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Home » Vietnam information » Vietnam Travel News »

Vietnam travel firms to face tough post-WTO challenges

03/08/2006 (GMT+7)

Vietnamese tour companies will face harsh difficulties as more foreign travel firms enter Vietnam after the country joins the World Trade Organization, an official said. .

Dinh Van An, head of the Central Economic Management Research Institute, warned that domestic travel companies will have to confront challenges to maintain their footholds on the local market during international economic integration.

An stressed that local travel companies have so far been protected with the Ordinance on Tourism, which does not allow foreign tourism firms to set up branches or wholly foreign-invested companies in Vietnam.

Foreign companies are allowed to set up joint ventures with Vietnamese partners but the establishment of such ventures has also been limited by several obstacles.

For instance, the ventures are permitted to trade in inbound tours only and must have legal capital of at least US$1 million, with the Vietnamese partners hold the governing share ratio of 51 percent. 

However, such barriers will be lifted once the country becomes a WTO member.

Challenges to status quo

An said the first challenge is expected to come in December this year when US travel firms are allowed to set up companies in Vietnam to serve inbound guests.

Phung Quang Thang, director of Hanoitourist Co., said more and more foreign travel companies are preparing to directly send inbound guests to Vietnam.

Truong Nam Thang, director of OSC-SMI branch in Hanoi, predicted that many foreign businesses will opt to become travel operators in Vietnam as such a business requires low investment capital and simple establishing procedures.

According to Thang, many older Vietnamese travel companies who have been in cooperation with foreigners are now facing the risk of being put out of business as 90 to 95 percent of their inbound guests have been brought by the foreign partners who will now be able to go it on their own.

“When they have the rights to directly send inbound guests to Vietnam, the foreign partners will not want to maintain the joint venture business,” Thang explained.

Foreign advantages

The Vietnam-US Trade Agreement will allow American travel companies to hold 51 percent of the capital in a venture with Vietnamese partners.

Beginning December 15 US businesses will have the rights to set up foreign travel companies to provide inbound service in Vietnam, though they must use local tour guides.

Nguyen Van Cu, deputy director of Ho Guom-Diethelm Tourism Joint Venture Co., said, “We can hardly compete against foreign travel firms.”

Cu stressed that foreign travel companies will seek to lure more customers through their agents in many countries abroad to gain a larger share in the Vietnamese tourism market.

He added that the strong financial ability of foreign businesses enables them to launch large promotions for certain periods of time in order to weed out weak rivals. These companies can cut tour prices, or work with other foreign partners to offer more incentives on accommodation and airfare.

Luu Duc Ke, director of Ben Thanh Tourist branch in Hanoi, worried over the move of well-trained staff from domestic companies to foreign firms, which offer higher salaries and better working conditions.

Ke also stressed that most Vietnamese travel firms have insufficient knowledge of international law, and some are even unable to map out a strict business contracts with foreign partners.

Tourism will be one of many fields challenged as Vietnam integrates into the global market.

(Source: TTN)

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