approach and learn scientific, advanced and effective ways of working and have the conditions to improve professional knowledge as well as management methods, quickly integrate with the general trend of the world, accelerate the process of industrialization, modernization of the country and integration into the world economy.
3.3. Difficulties and limitations
3.3.1. Late opening economy
Before our country opened its economy (in 1986), the state applied a one-component economy, without competition, a period in which most economic activities took place under a planned economy. That economic regime left serious consequences, the country was underdeveloped, lagging behind dozens, hundreds of years compared to foreign countries.
Regarding the freight forwarding industry in particular, after the liberation and reunification of the country, the State also applied a foreign trade monopoly policy, all freight forwarding activities were carried out by the sole Vietrans Foreign Trade Freight Forwarding Corporation. Also because our goods trading activities mainly took place with the Soviet Union and Eastern European Socialist countries, the freight forwarding service did not really develop strongly during this period. We mainly carried out freight forwarding within the domestic scope, from the port to the inland and vice versa, there was no international freight forwarding business through the freight forwarding network in Vietnam.
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After Vietnam opened its economy, we implemented a policy of multilateralizing economic relations, diversifying markets and partners, and expanding economic sectors. This created favorable conditions for the development of the delivery sector, and a series of businesses operating in the delivery sector were born. Delivery activities also became more abundant and diverse.
Compared to other countries in the region and the world, we have only really had about 10 years of development while in many other countries, the history of their freight forwarding industry has gone through hundreds of years of existence and development. This is a
This is a great disadvantage for Vietnamese freight forwarders, especially when participating in the world freight forwarding market, having to compete with long-established businesses with capital, human resources and experience in the profession.
3.3.2. The State does not have a reasonable development policy.
* There is no legal corridor for the activities of freight forwarders in Vietnam:
Currently, the management tools of our state are legal and sub-legal documents. Documents related to the activities of enterprises in general and of enterprises providing transportation services in particular have been amended and supplemented many times but still do not meet the needs, do not keep up with the diverse and complex activities of the Vietnamese transportation industry, this creates many obstacles and difficulties for the activities of freight forwarders.
Current legal documents have regulations related to the activities of freight forwarders:
- Amended and supplemented Commercial Law (2005), Amended and supplemented Maritime Code (2005), Amended and supplemented Customs Law (2005), Civil Aviation Law (2006).
- Decree 140/2007/ND-CP dated September 5, 2007 of the Government: Detailing the Commercial Law on conditions for doing business in logistics services and limitation of liability for traders doing business in logistics services.
- Decree 79/2005/ND-CP dated June 16, 2005 on conditions for registration and operation of customs clearance agents.
- Circular 125/2004/TT-BTC dated December 24, 2004 guiding customs procedures for international multimodal transport goods.
- Decree No. 10/2001/ND-CP of the Government dated March 19, 2001 on conditions for maritime service business
- Decree No. 125/2003/ND-CP of the Government dated October 29, 2003 on international multimodal transport
Currently, the number of enterprises operating in the field of freight forwarding is very large, leading enterprises in the form of state-owned enterprises are under the management of different ministries and branches, causing many shortcomings and inconsistencies in the operations of the freight forwarding industry. For example, foreign trade warehousing is managed by the Ministry of Trade (now the Ministry of Industry and Trade), ship supply is managed by localities, and freight forwarding is managed by the Ministry of Transport.
* The State does not have a reasonable support mechanism for the activities of freight forwarders: In countries with a strong and leading freight forwarding industry in the world such as the United States, Japan, European countries... although they have a position and strong competitiveness, the governments of these countries still apply support measures for the activities of their freight forwarders. These measures are expressed in laws such as allowing businesses to use funding sources from the Government, projects with foreign capital, projects using the State budget... forcing import-export businesses to hire means of transport and services provided by freight forwarding companies in their country. For example, in the US, to develop that service industry, the law of this country stipulates that foreign freight forwarding service providers who want to do business here must satisfy conditions such as: applying for a license from the Ministry of Maritime Affairs (FMC), depositing 150,000 USD, registering a bill of lading with FMC, and presenting a professional liability insurance contract... Because of those strict conditions, up to now, although the Vietnam - US Trade Agreement has been in effect for several years and the two-way trade turnover has reached 2 billion USD, no Vietnamese freight forwarding business has been able to do so.
penetrate this market.
