Construction ministry proposes transport measures amid Middle East conflict

Construction ministry proposes transport measures amid Middle East conflict

Conflict in the Middle East is disrupting aviation and shipping routes, prompting the Ministry of Construction to propose tax and fee cuts to help stabilise transport costs and logistics activities.

Containers are unloaded at Nghi Sơn International Port in Thanh Hóa Province. — VNA/VNS

The Ministry of Construction has proposed a range of measures to stabilise transport operations and logistics costs, as conflict in the Middle East is disrupting international aviation and shipping routes and pushing up global fuel prices.

In a report submitted to the Government on March 16, the ministry said developments in the region are increasing operating costs for transport enterprises and putting pressure on logistics.

The ministry said fuel currently accounts for around 35–40 per cent of airlines’ operating costs. Airspace restrictions in parts of the Middle East have forced airlines to reroute flights, increasing fuel consumption as well as insurance and operational expenses.

Statistics show operating costs at Vietnam Airlines have risen by about 50–60 per cent, while Sun Phu Quoc Airways reported an increase of roughly 30 per cent. Vietjet Air has also incurred additional costs of around VNĐ2 trillion per month (US$76 million).

Aviation fuel prices have also increased. Jet A-1 fuel in Singapore is currently trading at about $160 per barrel and could approach $170 by the end of the month.

According to the International Air Transport Association, if prices rise to $200 per barrel, airline operating costs could increase by more than 70 per cent.

Containers are unloaded at Nghi Sơn International Port in Thanh Hóa Province. — VNA/VNS

The maritime sector has also been affected by the situation in the Middle East.

The ministry reported that 15 vessels owned by Vietnamese enterprises are currently operating in the region, including eight flying the Vietnamese flag. Some ships have resumed normal operations, while others remain anchored awaiting further instructions, although all vessels and crew members are reported to be safe.

Global container freight rates have also risen. The Drewry World Container Index increased by about 10 per cent compared with the previous week and 12–15 per cent compared with the period before the conflict, reaching around $2,300–$2,500 per 40-foot container.

Freight rates on the Asia – Europe route have surged by more than 20 per cent, while those on Asia – Mediterranean routes have risen by about 10 per cent. Several shipping companies have also begun imposing war risk and fuel surcharges on certain routes.

Fuel costs also account for roughly 30–40 per cent of operating expenses in maritime transport. If fuel prices rise by 20 per cent, sea freight rates could increase by about 15 per cent, while inland waterway transport costs may rise by around 18 per cent.

Domestically, road transport costs have been rising as fuel prices increased by 20–30 per cent. For railway transport, passenger ticket prices have increased by 3 per cent and freight charges by 4 per cent. However, since March 13 prices have declined slightly, after Vietnam Railways Transport JSC reduced fares following a modest drop in diesel prices.

Proposed tax and fee reductions

To ease cost pressures on transport companies, the Ministry of Construction proposed several fiscal measures.

The ministry recommended that the Ministry of Finance consider reducing special consumption tax and environmental protection tax on fuel for a certain period to mitigate the impact of global energy price fluctuations.

It also proposed cutting aviation landing and take-off fees and air navigation service charges by 50 per cent. In addition, it suggested reducing or exempting port entry and exit fees for inland waterway transport.

Another proposal is to include fuel used in transport in the list of goods eligible for a reduction in value-added tax from the current 10 per cent to a lower level.

The ministry also urged the Ministry of Industry and Trade to direct refineries and gas processors to diversify input supplies to sustain output. Fuel distributors should prioritise supply for transport and key industrial sectors if shortages emerge.

According to the ministry, it will continue coordinating with relevant agencies to monitor developments and support transport enterprises in maintaining stable logistics operations amid global uncertainties. 

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