Road Maintenance Fees: Unreasonable

Members of VCCI - HCM, VIFFAS and Ho Chi Minh City Freight Transporting Association agreed that ongoing and upcoming traffic tolls will be real “storms” sweeping over enterprises. Mr Vo Tan Thanh, Director of VCCI - HCM, said: Vietnam witnessed more than 80,000 companies going out of business since 2011 and this number is rising. Despite this reality, the Ministry of Transport proposed the Government impose road fees, which would further depress the business community.

 

Concurring with Mr Thanh, VIFFAS General Secretary Tran Huy Hien said the country has over 1,000 logistics businesses which are directly affected by the road maintenance fee policy. According to proposal by the Ministry of Transport, freight transport means like trucks, tractors, container lorries and trailers are subjected to very high fee rates. Trucks, trailers and vehicles of a gross weight of 27 tonnes or more are levied the highest fee rate of VND1.44 million a month each, or VND16.76 million a year. With current economic difficulty, weakening purchasing power, declining freight volume plus fierce competition, most transporters are operating well under their capacity. Many are even suffering losses from transport services and offsetting these losses with revenue from other services. If the road maintenance fee is applied right now, transportation companies will face an even more appalling dilemma.

 

A representative from Son Ha Transportation Company said his company has 100 trailers and 20 tractors. With the fee rates proposed by the Ministry of Finance and the Ministry of Transport, the company will have to pay up to VND1.4 billion each year. In the current hard economic context and with pessimistic business outlook this year, the company will have little choice but raise transport fares. However, this move may mean losing customers.

 

Mr Dang Duc Tiep, Director of Dang Tien Transport Company, said: Transportation companies had to pay traffic fees for toll booths. Now, with proposed road maintenance fees, they have to bear overlapping fees. Having to pay so many kinds of fees, businesses can do nothing but go bankrupt.

 

Sharing the viewpoint with Mr Dang Duc Tiep, Mr Nguyen Ngoc Huyen, Director of Quang Chau Logistics Shipping Joint Stock Company, said: There are so many high traffic fees. Transport companies only pray to god. Mr Huyen cited that the100-km road from Ho Chi Minh City to Binh Duong and Binh Phuoc provinces has three toll stations. Remarkably, the nearly 190-km distance from Cat Lai (HCM City) to Can Tho City has five toll gates which charge each vehicle nearly VND1.4 million, accounting for about 19 percent of transport costs. With this rate of traffic tolls plus depreciation expenses and interest rates, profits are extremely modest.

 

According to representatives of many enterprises attending the conference, the Ministry of Transport should review impractical provisions of Decree 18/2012/ND-CP. As for the group of tractors and trailers, the decree imposes fees on both tractors and trailers pulled by such tractors. This is unsuitable because trailers are mechanical devices and they are immovable if they are not fitted with engines. Similarly, if containers are not placed on trailers attached to tractors, they are immovable too. Only when they are fitted together to form a combination, they are used for transporting goods. Each tractor pulls only one trailer and one container; thus, the decree separating this special combination into individual components to levy fees is not reasonable.

 

Besides, vehicles broken down, seized by traffic wardens or used for transporting goods within ports or industrial zones still have to pay annual fees although they do not use the roads. This is also irrational. Similarly, private vehicles (motorcycles and passenger cars) still have to pay road fees although they do not use roads sometimes.

 

Lawyer Thai Van Chung, General Secretary of Ho Chi Minh City Forwarders Association, said: “Fee collection in accordance with registration periods is an extreme difficulty for businesses. Now, the Government reapplies per vehicle fee collection based on registration periods (three months, six months, one year or two years, depending on the age of vehicles). Many businesses will have to borrow to pay the fees. A company with more than a hundred tractors and nearly a thousand trailers will have to pay up to several billion Vietnamese dong a month. Its profit is not even enough for fee payment. On many traffic routes (e.g. from Cat Lai Port to Can Tho City), road fees account for 19 percent of transport costs. Plus expensive interest rates, fuel and tyres, many transport companies do not have profit and they have to sell vehicles to survive. Moreover, advance fees are like appropriating the capital of enterprises.”

 

However, in the long term perspective, road maintenance fees are essential to maintain and improve road quality, reduce costs for businesses and lower logistics costs. Freight service is one of the most important links in the logistics chain as it ensures goods circulation, the “blood vessels of the economy”, reduces logistics costs and enhances the competitiveness of Vietnamese goods. Currently, Vietnam’s logistics costs are very high, accounting for 25 percent of GDP (compared to 11 percent in Japan, 8 percent in Singapore, 13 percent in Malaysia, and 13 percent in Indonesia). In 2011, businesses spent over US$20 billion on logistics services. This figure is extremely high. If Vietnam can cut 1 - 2 percent of logistics costs a year, it saves billions of US dollars for the society. In particular, freight costs make up for 70 percent of logistics costs.

 

This means if transportation infrastructure is good, it will facilitate freight transportation, helping businesses reduce transport costs, protect assets and prolonging the lifespan of vehicles. So, this is a matter of concern of many companies. But, with such high annual fees, many wonder whether the fees collected will be used for road maintenance to improve freight transportation and enhance competitiveness, or used for other purposes.