Meanwhile, in Vietnam, the State has almost no support mechanisms for the business activities of freight forwarders in general and the freight forwarding industry in particular. The State's economic development policy mechanism for many years
has only focused on encouraging production development, but has not paid much attention to service development, although this is a sector that brings many great economic benefits. The investment capital required is very large, but in general, services in the field of logistics and warehousing are not prioritized for loans like the manufacturing industry. Previously, the Ministry of Finance also had a few regulations related to the export of rice, coal, etc., forcing trading companies to use the services of Vietnamese freight forwarding enterprises. However, these regulations have a short validity period, and no agency has come forward to control the implementation, so they have not brought many results. Taxes on the freight forwarding service business are still very high and unclear, causing many difficulties for businesses. The previous Law on Revenue Tax considered freight forwarding as a service activity and applied a tax rate of 45% of revenue. The General Department of Taxation has not yet agreed on tax rates for transportation and loading and unloading business activities to guide the implementation of tax policies. For example, in document No. 7008TCT/NV2 dated December 6, 1999, the General Department of Taxation explained that the applicable tax rate is 10% if transportation and loading and unloading cannot be separated into another value-added invoice. Meanwhile, in document No. 6402/TCT/NV6 dated November 6, 1999, the General Department of Taxation instructed to apply a tax rate of 5% regardless of the means, outsourced labor or the unit's own.
From the above, we can see that most State management agencies have not paid due attention and have not had measures to encourage businesses and customers to use products and services provided by domestic delivery companies. On the contrary, the current import and export tax calculation mechanism has made it more difficult for the Vietnamese delivery market, and we have less opportunity to compete with foreign businesses.
* The role of VIFFAS is still unclear:
Although Vietnam has established the Vietnam Freight Forwarding Association (VIFFAS), it is not a management body of enterprises.
The delivery service is just a professional organization established with the aim of creating cooperative relationships, linking and supporting each other among members.
In recent times, the Association has also achieved a number of achievements:
- Acting as a bridge between Enterprises and State management agencies, the Association has compiled the requirements and aspirations of Member Enterprises to reflect and make recommendations to State management agencies to remove bottlenecks in production and business activities, creating a favorable and open environment for enterprises. The Association is ready to guide and advise on professional and legal issues related to logistics activities when requested, but does not directly participate in the production and business activities of its Members.
- In the Association's foreign affairs activities: fully perform the responsibility as a national member of FIATA, AFFA; Receive and exchange information and operational experience with other delegations and associations in the world.
- Enhance the position and popularize awareness of freight forwarding / logistics services through organizing professional training courses, refresher courses, seminars and discussions on issues related to freight forwarding activities.
Besides the above achievements, VIFFAS Association still has the following shortcomings:
- The Association has also tried to act as a bridge between member businesses and the Government and state management agencies, but has not achieved many results.
- The relationship between the Association and its members and vice versa is still loose and not really connected. The Association does not have information about each member to synthesize into the Association's general information, so it has difficulty when it needs to exchange with fellow associations of other countries, with FIATA, with AFFA.
- Not fulfilling the responsibilities of being a FIATA member.
Due to many limitations, it is necessary to have measures to improve the organizational structure and form of operation to further enhance the role of the Association, contributing to the development of Vietnamese freight forwarders.
