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Policy helps keep domestic shippers afloat

Update: November, 19/2012 - 10:41

by Thien Ly

In June, the Ministry of Transport issued Document 5063/BGTVT-VT to temporarily halt foreign ships' operations in the container transport market.

Under this decision, beginning on January 1, the granting of licences for three or six months will be suspended for ships under foreign flags that transport containers on local routes.

About 20 foreign ships with a total carrying capacity of 500,000 dead weight tonnage (DWT) will be affected by this new policy.

Owners of these foreign ships will have to obey the regulation since local ships have priority over foreign ships when operating in the domestic market.

This decision is in line with the national Maritime Law and trade commitments on transport rights that Viet Nam has made as a member of the World Trade Organisation.

The transport ministry's decision is expected to create opportunities for the local ship fleet to regain market share in the local container-transport segment, which generates about VND1 trillion (US$47.6 million) for foreign ships.

Thus, the biggest beneficiaries from the decision are the Viet Nam Ship Owners Association and domestic shipping firms seeking opportunities to regain market share.

In the past, Vietnamese ships neglected the domestic market and actively participated in the flourishing international transport market.

To make up for what was lacking in the domestic market, the transport ministry had to allow ships carrying foreign flags to penetrate the domestic maritime transport market.

However, the international transport market has fallen into a recession, resulting from the prolonged global economic crisis, and now Vietnamese ships have to return to the home market.

According to the Viet Nam Maritime Administration, the country's container shipping fleet has 24 vessels, some of which are capable of carrying 13,000 (DWT). But only 50 per cent of their carrying capacity is being used.

The domestic ships are capable of replacing the foreign ships operating on domestic routes, including at important ports such as Hai Phong, Cai Lan, Sai Gon Port and Cai Mep-Thi Vai.

However, replacing the foreign ships with local ones is not that easy.

Foreign ships are operating effectively in the local market and have advantages that local ships do not possess.

For instance, foreign ships will dock at small ports to receive a few containers even though this can lead to financial losses. Owners of Vietnamese ships will not commit to taking containers at such small ports.

Additionally, the prices charged by foreign ships for shipping containers are more attractive than those from domestic ships, while the service quality of the domestic shipping fleets is worse than foreign-flagged ships.

Because of these limitations, many cargo owners have doubts about the Transport Ministry's policy to temporarily halt foreign ships' operations in the domestic market.

Many of them are concerned about the capacity of Vietnamese ships to ensure delivery of cargo on schedule. Others believe that Vietnamese ship owners might eventually have a market monopoly, which could lead to an uncompetitive situation and an erosion of quality of services.

Specialty retail flourishes

Despite a tough economy, the specialty retail trade is prospering. General department stores in which many kinds of goods are sold remain popular, but in recent years more specialty stores have opened.

At these stores, customers can choose from different brands of one kind of product, and producers can more easily set up a distribution chain of supermarkets and trade centres.

Retailers also have a better opportunity to design long-term strategies to build trade names and improve service quality.

Ten companies in Viet Nam are listed among the top 500 most successful retailers in the Asia-Pacific region, a list compiled by the Euromonitor International Ltd. market research group and the Journal of Asian Retail.

Most of them are involved in the specialty retail trade. They include Sai Gon Gemstone and Jewellery Company (SJC), Phu Nhuan Jewelry Company (PNJ), Nguyen Kim electronics company, Mobile World, Telecommunications A (Vien Thong A) supermarkets, Fahasa Publishing Corporation and the TCT Group.

This is the fourth consecutive year that Sai Gon Gemstone and Jewellery Company was listed in the top 500 retailers in the Asia-Pacific region.

By late 2011, the company had 186 shops with combined turnover of VND20.579 trillion, accounting for 18.5 per cent of the company's total turnover.

Participating in the domestic retail market in 1990, Nguyen Kim has six centres that specialise in selling electronic goods. The store generated about VND7 trillion in turnover (US$350 million) in 2011, up 35 per cent compared with the 2011 figure.

