering at a competitive price, then the need for such a relaxation is reduced.
3. Creating the hub port in CaiMep
Excluding the terminals that have halted their construction or further development planning,
the final container terminal within the Cai Mep range (Tan Cang CaiMep ODA Terminal -
TCOT) is now up and running.
On the one hand, this has increased the already severe under-utilisation of the deep sea
terminals of South Vietnam, but on the other hand, it also creates the opportunity to start the
implementation of the hub as outlined in the previous edition.
In 2005, the Port Master Plan signed by the Prime Minister, decided that the channel depth in
the CaiMep river entrance should be a minimum of 14 metres at low tide. There are currently
small areas where the river has reduced in depth and this could potentially restrict the size of
vessels capable of calling in Vietnam.
The new alliances of the 2M (Maersk Line and the Mediterranean Shipping Company) and
the Ocean 3 (CMA CGM, China Shipping (CSCL) and United Arab Shipping Company
(UASC)), are likely to require the full 14 metres of water depth for vessels wishing to call in
Vietnam. These direct calls are likely to be either Northern or Southern European services.
Without such a dredge, this could jeopardise the whole initiative of calling with a direct
service and the implementation of the hub.

4. Potential/gains for Vietnam
The Cai Mep - Thi Vai ports could be developed into an international maritime hub, which
would
increase the number of vessel calls and thereby increase overall income. In addition, if the
recommendations below are followed, the competitiveness of the proposed hub could
increase as
business would be enticed from Singapore and Hong Kong.
Recommendations
We would like to make the following recommendations:
• Continue the emphasis on reducing port dues;
• Keep current customers and attract more services, reduce more port dues and apply
them for all types of vessel calling instead of only applying for vessels capacity of
50,000 Gross Tonnage (GT) and above as per the current regulation;
• Enter the draft circulars on port charges that have been presented as soon as possible.
The Government is surely encouraged to push the draft circulars through for
implementation. It is worth emphasising again that the reduction of port dues for
certain vessel types will attract more vessels and thereby increase overall income;
• Make sufficient funds available immediately in order to dredge and maintain the
channel depth to at least 14 metres 24 hours a day and seven days a week;
• Make sufficient funds available to dredge the CaiMep entrance channel; and
• Foreign-invested enterprises are permitted to carry out the provision of maritime
transport services between Vietnamese ports including cabotage services by foreign
flagged vessels for the supply of integrated transport services, in view of the
development of the hub. To secure investment from European companies in maritime
transport services, appropriate commitments should be made by Vietnam in the EU-
VN FTA currently negotiated.
Customs Procedures
Relevant Ministries: Ministry of Transports (MOT), Ministry of Finance (MOF)
Issue description
The Vietnam Seaports Association (VPA) has nominated the following Ports to ensure
customs procedures, (set up within and implemented with a national and universal
system) are in place at the major ports in Vietnam:
• Haiphong Port to represent for Northern Vietnam region;

5. • Da Nang Port to represent for Central Vietnam region;
• Saigon Newport and Saigon Port to represent the Ho Chi Minh City region;
• Cai Mep International Terminal to represent the Ba ria Vung Tau region; and
• Can Tho port to represent the Mekong delta river region
Electronic customs solution
We welcomed the Government's willingness to move towards an electronic clearance system.
The introduction of new automated customs systems, the Vietnam Automated Cargo
and Port Consolidated System/Vietnam Customs Information System
(VNACCS/VCIS) in select localities in April 2014 was followed by its operation at
some of its customs’ branches in Vietnam in June 2014. Implementation issues were
then reported due to the lack of uniformity of the system being applied only in some
localities, along with issues with the adaptation of the relevant actors to the new
system. Whilst progress has been made, it has yet to be implemented in all localities.
We welcomes the objectives set out in the Strategy for Customs Development up to 2020,
which foresees that by 2015, 100% of provincial and district-level Customs
Departments in key areas (international seaports, airports and road border gates and
key economic regions), 60% of basic customs operations, 70% of import and export
value, and 60% of enterprises will apply e-customs procedures. According to the same
strategy, by 2020, 100% of provincial - and district
- level Customs Departments, 100% of basic customs operations, 90% of import and
export value, and 80% of enterprises will apply e-customs procedures.
However, consistency issues remain. According to Circular 22/2014/TT-BTC of 14 February
2014 providing e-customs procedures for commercial imports and exports, which
defines procedures for implementing the VNACCS/VCIS system, in-country export
procedures have to be completed before corresponding import procedures. However,
according to Circular 196/2012/TT-BTC of 15 November 2012, which is still in force,
the import procedures have to be done before the export procedures.
Treatment of Transshipment Containers
Under standard import / export conditions, shipping lines are required to provide an e
manifest with full details such as container numbers, seal numbers, weights, quantity
of cartons/pallets/ descriptions etc. This full process is not required for transshipment
containers.
Free Trade Zone
In line with the development of an international hub, global retailers and investors will be
looking to consolidate their goods for import and export as a distribution point for the
region within a Free Trade Zone (FTZ).

