'Stopping chickens fighting each other' in rail transport

Vietnam Railways Corporation (VNR) has a plan to reorganize railway transport, in which the notable point is to merge the two railway transport companies Hanoi and Saigon to minimize internal competition in order to revive the railway industry.

"Chickens fight each other!"

Previously, on January 1, 2015, Hanoi and Saigon Railway Passenger Transport Company began operating under the model of a One-Member Limited Liability Company with 100% of the charter capital held by Vietnam Railway Corporation. By January 1, 2016, these units officially operated under the model of a Joint Stock Company with a total number of employees of more than 7,600 people.

Passengers at Vinh Station. Photo courtesy of Nghe An Newspaper

According to the leader of Vietnam Railway Corporation, after one year of restructuring and equitization, the above two companies have suffered a serious decline in output, revenue, transportation market share, wages, and living income of workers.

Explaining more clearly, VNR said that railway transport must compete fiercely with aviation and road transport in terms of passenger transport while the infrastructure system and transport technology are old, outdated, and have not received investment for many years, resulting in low labor productivity.

Furthermore, these two companies provide the same type of product in the market, so it is inevitable that there will be competition and unfair competition, causing difficulties for each other, reducing common resources and reducing competitiveness with other means of transport, leading to hindering development and directly affecting the overall production and business results of the railway industry.

For example, at each station and business location, both companies arrange labor, rent headquarters, offices and warehouses... which has resulted in an increase in management apparatus, labor, increased costs, dispersion of resources, facilities and capital; large, cumbersome management apparatus, labor, low labor productivity, affecting the quality of transportation...

“The management, operation and use of freight and passenger cars between the two companies is difficult, complicated, ineffective, and the efficiency of vehicle use is low, leading to a waste of common resources in the use of cars, increasing transportation costs and service quality, significantly reducing the competitiveness of railway transport,” said the leader of VNR.

In addition, due to the many organizations that organize passenger and cargo transportation, when customers want to contact to sign transportation contracts, learn about joint ventures, partnerships or resolve problems... it is very difficult. That is also the reason why the railway industry points out that customers are increasingly less likely to come to the railway, reducing the market share of railway transportation.

Two stages of "transformation"

Referring to the business organization models of domestic corporations and general companies, especially the railway industry in some countries such as Japan, China, Russia, Germany, France, Italy, Indonesia, Malaysia, etc., it can be seen that most domestic transport enterprises only trade in one product: passenger transport or freight transport. Even railways in Japan, Russia, Germany, France, Italy, etc. separate freight transport and passenger transport.

Emphasizing that merging the two companies into one will create a driving force for railway transport to constantly innovate and develop, the Railway Corporation believes that the principle of arrangement is to minimize organizational disruption, especially minimizing the transfer of labor from one location to another; ensuring the goal of restructuring the growth model; improving production and business efficiency and competitiveness of railway transport; attracting strategic shareholders to participate in railway transport business...

Therefore, Vietnam Railway Corporation proposed a plan to restructure transport in 2 phases.

In particular, phase 1 (expected to be completed in 2017) will merge Saigon and Hanoi Transport Joint Stock Companies into one Railway Transport Joint Stock Company with the function of organizing passenger and luggage transport and value-added services in domestic and international passenger transport; owning all passenger cars, freight cars, other means of transport equipment to serve passengers, rescue and repair means of transport...

This merged enterprise will perform the task of passenger transport business and at the same time establish a freight transport joint stock company (initially a one-member limited liability company with 100% capital held by the Railway Transport Joint Stock Company, assigned to manage and operate all freight cars, equipment and vehicles serving freight transport and railway rescue; manage all train car examination and repair stations).

Phase 2 (expected to be completed in 2019 - 2020), after stabilizing production and business activities, growth and efficiency, the railway industry will equitize the One-Member Limited Liability Company for railway freight transport business in the form of a non-dominant State-owned joint stock company.

Railways are losing ground to their air and road counterparts. So merging the companies will add strength. File photo

Questioning the effectiveness of the plan to reorganize railway transport, VNR leaders made the assumption that in the case of low average vehicle utilization and labor productivity, the passenger train seat utilization coefficient would still be raised to an average of about 75% (60% in 2016), saving passenger train operating costs by about 5-6%; reducing organizational units, reducing labor quotas and costs for office headquarters at branches and stations.

According to the survey, the maximum workload during the peak period only requires a maximum of 60% of the current workforce of both companies. Thus, reducing 40% of the workforce to work in value-added services such as short-distance transportation, Logistics... at the same time, correspondingly reducing 40% of office space and other costs such as electricity, water...

Along with diversifying ticket ranges by launching thousands of cheap tickets, improving the quality of transportation services, maximizing the safety of existing infrastructure, building new long-distance cars, putting high-quality trains into operation on short distances... The Railway Corporation is making strong changes to erase the image of stagnant thinking, in order to regain the market share of passengers that have left this industry in recent times.

According to vietnamplus.vn