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.doc

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
1.3. Facts of the industry
1.3.1. Advantages to the development of the industry
1.3.2. Pressures on Vietnam freight forwarding
industry
1.4. Comments on the facts of Vietnam freight forwarding
industry
CHAPTER 2: VIETNAM FREIGHT FORWARDERS
ASSOCIATION (VIFFAS)
2.1. Introduction of VIFFAS
2.1.1. History of VIFFAS
2.1.2. Management Board of VIFFAS
2.1.3. Statues and Standard Trading Conditions of
VIFFAS
2.2. Functions & Main Activities of VIFFAS
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2.3. Activities of VIFFAS during the past term
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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
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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
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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.
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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 do their business and
catch their own opportunities in the international economic integration process today.
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
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Hanoi University of Foreign Trade Faculty of Business English
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 do freight-forwarding/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.
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,
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Hanoi University of Foreign Trade Faculty of Business English
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

exports
mil. tones 73.51 169.49
Transit cargo (of Laos,
Thailand, Cambodia, South
China)
mil. tones 3.19 9.31
Goods transferred between
foreign ships
mil. tones 9.50 49.00
Airway tone 127.629 431.644
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 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
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Hanoi University of Foreign Trade Faculty of Business English
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 do they use those keys
properly to open the door? It depends on other factors, which include troubles and their
own capability.
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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 4 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 co-ordination are the inner problems that Vietnam Freight Forwarding industry
needs to get over.
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Hanoi University of Foreign Trade Faculty of Business English
The first problem is poor infrastructure. Many ports in Vietnam Port System
are very old and out-of-date. They are shallow in draft and their yard & warehousing
systems are insufficient for accommodating containers and cargo. Today, there are only
a few ports with modern handling facilities and equipment to serve big ships.
Accordingly, freight-forwarding activities are conducted mainly in big cities and their
suburban areas such as Ho Chi Minh City, Hanoi, Hai Phong, Da Nang, and Qui Nhon.
Airports and airlines are also undeveloped. There are about 100 airports
throughout Vietnam, but only three serve international routes. Those three international
airports are known as Tan Son Nhat, Noi Bai and Da Nang. Moreover, there are only
two national airlines, Vietnam Airline (state-owned) and Pacific Airline (joint stock),
which are basically passenger carriers. Vietnamese freight forwarders use these two
lines for approximately 20% of their cargo volume, whereas the other 80% is contracted
to the foreign airlines market.
Land transportation system is uncompleted. The road system of Vietnam is
about 106,000 km long. Land transport accounts for about 65% of domestic passenger
and cargo transport. While pre-export and post-import legs for door-to-door shipments

require land transport, roads in Vietnam are still limited in quantity and bad in quality,
resulting in traffic congestion and posited negative impact to logistics activities. On the
other hand, the railway system in Vietnam with about 2,600 km long is not absolutely
exploited. Container transport by rail in Vietnam is still at primitive stage and operated
only by the state-owned Vietnamese Railway Company.
While land transport is very limited as mentioned above, inland waterway
transport is very advantageous in serving transport in the Mekong Delta linking to
Cambodia. The total length of the inland waterway (IW) system is about 40,998 km,
mainly in the Red River Delta and the Mekong Delta. In the past few years, inland
waterway transport accounts for about 30% of the domestic cargo transport volume, but
in fact, inland waterway has not been optimized enough to get expected results.
The second problem is financial scale. According to official statistics of
VIFFAS (Vietnam Freight Forwarder Association), there are more than 800 freight
forwarders in Vietnam at present, 18% of them owned by the state, 70% privately
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Hanoi University of Foreign Trade Faculty of Business English
owned, 10% non-registered and about 2% made up of foreign logistics companies.
Privately owned companies now account for 80% of total logistics companies, most of
which are very small with the capital of VND300-500 million (US$18,750-31,250) for
each. Several joint stock companies have been set up on the foundation of equities parts
of state owned enterprises. These newly set up companies have the total capital of 5
billions VND or 312,500 USD, with which they cannot meet the requirements for
joining the world’s logistics companies.
With such very small financial scales, Vietnam freight forwarders just have the
ability to provide simple logistic services such as customs declaration, trucking, and
warehousing. About 80% of them have to outsource warehousing and trucking services.
Today, only 10% of Vietnamese freight forwarding enterprises has ability to provide
consolidated service at their own warehouses (or their contractors’ warehouses). They
issue House B/L but only some of them buy Civil Liability Insurance for transport

operators.
In addition, many companies have 3-5 staffs only, including managers. With
such modest capital and few staffs, the companies just can fulfill simple works for
separate clients. In other words, Vietnam still lacks “full-package” or “door to door”
logistic providers, who can provide logistics or freight forwarding services sufficiently
and completely. Moreover, while logistics are going globally, most Vietnamese
logistics companies do not have overseas representative offices. That creates the risk of
losing international market share and being lagged behind.
One more problem to freight forwarding enterprises is human resource, whose
poor quality and professional skills do not satisfy the demand of logistic activities.
Professional training in logistics/freight forwarding business is unavailable in Vietnam,
and employees who are working in this field have to get their training with simple
theories and unfulfilled reality. As a result, most of them do their work basing on
experiences without total knowledge and skills.
Lacking of modern technology is also a big trouble for Vietnam freight
forwarders. Applying modern technology in freight forwarding activities is one of
efficient measure to reduce inconvenient procedures and minimize cost for enterprises.
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