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Facts of Vietnam Freight forwarding industry and the role of Vietnam Freight Forwarders Association (VIFFAS) to the industry in international economic integration processhelpful to Oristar
TABLE OF CONTENTS INTRODUCTION CHAPTER 1: FACTS OF VIETNAM FREIGHT FORWARDING INDUSTRY 1.1 Definition of “Freight Forwarder” 1.2 The importance of Freight Forwarding industry 1.2.1 To the national economy 1.2.2 To enterprises Facts of the industry 1.3.1 Advantages to the development of the industry 1.3 1.3.2 Pressures on Vietnam freight forwarding industry 1.4 Comments 12 on the facts of Vietnam freight forwarding industry 13 CHAPTER 2: VIETNAM FREIGHT FORWARDERS ASSOCIATION (VIFFAS) 13 2.1 Introduction of VIFFAS 13 2.1.1 History of VIFFAS 13 2.1.2 Management Board of VIFFAS 13 2.1.3 Statues and Standard Trading Conditions of VIFFAS 2.2 14 Functions & Main Activities of VIFFAS PAGES II Hanoi University of Foreign Trade Faculty of Business English 2.3 Activities of VIFFAS during the past term 2.3.1 VIFFAS with the role of member’s representatives 2.3.2 External activities 2.3.3 Actions for members’ benefits 2.4 Roles of VIFFAS to Vietnam Freight forwarding industry in international economic integration process 2.4.1 Achievements of VIFFAS 2.4.2 Some weaknesses of the Association in the past terms CHAPTER 3: RECOMMENDATIONS 3.1 Macro scale 3.2 Micro scale CONCLUSION REFERENCES 16 16 16 16 Nguyen Thi Mai Huong A3 - K42 - BBE Hanoi University of Foreign Trade Faculty of Business English 18 18 21 23 23 25 26 27 Nguyen Thi Mai Huong A3 - K42 - BBE Hanoi University of Foreign Trade Faculty of Business English INTRODUCTION Freight forwarding industry plays a significant role in expanding trade by procuring efficient and economic modes of transport It creates necessary conditions to ensure that import and export products may timely reach their destinations and helps to deliver efficiently goods from sellers to end users This national industry is still young in Vietnam, but it has gradually contributed to the improvement of the country’s balance of payment by assisting export promotion and giving support to the national Carrier & Insurers Vietnam Freight Forwarding industry has played, to somewhat extent, an active role in facilitating trade by simplifying and rationalizing trade and documentary procedures, thereby reducing transport cost Vietnam went through a lot of hindrances and difficulties to reach the splendid achievements over the past years In international economic integration process, challenges remain considerable but there are always opportunities for the development of national economy Freight forwarding industry also finds its opportunities to grow up, contributing to the national development strategy of restructuring the economy, intensifying the industrialization & modernization process and laying the foundation for rapid & sustainable development of national economy During my internship at Vietnam Freight Forwarders Association (VIFFAS) in Ho Chi Minh City, I have learnt a lot about the facts of Vietnam freight forwarding industry and the Association’s importance to the industry, especially in today’s economic integration process Therefore, I chose the topic “Facts of Vietnam Freight forwarding industry and the role of Vietnam Freight Forwarders Association (VIFFAS) to the industry in international economic integration process” for my Field Study Report Nguyen Thi Mai Huong A3 - K42 - BBE Hanoi University of Foreign Trade Faculty of Business English My Field Study Report is divided into three chapters In the first chapter, I will describe the facts of Vietnam Freight Forwarding industry and then analyze the opportunities as well as challenges to Vietnam freight forwarders in the international economic integration process In chapter 2, I want to introduce about Vietnam Freight Forwarders Association (VIFFAS) and then emphasize on the role of the Association (VIFFAS) to Vietnam freight forwarding industry in international economic integration process, summarize the achievements of the Association and analyze its weaknesses during the past time Finally, in chapter 3, I would like to make some recommendations for improving the efficiency of the Association in the future I hope my Field Study Report will help the Association see what strengths they need to promote and what weakness they need to overcome to gain more efficiencies and successes Nguyen Thi Mai Huong A3 - K42 - BBE Hanoi University of Foreign Trade Faculty of Business English CHAPTER 1: FACTS OF VIETNAM FREIGHT FORWARDING INDUSTRY 1.5 Definition of “Freight Forwarder” According to the definition from Wikipedia, the free encyclopedia, a