New Regulations on Freight Rates: Concern over Unofficial Costs

The declaration of fare rates is made when the company has adjusted unit price up to 5 percent or more over the price of the preceding declaration. In case of an adjustment or readjustment of the total fares (compared to the preceding declarations) under 5 percent, the company does not have to declare the price but must send the notice of adjustment to the authority to accept the declaration. In case of an adjustment or readjustment of the total fares (compared to the preceding declarations) from 5 percent or more, the company must declare the value as prescribed. According to the experts in the industry, the new regulation exposes certain advantages. The new regulations only require the business to declare the fare rates when the rates are increased or decreased, compared to the fare rate of the preceding declarations.

 

One of other advantages is that all transport companies are required to list the fare rates under the regulations and announce the rates publicly on board, flyers or other platforms such as at the ticket counter, outside and inside the vehicle to help the passengers to recognize the notice. In addition to the form of publicly listed fares, the company must list fare rates publicly in other forms prescribed by law.

 

The Ministry of Transport recently proposed the local governments to direct the traffic police to tighten inspection for overloaded vehicles in the area and also, request the driver to lower the load and pay the related costs.

 

Recognising the new regulations of the Ministry of Transport, Nguyen Van Thanh, Deputy Chairman of Vietnam Automobile Transport Association, agreed with the regulations of load testing on the highway and said that the increase of the freight rates is in line with the market rules. "This will be an opportunity to reform the market to avoid the overload situation to reduce the fare rates, causing unfair competition; it also gives an opportunity to turn the fare rate to its real value", said Thanh. However, Thanh also expressed the view that the authorities should adopt strict measures to block the "hidden operating costs", known as a lubrication cost, which violates business ethics and negatively affects other well-performed businesses.

 

According to a recent report of the Directorate for Roads of Vietnam, in a week of checking for overloaded vehicles from April 1-7, the agency recorded 750 violated vehicles among 4,122 checked vehicles (accounting for 18.2 percent). Currently, there are 39 out of 63 provinces that start the mobile weighing stations and 24 provinces that have not finished the procedure to put the mobile weighing stations into operation. Many localities only check for overloaded vehicles on local roads or highways where there are not many overloaded vehicles and have not closely checked vehicles on major highways such as Highway 1A, 18, and 5. Through the overall testing, the Directorate for Roads of Vietnam has also proposed to the Ministry of Transport to make a proposal to the Government to criticize 25 provinces, including Ho Chi Minh City, about not tightening the control of vehicle loading.

 

According to Nguyen Manh Hung, Chairman of Vietnam Automobile Transport Association, the economy of the country is not really stable and the aggregate demand of the economy remains weak while essential items such as gasoline prices, electricity prices have climbed up. Transportation of goods and passengers only reached 80 percent of the capacity. The transportation sector still lacks the customers and the market competition is fierce. Therefore, to offer the customers with affordable rates and comply with the provisions of the regulations, the government is required to make an increase of the fare rates. This poses a difficult problem for transportation businesses. Therefore, many businesses are now taking into serious consideration and waiting for the market dynamics instead of raising rates.

 

Sharing about "escalating" freight rates at present, a director of a private business in Cai Be District, Tien Giang complained about the rising fare rates of transportation. Previously, the cost of transporting rice from Tien Giang to Saigon ranged from VND120,000 to VND130,000 per tonne but three days ago, the vehicle owners increased the rate to VND220,000 per tonne. After inquiring about rates from other vehicles owners, Tuan got the answers of an increasing rate. To explain the increasing rate, a vehicle owner said that the previous fare rate of VND130,000 per tonne was applied when the vehicle load exceeds 100-150 percent. Now the new regulation requires a right load amount while the rate is constant, which hardly covers the gasoline costs, salaries of the drivers. This leads an increase of the fare price.

 

Some construction businesses share the same opinion. A business in construction material (iron and steel) in Ho Chi Minh City said that the release of the new regulations, the transportation cost of the company has increased by 3 times, up from VND5 billion to VND15 billion. In addition to raising rates, the businesses also incur increasing costs of warehousing and miss the opportunities to supply raw production materials. Many businesses also complain about their current situation that they not only suffer from a loss of orders but also still pay the full cost of road maintenance from VND7-10 million per year, although they have less shipping orders than before. This puts more burdens on the businesses for a mandatory increase of fare rates.