Domestic ports’ price war benefits foreign shipping agents

It is necessary to renovate the mechanism to better exploit the Cai Mep-Thi Vai ports, or some ports would be eliminated due to interminable losses.

Price war leads to heavy losses

According to Nguyen Uyen Minh, Director of the Ba Ria-Vung Tau branch of the Saigon Port Development Company, all the container ports in the area are fiercely competing with each other and with the ports in HCM City in exploiting the domestic market. This has paved the way for foreign shipping agents to force the service charges to very low rates.

Minh said that the port service fees in Cai Mep-Thi Vai area are just equal to ½ of the lowest service fees applied at the ports with the same conditions in South East Asia. The ports in the area can collect 32 dollars per 20 feet container and 50 dollars per 40 feet container only. Meanwhile, foreign shipping firms collect from importers and exporters 70 and 115 dollars per every 20 feet and 40 feet container, respectively.

“With such dirt cheap charges, deep water ports would incur the loss of 12-13 years, which will surely incur the financial capability and the stability of the projects,” Minh said.

The current situation has been blamed on a spontaneous massive scale of investments in seaport development in Ba Ria-Vung Tau and the whole southern region. HCM City is witnessing the rapid development of container port system with more and more ports established, including the Cat Lai (Tan Cang Saigon), VICT, SPCT, Hiep Phuoc which have the total capacity of 7 million TEU a year.

Meanwhile, it is expected that the volume of goods to go through the ports in the southern region would reach 4 million TEU in 2011 and 6-7 million TEU by 2010. As such, the capability of the ports in HCM City has far exceeded the demand.

Though there are many ports in the areas, most of them are small, just capable to receive 30,000 DWT ships. Therefore, all the imports and exports have to be carried with small ships to big ports in Singapore or Hong Kong, where they are loaded into bigger ships and carried to different countries in the world.

There are also many ports with redundant capacity in Ba Ria-Vung Tau as well. According to Luong Anh Tuan, Deputy Director of the Ba Ria-Vung Tau provincial transport department, 24 ports are operational in the locality with the total capacity of 67 million tons per annum. Meanwhile, the volume of goods going through the ports was 35 million tons only in the first eight months of the year.

While the total capacity of the existing 24 ports has exceeded the demand, ten other port projects are under construction in the locality, 16 other projects are in the first step of investment and 2 other projects being drawn up.

The total registered investment capital of the 52 projects in Ba Ria-Vung Tau is 7 billion dollars.

Le Cong Minh, General Director of the Saigon Port, said that the investor accepts to take loss in the first several years of operation, but it will not bear the loss for tens of years, and that the port may go bankrupted due to the problems in the programming, policies and the unhealthy competition among ports.

Gathering strength

According to Nguyen Xuan Ky, Deputy General Director of the Cai Mep International Port (CMIT), when the volume of goods decreases and the number of international ships docking at the ports decreases, the competition among port developers in lowering the service fees is inevitable, and it is understandable why ports take losses.

However, Ky said that there seems to be an “excessive enthusiasm” of investors and government agencies in programming and licensing enterprises in the Cai Mep-Thi Vai port complex.

“It is easy to obtain licenses for developing national ports, and all investors have been satisfied, especially when the decentralization mechanism has been applied,” Ky said.

Ky went on to say that in other ports in the world, ports can only compete in technologies and equipments, while they cannot dump the services. In Mumbay, for example, the port authorities set the floor service charges for all the ports.

Source: SGTT

Tags: Vietnam ports