Vietnam - Wheels come off transport firms

Transport firms are being knocked sideways amid escalating input costs.

Thai Binh Bus, one of two major transport firms running the Thai Binh-Hanoi route which features the largest passenger traffic volume in northern areas, saw a 10 per cent decline in its revenue in the first quarter of 2012, said the company’s director Phan The Hung.

Hung said despite an 8 per cent hike in diesel price (VND1,500 per litre) after two revisions from the year, the firm could not raise ticket fares and its greatest challenge was to keep revenue figures from further sliding.

Under Hung’s calculations, the company may incur losses of around VND5-6 billion ($240,000-$285,000) this year if the petrol price and relevant costs continue to be pegged at current high levels, after counting losses in the two previous years.

The company even accepts ticket prices under actual production costs to keep passengers through collecting just VND5,000 per ticket on the Thai Binh-Hanoi route passengers after collection of a road maintenance fee comes into force from June 1, 2012. Each bus has to pay VND4.6 million ($220) worth in fee per year.

Vietnam Auto Transport Association (VATA) said VATA had sent documents to fixed routes’ passenger transport firms and associations urging them to carefully consider ticket price revisions in current context.

“In the face of shrinking passenger transport market and stiff competition hiking fares means committing suicide,” said VATA’s deputy chairman Nguyen Van Thanh.

VATA assumed the passenger transport market was in a bind where most firms have to cut down relevant indirect expenses and delay investments into replacing or upgrading old vehicles.

In respect to freight transport, since most commodities producers sign up to one-year contracts with transport firms, whether transport fares are revised or not the revisions depend on negotiation outcomes.

“For big commodities like coal or cement it is almost impossible to negotiate rising fares with consigners. Some goods owners even asked us to cut down fare albeit input costs rose continually,” said Nguyen Xuan Bac, chairman of Waterway Transport Joint Stock Company III.

In fact, many transport firms sold their vehicles on the back of soaring input costs. Then, Ministry of Transport’s (MoT) commitment to collect fees for the road maintenance fund from June 1, 2012 has exaggerated firm burdens.

Under the MoT proposal, for a firm operating 120 tractors and 800 trailers it would have to pay VND18.2 billion ($860,000) fee to the road maintenance fund a year, according to Ho Chi Minh City Freight Transport Association general secretary Thai Van Chung.

“This colossal amount surely hurts firm,” said Chung.

Hoang Quang Ngoc, director of Hoang Ha Transport Services Company, said: “Management authorities should be aware of firms’ burdens. It is unjust to levy same fee levels on personal cars and the vehicles serving the public. Multiple fee imposition could cause firms to die, making scores of labourers jobless and causing losses to state coffers.”

Pham Hoa | vir.com.vn

Business & Investment Opportunities 
YourVietnamExpert is a division of Saigon Business Corporation Pte Ltd, Incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Strategy, Investment and Management, focusing Healthcare and Life Science with expertise in ASEAN. We also propose Higher Education, as a bridge between educational structures and industries, by supporting international programmes. Many thanks for visiting www.yourvietnamexpert.com and/or contacting us at contact@yourvietnamexpert.com

Dear Reader,

May I invite you to visit our new blog: IIMS-Asean http://iims-asean.blogspot.com/

News and activities of the International Institute of Medicine and Science Asean Chapter of IIMS, Inc. California, USA - Health care, Life Science, Education, Research, Philanthropy. Asean is the economic organisation of ten countries located in South East Asia: Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. IIMS is a non-profit organization.