freight forwarder is an individual or company that dispatches shipments via asset based carriers and books or otherwise arranges space for those shipments Common carrier types could include waterborne vessels, airplanes, trucks or railroads Acting as a link of logistic series, freight forwarders typically arrange cargo movement to an international destination Also referred to as international freight forwarders, they have the expertise that allows them to prepare and process the documentation and perform related activities pertaining to international shipments Some of the typical information reviewed by a freight forwarder is the commercial invoice, shipper's export declaration, and other documents required by the carrier or country of export, import, or transshipment As an analogy, freight forwarders have been called travel agents for freight 1.6 The importance of Freight Forwarding industry 1.6.1 To the national economy Freight forwarding activities plays an essential role in producing, circulating and distributing import & export goods Around the world, the average cost of freight forwarding service for imports and exports equals about 15 percent of the value of import or export goods, the highest rate accounts for 40 percent and the lowest around 10 percent Experts predict that Vietnam exports and imports together could come to US$200 billion per year by 2017, and thus freight-forwarding services could earn Vietnam about 30 billion USD in 2016 Accordingly, the development of freight forwarding industry will naturally contribute to the improvement of national economy as well as Vietnam freight forwarders if they know the tips to their business and catch their own opportunities in the international economic integration process today Nguyen Thi Mai Huong A3 - K42 - BBE Hanoi University of Foreign Trade Faculty of Business English 1.6.2 To enterprises Freight forwarding in particular and Logistics in general are the keys for enterprises to deal the input and output problems They help to change the input material and maximize the flow processes of material, goods and services and therefore reduce the cost and enhance enterprises’ competition Without freight forwarding or logistic services, enterprises’ business activities would meet huge troubles and may come to a deadlock 1.7 Facts of the industry 1.7.1 Advantages to the development of the industry Freight-forwarding industry is still young in Vietnam, but it has rapidly become a developing field and played a significant role in the national economy Now Vietnam has become a member of WTO, favorable conditions would be created for Vietnam freight forwarders According to Vietnam Freight Forwarders Association (VIFFAS), there are four reasons to freightforwarding/logistic services in Vietnam Firstly, the Government policies have strongly encouraged enterprises to penetrate deeper and wider into international market For example: Vietnamese Government Decree No 55/1998/ND-CP of July 22, 1998 dealing with cargoes that are retained by sea carriers Decree No 10/2001/ND-CP of March 19, 2001 regarding business conditions for maritime service provision the Government Decree No 125/2003/NDCP of October 29, 2003 on international multi-modal transportation the Government Vietnam Commercial Law Provisions on Freight Forwarding Services Furthermore, Vietnam is speeding up the integration process in both scope and rate by amending structure, policies, bureaucracy and building the law of economic & financial system to make it more suitable to international rules Nguyen Thi Mai Huong A3 - K42 - BBE Hanoi University of Foreign Trade Faculty of Business English Secondly, Vietnam has a strategic location in South-East Asia with a more than 2000km of coastline, deep-water ports, international airports, trans-national railways and a rather developing road network, which are good backgrounds for developing freight-forwarding services Moreover, borderlines with China, Laos and Cambodia can bring favorable conditions for providing transport services, especially the multi-modal transport, an important factor in logistics service chains With such advantages, Vietnam import-export turnover will increase accordingly The table below shows the data and estimate of the amount of merchandise carried via Vietnamese ports: Figure: Estimate of Amount of Merchandise Carried Via Vietnamese Ports Lines Unit 2000 2010 Seaway mil tones 86.20 227.80 Vietnamese imports and mil tones 73.51 169.49 mil tones 3.19 9.31 mil tones 9.50 49.00 tone 127.629 431.644 exports Transit cargo (of Laos, Thailand, Cambodia, South China) Goods transferred between foreign ships Airway Source: Vietnam Maritime Department, Ministry of Planning and