Vien Thong A (VTA) has also recorded regular growth in turnover, with 10 per cent in 2010, 20 per cent in 2012 and 30 per cent expected in 2013.

Despite such growth, domestic specialty retailers still do not have a good understanding of consumers, and their categories of goods and related products on sale do not match customers'demand.

In addition, they have not built up their trade names through their own products and they do not offer replacements or spare parts.

Many of their staff are not qualified. This is a serious problem since many customers go to specialty stores to receive good service and professional advice from sellers.

And, many of these stores do not pay sufficient attention to post-sale services. Such services help to ensure customer satisfaction and retention.

Gold draws higher interest

Interest rates on gold deposits have again risen recently because of banks' attempts to mobilise more gold to balance their gold accounts before June 13, 2013, when they will no longer be allowed to do so.

The deadline, which was extended after many complaints, is related to the State Bank of Viet Nam's Document 7019/NHNN-QLNH.

Under the document, credit institutions can continue to issue short-term gold-denominated certificates until November 24.

The maturity of short-term gold-denominated certificates cannot be beyond June 30,2013, and the new certificates should not be repaid before the due date.

On November 5, the Asia Commercial Joint Stock Bank (ACB) announced that, as part of its gold-mobilisation restructuring, it would eliminate certificates of gold deposits and only retained its option-enclosed gold deposit certificates.

The bank changed the deposit term structure and reduced the gold interest rate to only 0.5 per cent per year for terms of one, two and three months for both SJC and ACB gold products.

However, two days later, the bank suddenly resumed issuing certificates of gold deposits at increased interest rates.

The bank issued gold certificates for terms of four, five and six months at higher interest rates of 0.8-1.8 per cent per year.

However, the ACB's gold mobilisation programme lasted for only one week.

The Viet Nam Commercial Joint Stock Bank (VietABank) is also continuing to issue certificates of gold deposits with one, two, three and six month terms at interest rates between 1 per cent and 1.9 per cent per year. They will issue the CDs until November 24.

The 1.9 per cent interest rate is considered to be the highest level for gold deposits at this time.

The Export and Import Commercial Joint Stock Bank (Eximbank) has also raised its interest rate on gold deposits from 0.2 per cent and 0.5 per cent to 1 per cent per year, and terms from two weeks to three to six months.

Other commercial banks are also offering gold deposit interest rates at high levels, between 0.5 and 1 per cent per year.

The banks' mobilisation of gold deposits at this time is not aimed to increase profits but to improve their gold liquidity.

According to the central bank, about five or six credit institutions still do not have enough gold to terminate their gold lending and deposit contracts.

The banks'gold mobilisation this time would not affect the domestic gold market because the banking sector has bought about 60 tonnes of gold for their payment activities.

Promotions of electronics

Electronic product retailers in HCM City are launching various promotions to attract buyers during the year-end shopping season.

Given the current economic difficulties, retailers are focusing on inexpensive basic products for household use rather than luxury goods, as they have done previously.

With attractive promotions and strong discounts, retailers like Thien Hoa, Nguyen Kim and Gia Thanh, hope that consumers will open their wallets during the biggest holiday of the year.

The prolonged economic recession has made slowed down sales significantly this year, and the downward trend is forecast to continue during the Lunar New Year holidays next year.

According to a survey conducted by GFK Viet Nam, local demand for electronic and technology goods has been falling since the beginning of this year.

Electronic and IT product sales in the first eight months totalled US$2.5 billion, compared to US$2.7 billion in the same period last year.

The sale volume of electronic and IT goods fell 7.1 per cent year-on-year, and the number of buyers for electronic goods also declined from 20.9 per cent to 18.7 per cent.

In particular, the total revenue of the electronics industry plunged 13 per cent. Sales of telecommunications items, such as mobile phones, also declined 4.5 per cent in revenue and 5.3 per cent in volume.

Experts predict that falling demand could continue until the end of 2013. — VNS

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