6. With a FTZ in situ, (as is the case in Yantian/Shenzen, Hong Kong and Singapore),
CaiMepwould become a more competitive hub, as it seeks to facilitate regional trade.
Potential gains/concerns for Vietnam
A fully electronic customs clearance solution will reduce costs, speed up processes and thus
make Vietnam more competitive compared with other ASEAN countries.
Recommendations
• Ensure the efficient and transparent application of customs procedures. To this end,
negotiate in the pending EU-VN FTA a commitment whereby both parties will ensure
that efficient electronic customs clearance procedures will be available to importers of
the other party and that there will be no distinction between e-customs and other
means of customs clearance
• Continue to invest in the Electronic Data Interchange (EDI)
• Ensure the consistency of electronic customs clearance procedures from one locality
to another
• In order to facilitate the movement of transshipment containers, it is recommended
that the e-manifests for container that are being transshipped through CaiMep to other
countries should report the container number only, since there is no need for other
information to be declared
• New directives and guidelines within the customs’ procedures should facilitate the
opening of a Free Trade Zone within the CaiMep ports’ complex, for international
cargo transshipments
Airport Infrastructure
Relevant Ministries: Ministry of Transport (MOT)
Issue description
In August 2011, the Government launched the Long Thanh International Airport project,
in the Dong Nai province. The construction of the airport is planned to start in 2015, and
the airport is expected to be in operation in 2020.
At this stage, it is difficult to assess the impact the Long Thanh Airport will have on
Vietnam. It is however certain that as Vietnam’s air market keeps growing, more capacity
will soon be needed for both passenger and freight.
We welcomes the construction of a new airport in the area of Ho Chi Minh City. The Tan
Son Nhat airport, being located in the city, makes cargo handling more difficult due to
road restrictions, and contributes to the increase of traffic congestion. Furthermore,
having one major international airport will help promoting Vietnam Airlines as a global
carrier, with passenger and freight using the airport as a transit airport.

7. In addition, another airport will facilitate aircraft maintenance and will help promote
maintenance services to carriers, bringing additional business, expertise and jobs to
Vietnam. Currently, many airlines send their aircrafts overseas for maintenance.
Finally, a newly designed airport with all modern infrastructure facilities will help reduce
logistics costs and improve efficiency.
Potential gains/concerns for Vietnam
The construction of the Long Thanh airport will be beneficial for various reasons. First of
all, it is strategically located, well connected to HCMC and nearby provinces. It will
contribute to building a logistics hub in Vietnam, together with Cai Mep deep sea port
and eventually a free trade zone, which was recommended in previous editions. In
addition, it will help developing the satellite cities around HCMC.
At the same time, it could be argued that the capacity of the current Tan Son Nhat (TSN)
airport is not fully utilised, but this will soon be achieved. Building the new airport will
take time - as seen in the case of the Hanoi airport - and it will need to be viable in the
long term.
A possible alternative could be to enlarge TSN airport to the North, and use the Bien Hoa
military airport as a further extension. However, the question remains whether this will
provide long-term benefits. Of course, having two airports would not allow for the costs
reduction needed to attract FDI and increase the competitiveness of Vietnamese products.
Recommendations
Our companies have a Lot of expertise in terms of ensuring the successful setup and
management of airport facilities, from the architectural designs, engineering and
construction to human resources and ensuring the good management and best practices to
ensure the smooth running once completed. We are open to discussing all opportunities to
ensure the best possible outcome.
We recommend the following:
• Continue to invest in domestic airports and ensure that key milestones and deadlines
as set out in plans are achieved;
• Proceed with the construction of the proposed Long Thanh International Airport,
ensuring key milestones (phases) are achieved/completed according to schedule; and
• Open and commit in the pending EU-VN FTA negotiations the providing of relevant
services to European companies and in particular European expertise dealing with set up
and management of airport facilities, architectural design, engineering and construction,
and human resources.

8. Please contact Oliver Massmann under Uomassmann@duanemorris.comU if you have any
questions.