Vietnam National Shipping Lines (Vinalines) has asked the Ministry of Transport to lower investment in the fleet in the period between 2011 and 2015 from VND100 trillion (USD4.8 billion) to VND68 trillion (USD3.3 billion).
Vinalines asked to cut down USD1.5 billion in its investment
The request, made on May 10, came as a surprise to many after the losses announced by the Government Inspectorate, along with various violations that were revealed within the company. The Ministry of Transport had already approved a VND100 trillion investment.
Nguyen Canh Viet, General Director of Vinalines, said that the reason for the request was the low transport fee that companies are required to pay.
Another reason, he said, is the the bright outlook for international shipping industry. Shipping fees are expected to recover late this year, increasing through 2020.
"The previous plan was to invest VND30 trillion (USD1.4 billion) between 2011 and 2015, to acquire ships with a capacity of 1.5 million DWT, and then to would invest in ships of 3.5 million DWT, which could require an investment of VND70 trillion (USD3.4 billion) between 2016 and 2020. This was to be carried out through both buying ships and manufacturing them domestically," Viet said.
However, after reviewing their economic situation, Vinalines has changed their investment plan. They will send a thorough plan to the Ministry of Transport and other central agencies.
According to the new plan, Vinalines will spend just VND22 trillion (USD1.1 billion) for vessels that have a total of 1.1 million DWT. They will build 29 new ships with a capacity of 920,000 DWT and buy ships that are already in operation. These ships are to have 190,000 DWT. By 2015, Vinalines expects to have a total carrying capacity of 3.9 million DWT, around 44% of that of the national fleet.
Concerning the losses incurred during 2007-2010 period, Vinalines admitted that it was hasty in making investments just one week after the Government Inspectorate announced its results. However it also asked that the world economic situation be taken into account.
Le Trieu Thanh, Vice General Director of Vinalines said much of the losses were caused by the sharp decrease in shipping fees in the fall of 2008.
"With increased fuel and maintenance costs, coupled with high interest rates, the company had to borrow at rates as high as 20% just to stay afloat. This was the first time in 15 years that we have been running at a loss," he said.
Thanh added that not only Vinalines, but other international shipping companies such as Maersk, NYK, MOL and China Shipping are operating under losses. The MISC even stopped operating container vessels.
The movement that transfer some member companies from Vinashins to Vinalines is also a reason that Thanh blame for the past losses.
Do Xuan Quynh, General Secretary of Vietnam Shipowners' Association, said, "Vinalines has the potential for a solid business strategy because of its advantages, especially when the world economy recovers. On the other hand, it may face dissolution if there are no urgent reforms made."
