Thanks to the commitments in the Vietnam – EU Free Trade Agreement (EVFTA), Vietnamese maritime transport service providers are having many great opportunities in terms of both supply and demand as well as conditions to effectively implement this service.
Vietnam’s commitments on maritime transport services in EVFTA
In EVFTA, Vietnam’s commitments related to maritime transport services include:
- For international maritime transport, Vietnam’s EVFTA commitments fully open the door to cross-border supply and overseas consumption for both passenger transport services and freight transport services, except for domestic maritime transport. Particularly for the commercial presence method, Vietnam allows EU investors to establish a company operating a fleet flying the Vietnamese flag in the form of a joint venture with the condition that foreign capital does not exceed 70%; foreign crew members do not exceed 1/3 of the ship’s crew and the captain or first mate is a Vietnamese citizen. When wanting to establish a 100% foreign-owned enterprise, it is only allowed to provide 07 groups of services including: Sales and marketing of maritime transport services; Representing shippers; Providing information; Preparing documents related to transport documents; Providing maritime transport services including domestic transport services by ships flying the Vietnamese flag if it is an integrated transport service; Organizing ships to enter ports or receive goods on behalf of the company; Negotiating and signing contracts for road, rail and inland waterway transport related to goods transported by the company.
- Ship maintenance and repair services are fully open to cross-border supply methods and overseas consumption methods; for commercial presence, Vietnam only allows the establishment of joint ventures with foreign capital accounting for up to 70%.
- For maritime transport support services, Vietnam has not committed to cross-border supply methods but is fully open to overseas consumption methods for both container handling services and customs clearance services; at the same time, it only allows the establishment of foreign-owned joint ventures with up to 50% foreign capital for container handling services and does not limit the foreign capital ratio for customs clearance services. Regarding maritime agency services, Vietnam commits to fully open the market for two modes of cross-border supply and overseas consumption; but only allows the establishment of foreign-owned joint ventures with up to 49% foreign capital. In particular, container warehousing services have the strongest commitment level when allowing full opening of all three modes of cross-border supply, overseas consumption and commercial presence in Vietnam for EU enterprises.
- For inland waterway transport services, in the EVFTA, Vietnam still excludes inland waterway transport from the scope of maritime transport service commitments, thereby maintaining the domestic maritime transport market for Vietnamese shipping lines and transport enterprises. However, Vietnam has a commitment to allow EU international maritime transport service providers to: (1) Redistribute empty containers (on condition that such containers are not transported for a fee as cargo and will be used to handle the cargo of that shipping line) between Quy Nhon port and Cai Mep – Thi Vai port. After 5 years, the port limit will be removed, but with the condition that the cargo consolidation vessels (mother ships) must call at Vietnamese seaports and provide cargo consolidation services by ship between Quy Nhon port and Cai Mep – Thi Vai port.
Opportunities and challenges for Vietnam’s maritime transport services
Thanks to the commitments in EVFTA, Vietnamese maritime transport service providers are facing many great opportunities in terms of both supply and demand as well as conditions for effective implementation of this service.
- Opportunity to increase the size of the maritime transport service market: The EU is currently one of Vietnam’s leading trading partners with two-way turnover in 2019 reaching 56.45 billion USD; of which the import and export turnover of goods by sea reached 30.31 billion USD, accounting for 53.69%. At the same time, according to forecasts, EVFTA is expected to help Vietnam’s export turnover to the EU increase by about 42.7% and Vietnam’s import turnover from the EU increase by about 33.06% in 2025; the corresponding figures in 2030 are 44.37% and 36.7%. As import and export activities between the two sides grow, the logistics service market will expand, especially maritime transport services.
- Opportunity to increase the efficiency of maritime transport services from administrative procedure reform of the Government: In order to implement institutional commitments and non-tariff barriers as required by EVFTA, the Vietnamese government will have to reform administrative procedures such as customs procedures, specialized inspection procedures, etc. Thanks to that, many logistics activities can be significantly improved, including transportation and freight support services, including maritime transport.
- Opportunity to reduce investment costs in maritime transport infrastructure: The EU has always been a source of high-quality supplies for means of transport, machinery, equipment, and technology serving logistics activities. Therefore, Vietnam’s commitments to eliminate tariffs on means of transport and equipment imported from the EU are opportunities for maritime transport enterprises to save costs on investment in infrastructure providing logistics services and improve technological capacity.
- Opportunity to attract investment from the EU in the maritime transport sector: The wider opening of the maritime transport service market within the framework of EVFTA will encourage EU logistics companies to invest in the Vietnamese market. When forming joint ventures with EU partners, Vietnamese maritime transport service providers will take advantage of the experience, management skills, capital, and existing networks of their partners. This is a great opportunity for Vietnamese maritime transport enterprises to develop in the future.
From another perspective, EVFTA also poses significant challenges for Vietnamese shipping enterprises. Because the EU has many countries that are very strong in logistics with large, modern fleets, accounting for a significant market share in the world shipping market. The strong opening commitments in EVFTA will make competition between EU enterprises and Vietnamese shipping enterprises increasingly fierce. Although the EU also opens the logistics services market, including shipping services for Vietnamese enterprises. However, in reality, the ability to access the EU market of Vietnamese shipping enterprises is not high.
Therefore, Vietnamese logistics enterprises need to have a plan to overcome current limitations, thereby improving their competitiveness, especially understanding the EVFTA’s commitments to open logistics services to identify new risks in competition with competitors from the EU.
Dr. Tran Thi Thu Huong – Bui Duc Trung
According to Vietnam Logistics Review Magazine