3.3.3. The scale of Vietnamese freight forwarding businesses is still small and fragmented.
* Business size:
Due to the specific nature of the industry, establishing a freight forwarding company is quite easy. Therefore, the number of businesses operating in the freight forwarding sector has increased rapidly, currently reaching about 1,000 businesses. This large number is partly the result of removing barriers to establishing businesses in the newly amended Enterprise Law, which took effect in early 2000.
According to predictions, in the near future, Vietnam will surpass Thailand in the number of domestic companies (1,100 companies), far surpassing Singapore, Indonesia and the Philippines. However, it is worth mentioning that although the number of companies is large, the quality is low, long-standing, reputable, and capital-intensive freight forwarding companies are very few, while the majority are small and micro enterprises. Most of our freight forwarding companies have an average capital of only about 1.5 billion VND, while the number of large-scale enterprises with investment capital of over 100 billion VND is very small. Moreover, our freight forwarding companies do not focus on developing towards improving quality, but instead do business in a haphazard manner, competing only by lowering prices, leading to low business efficiency, making it even more difficult for businesses to accumulate for reinvestment. According to calculations, currently Vietnamese freight forwarding companies can only meet 25% of domestic demand and can only provide simple, common services in the service chain.
* Human resources in delivery service businesses:
- About management and executive staff:
In state-owned enterprises and equitized state-owned companies, the leaders are appointed by the Ministry and the relevant sector to operate and manage. This team of officials is currently operating mainly enterprises that are relatively large in scale and have seniority and experience in the industry, most of them have university degrees, many have achieved higher levels. Currently, this team of officials is being trained and retrained to help them keep up with modern management methods. However, in many state-owned companies, the leadership team still has an old working style, has not adapted to the innovations in the freight forwarding industry, they prefer to use experience rather than apply modern management science. In newly established freight forwarding companies, a team of young managers has been formed, usually only 28 to 40 years old, with university and post-graduate degrees, although they are ambitious and enthusiastic, their international business experience and skills are still low. However, it must be affirmed that in the near future, this force will be a source of supplement and continuation of previous generations. They need to be facilitated and helped to further train and improve.
- About the staff working in the field of delivery:
If in the early 90s, the number of businesses providing delivery and logistics services could be counted on the fingers, now the number of businesses providing this type of service has reached 1,000. According to statistics, at peak times, almost every week there is a delivery and logistics company licensed to operate. This massive development has led to a shortage of human resources for the market. In addition to the shortage in quantity, the quality of the delivery team is also not high.
Freight forwarding is a highly specialized profession, so human resources working in this field need to be properly trained and fully equipped with knowledge like international freight forwarders. Looking at the current training situation
The current staff and employees of the logistics industry can be seen to be mainly trained from the University of Economics and the University of Foreign Trade. A few come from the University of Transport, Maritime and even the University of Foreign Languages.
The curriculum for students at these schools is very outdated, mainly following traditional freight forwarding. Modern freight forwarding techniques such as multimodal transport, supply chain management skills, etc. are rarely updated. In addition, the practicality of the curriculum is not high, most students graduating from school only have empty theories without a practical, correct view of the tasks to be done. Most of the knowledge that officers and employees in the industry have is from actual work as agents or partners for foreign companies specializing in this service. It can be affirmed that the number of experts professionally trained in this field is too small compared to current demand, which makes the development of the freight forwarding industry very difficult. According to calculations, the human resources for the industry currently only meet about 40% of market demand. The supply channels include: firstly from universities but are insignificant in both quantity and quality. The second channel is from short-term training courses organized by the association. And finally, from self-training companies, the predecessors instruct the successors. It can be seen that all three of these training channels are not systematic and professional. Not only that, but currently, in domestic freight forwarding companies, there is a brain drain. Large foreign freight forwarding companies entering the market have a great attraction for employees at domestic enterprises. The most worrying thing is that when key employees go to work for foreign companies, they bring with them the company's old customers.
With a human resource that is both small in quantity and poor in quality as it is today, Vietnamese freight forwarding businesses can hardly compete on an equal footing.