Opening up the mail sector, the Vietnam Investment Review

The delivery of personal mail, long the sole domain of state-owned Vietnam Post and Telecommunications Corporation (VNPT), is to be opened to local and foreign investors. At the same time, industry leaders say the highly-profitable express delivery sector, a service used mainly by businesses, is expected to grow substantially as Vietnam continues to open up-heating up competition in an already fiercely competitive sector.

Currently, VNPT is the only company allowed to deliver personal mail. Privately-owned local company Saigon Postel and state-run Vietel are restricted to delivering business mail. Saigon Postel operates a significant express service but Vietel's is only small. Foreign-invested firms hold just 20 per cent of the market share on express delivery within Vietnam, according to Phan Dinh Loi, the director of the Tin Thanh Express company, one of Vietnam's biggest express companies. Most foreign companies focus on international routes.

Last October, the National Assembly issued an ordinance ending the state's control on personal mail. The ordinance also redefined personal mail as mail under 2kg. The Ministry of Post and Telematics (MPT) has begun drafting a law based on the ordinance and expects is will be approved by the government before September. The head of policy at the Ministry of Post and Telematics (MPT) said last week the under-2kg market would open to investors once the ministry finished drafting the post law.

Nguyen Thi Boi Lan said the law would open mail delivery to investors from all economic sectors. The decree would be submitted for government approval before September, Lan said.

The ordinance defined mail delivery as the delivery and receipt of packaged documents weighing less than 2kg via public post or delivery systems.

"Enterprises from all economic sectors are allowed to offer mail delivery services and the government only takes control over weight, price and quality of delivery," the ordinance said. Lan said the government's move was a great way to encourage investors in the industry because currently couriers were only allowed to deliver documents weighing more than 2kg.

The government is to also allow delivery companies to establish their own postal outlets next year, instead of hiring posts offices from VNPT. The ordinance said the outlets could be run by organizations or Vietnamese individuals representing delivery companies.

The MPT is to fix the price of delivering mail weighing less than 100g. Other companies are not allowed to deliver mail under 100g.

To cope with the new competition, VNPT plans to improve technology in delivery centers and reduce delivery times. At present nine centers have new technology with 14 more to be upgraded this year. Next year, all 51 provinces will have new systems.

The government said it would open the postal market gradually. The express delivery market is the most profitable and is expected to grow substantially in the next few years as business in the nation continues to open up.

So far foreign slice of domestic market small There are more than 10 foreign-invested firms operating in the express mail delivery sector in Vietnam, including TNT International Express, DHL, FEDEX, UPS, AIRBORNE, OCS and JNE.

Most foreign-invested firms concentrate on express delivery on international routes. Only TNT International Express has significant domestic business.

A representative of a foreign-invested express mail delivery firm said the unfamiliarity of the domestic market made it difficult for foreign companies to keep pace with domestic firms which have proved their competitive advantage by offering relatively cheap prices to attract customers.

"Therefore, foreign-invested express delivery firms have concentrated on international routes set up through the global network already operated by their companies," she said.

Tin Thanh Express director Phan Dinh Loi said in the future more and more foreign-invested enterprises would start providing domestic services as the market has a lot of potential to grow.

"Cheaper prices are still the indispensable competitive edge that domestic firms have over foreign companies," he said, adding that foreign-invested companies in Vietnam would be the main customers of foreign-invested express delivery companies.

He estimated that foreign-invested express-service providers

hold nearly 20 per cent of the domestic market share.

A local company director told Vietnam Investment Review that despite the foreign-invested companies being prestigious and well-known all over the world, she and most of her local partners used the express mail services of local companies.

"The advantages of using domestic firm services are cheap prices and an understanding of Vietnamese culture and business ethics," U-Tech Vietnam director Nguyen Thanh Mai said. Tough competition amongst domestic firms Loi from Tin Thanh predicted that competition would not only become fierce between domestic and foreign providers in the future but also between local companies like Vietel, Saigon Postel and VNPT.

"Due to a simpler way of managing operations and human resources, private local enterprises can offer cheaper rates and shorter delivery times," he said.

"It takes 24 hours for VNPT's express service to deliver mail.

But for Tin Thanh, it takes around eight hours.

"This is because VNPT has thousands of staff working on their express service. The number of staff at Tin Thanh is much smaller," he said, adding that VNPT spends a lot of time collecting and categorising mail and then transporting it to the airport. Saigon Postel general director Nguyen Thi Kim Cuc said it was not easy to profit from postal delivery.

Cuc said Saigon Postel was at present only trying to serve its current 1,600 customers in 20 main provinces. Cuc was not willing to invest a large amount in expanding their service.

The company has to deliver post to three regional post offices-one in the north, central Vietnam and the south-from which the post is delivered. "It's hard for the company to expand its services to all the corners of the country because we do not have enough money to hire post offices to operate the service while demand of delivery is not high enough," Cuc said.

The domestic market is dominated by VNPT's express service. It has aa more than 80 per cent share of the express delivery market. VNPT delivers mail to 51 provinces. Last year, the company delivered about 3 million items.