Investment, and Vietnam Airlines The third, joining WTO, ASEAN Free Trade Area and normalizing relationship with the U.S have created the best conditions for the development of Nguyen Thi Mai Huong A3 - K42 - BBE Hanoi University of Foreign Trade Faculty of Business English many industries and services, including freight-forwarding industry There are more and more money from ODA projects, non-governmental organizations and foreign investors pouring into Vietnam to raise infrastructure Many deep-water ports and airports have been upgraded to attract customers Land route system as well as railway system have been repaired and renewed to serve in transportation The fourth, freight forwarding and logistics activities have drawn the attentions of Governmental institutions as well as local and foreign freight forwarding enterprises As a result, many container ports and airports have been taken into long-term investment projects and development programs In addition, land routes and railway systems are being upgraded and expanded Therefore, there are 25 leading international logistic services providers (LSP) established their branches in Vietnam to exploit this abundant source of income Finally, the strong development of Information technology has significantly contributed to modernize freight forwarding industry Since July 2005, Electric custom-clearance procedure has been applied in some ports and will be deployed widely in 2007 In some recent years, General department of Customs has invested more than 10 billions VND to develop Information technology and upgrade Local Area Network (LAN) and Wide Area Network (WAN) Moreover, some enterprises have tried to use “tracking & tracking” network and “booking through the net” The five advantages above are the keys for Vietnam freight forwarding industry to open the door of development now and in the future How they use those keys properly to open the door? It depends on other factors, which include troubles and their own capability Nguyen Thi Mai Huong A3 - K42 - BBE Hanoi University of Foreign Trade Faculty of Business English 1.7.2 Pressures on Vietnam freight forwarding industry In spite of many advantages to develop freight forwarding services, it still exist many problems, which set obstacles to the industry’s development Mr Nguyen Hung, deputy director of Sotransn gave his comment: “Freight Forwarding industry in Vietnam is still small, fragmentary, mugging and always ready to dumping to struggle for customers.” a/ Outside pressure The development of material-distribution modal is the main outside pressure on the industry It can be divided into kinds: + The change of consumer-demand modal, market and the attitude to the availability and diversity of goods + The pressure of reducing cost + The development of Information technology + The pressure of globalization tendency Those pressures set many hindrances to Vietnam freight forwarding enterprises Once they cannot make some reform or changes to catch up with the development of the industry, they may be kicked out of the field b/ Inside pressures Vietnamese businesses in the freight forwarding industry are facing various difficulties now According to Mr Nguyen Tham, Deputy President of Vietnam Freight Forwarders Association (VIFFAS), freight-forwarding enterprises are held back by their small size, lack of skilled employees, and minimal cooperation among businesses in the field General Secretary of VIFFAS, Mr Vu Xuan Phong also stressed that poor transport infrastructure, small financial scales, unskillful employees, low technological capacity, insufficiency of Government laws & regulations as well as poor understanding of international laws and marine transport procedures & policies and loose coordination are the inner problems that Vietnam Freight Forwarding industry needs to get over Nguyen Thi Mai Huong 10 A3 - K42 - BBE Hanoi University of Foreign Trade 2.3 Faculty of Business English Functions & Main Activities of VIFFAS VIFFAS has the function of socio-professional associated organization of the enterprises, irrespective of economic sectors and expert operating in freight forwarding, warehousing and transportation of import and export goods The aims concentrate on co-operating, co-associating and helping members in developing professional skills, improving business efficiency and protecting the legal interest of the members in the import-export goods freight forwarding activities of the S.R of Vietnam, and on this basis to integrate with such professional colleagues on the world The Association has the role of coordinating the activities of the members in order to protect the interests of the members and improve the position of Vietnam in