Vietnamese shipping meets raging waves on open sea

shipping, sea, ocean, cargo, ships

Selling ships is a solution that helps shipping firms survive the current difficulties, but it is not the way they can follow to earn their living.

Deputy Minister of Transport Nguyen Hong Truong said Vinashinlines has successfully sold 90 percent of the ships anchored overseas for many days. The last one, Hoang Son 28, still cannot be sold due to some problems with the procedures, but will be sold this year.

Everything put on sale

Incurring big losses and having to sell ships is the thing suffered by nearly all Vietnamese shipping firms over the last three years.

A member of the Vietnam Ship owners’ Association noted that while Vietnamese firms rushed to buy new ships in 2003-2007, they all offer to sell ships now.

In September 2011, Vitranschart JSC decided to sell Phuong Dong 3 and Phuong Dong 1 for VND117 billion to offset the loss.

With the accounts payable worth trillions of dong by the end of the third quarter of 2012, DDM asked for the shareholders’ permission to sell some ships. However, the 2012 shareholders’ meeting did not approve the plan.

DDM plans to get the turnover of VND288 billion this year, but foresees the loss of VND40 billion, including the VND36 billion loss from the fleet development. Therefore, the board of directors of the company may seek the permission to sell ships once again.

Vinaship has recently announced it would sell some of the ships to have more working capital and restructure the long term loans.

Nosco has also said it would sell Long Bien ship. It expects the turnover of VND371 billion this year, but the anticipated loss may be up to VND50 billion.

Do Xuan Quynh, Secretary General of the Vietnam Ship owners’ Association, said it is a big waste and a big economic damage to sell ships. However, he also said that this proves to be the only thing ship owners can do when they have become penniless.

What to do to exist?

Head of the Vietnam Maritime Bureau Nguyen Nhat has made some suggestions to help shipping firms recover and develop when the global economy warms up again.

As for the projects on buying ships with the capacity of 5,000 tons and more, the government should impose the 5 percent VAT rate and allows paying tax within five consecutive years since the day of registration.

Meanwhile, ship equipment and materials should be imposed zero percent in import tax and VAT for five years. Especially, the goods owners using Vietnamese shipping services would get the 10 percent import-export tariff reductions.

The government of Vietnam has drawn up an ambitious plan to develop the shipbuilding and maritime industries. Vietnam hopes to increase the shipbuilding capacity from 3 million tons in 2010 to 5 million tons by 2015. By that time, Vinashin, the key Vietnamese shipbuilding group, would be as big as ¾ of the South Korean Hyundai, the world’s biggest shipbuilder.

However, Vu Thanh Tu Anh from Fullbright Economics Teaching Program pointed out that Vietnam hasn’t got any advantages to develop the industry.

Therefore, Anh believes that Vinashin should focus on developing some shipbuilding complexes, rather than making its presence in many different localities.