the international freight forwarding industry Namely, VIFFAS establish the co-operative, associative and assisting relationship among its members; contribute to improve the transaction standards and the quality of business activities for enhancing the efficiency of export and import activities, expanding the external economic relations and co-operate with other country in accordance with Vietnamese laws VIFFAS also presents the interest of Vietnamese business community in freight-forwarding field in the international co-operation and business relations The Association’s members are divided into two categories: Ordinary members and Associate members However, in the fourth General Congress held in Ho Chi Minh City on May 28, 2004, the Association has presented for approval by the relevant authority with following three categories of membership: a/ Ordinary members shall include enterprises with 100% Vietnamese capital who have registered to operate in Forwarding as its main business and has registered capital not less than the liability limitation of a Freight Forwarders as stipulated in the Standard Trading conditions, Article 35 (a) (iii) b/ Associate members: enterprises with foreign invested capital registering to operate in Forwarding in Vietnam under the Law on foreign shareholders who Nguyen Thi Mai Huong 17 A3 - K42 - BBE Hanoi University of Foreign Trade Faculty of Business English have capabilities to contribute to the development of the Association and accept its Statue may be considered to become associate members c/ Honorary members: Vietnamese experts involving in Freight Forwarding and having high professional skills and abilities to contribute to the realization of the objectives and duties of the Association, may be invited to join the Association as Honorary members In general, this stipulation on the membership in the Statue of the Association has paved the wider way for foreign parties to join in freight forwarding activities in Vietnam and quite in accordance with our Government’s open policy Nguyen Thi Mai Huong 18 A3 - K42 - BBE Hanoi University of Foreign Trade Faculty of Business English 2.3 Activities of VIFFAS during the past term 2.3.1 VIFFAS with the role of member’s representatives Acting as the bridge between enterprises and the Government, the Association has gathered member’s ideas & expectations then submit to Government’s offices to solve troubles in freight forwarding activity and create healthy environments for enterprises 2.3.2 External activities Keeps constant relationship with International Federation of Freight Forwarders Associations (FIATA) and implements fully duties of National Member to FIATA Takes part in periodical meetings of Asean Freight Forwarders Association (AFFA) with the role of official member Contact and exchange information & experiences to: + Singapore Logistics Association + JETRO’s logistics researchers from Japan + Japan International Freight forwarders Association + Port Sale representatives from Guangyang – Korea + Representatives of Singapore International Enterprises + Representatives of Australia consulate Signed the memorandum of Co-ordinate and exchange information & experiences with TIFFA and Freight forwarding Associations of GMS countries 2.3.4 Actions for members’ benefits Together with Marine Department of Thailand and Vietnam Maritime Administration, VIFFAS organized a course to train lecturers teaching multi-modal and logistic management on October 31 2005 in Hanoi Nguyen Thi Mai Huong 19 A3 - K42 - BBE Hanoi University of Foreign Trade Faculty of Business English VIFFAS also gives introduction and advices about professional knowledge and legal procedures to members The website of VIFFAS has been upgraded and connected to other websites of the Government & International Organizations with the aim of introducing about the Association and its activities VIFFAS’s members are usually supplied with new legal documents and information about freight-forwarding and logistic issues and international conferences Nguyen Thi Mai Huong 20 A3 - K42 - BBE ... forwarding industry and the Association? ??s importance to the industry, especially in today’s economic integration process Therefore, I chose the topic ? ?Facts of Vietnam Freight forwarding industry and. .. Association (VIFFAS) and then emphasize on the role of the Association (VIFFAS) to Vietnam freight forwarding industry in international economic integration process, summarize the achievements of the Association. .. world The Association has the role of coordinating the activities of the members in order to protect the interests of the members and improve the position of Vietnam in the international freight forwarding