Vietnam's Poor Infrastructure Impeding
Investment
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At the Vietnam Business Forum in Hanoi on 27th of May 2010, foreign business associations said Wednesday that poor infrastructure and high transport costs are major obstacles that hinder investment into Vietnam. Limitations in infrastructure will have negative impacts on foreign investment into Vietnam and the country’s exports, reported Thanh Nien News According to the newspaper, Tony Foster, who heads an infrastructure sub-committee at the forum, said Vietnam was the least competitive among regional countries in terms of infrastructure. Due to the lack of large seaports Vietnam has to spend around US$1.7 billion every year to have local exports transported to Hong Kong or Singapore first. Jocelyn Tran, chairwoman of American Chamber of Commerce, said limitations in infrastructure would have negative impacts on foreign investment into Vietnam and the country’s exports; while Alain Cany, chairman of the European Chamber of Commerce said it would cost Vietnam $70-80 billion to improve its infrastructure in the next ten years so that the country can maintain its competitive edge. He said Vietnam only needs 11-12 large seaports instead of 50-60 smaller ones.(Runckel & Associates has consisently put the need at much less - we believe Vietnam needs 2-3 well designed high volume ports and needs to target investment into these instead of spreading the money so widely.) The Japan External Trade Organization (Jetro) estimated that it cost around $1,570 to transport a 40 feet container from Da Nang to Yokohama, among the highest rates in the region. Vo Hong Phuc, Minister of Planning and Investment, said the country has realized that infrastructure is its bottleneck in economic development. (read Business-in-asia.com exclusive interview with H.E. Minister Vo Hong Phuc, click here) responded that the Improving infrastructure was actually one of the main focuses of the government’s development plan in the next ten years. Aviation Improvement Passenger flights: Amid a tough year for the industry worldwide, Vietnam's aviation market posted an encouraging increase of 8.4 percent in the number of passengers in 2009, according to a report by the Civil Aviation Administration of Viet Nam (CAAV). The number of passengers passing through the country's airports reached 17.5 million in 2009, up 8.4 percent over 2008 and 4 percent points higher than previous estimates. More than 11.6 million passengers flew with local airline c.ompanies comprising national flag carrier Vietnam Airlines and its subsidiary - the figure represented an annual growth of 12 percent for the domestic segment. Cargo Transportation: Cargo transportation by air showed a slight increase of 2 percent over 2008 to 346,000 tonnes. Domestic carriers transported 141,000 tonnes of cargo, up 4.2 per cent year-on-year while foreign airlines made up for the remainder. Road Improvement - Southern expressway Roads at Binh Duong Province and Dong Nai Province: The Government has given the green light to an expressway linking the southern industrial cities and the 77.56-km highway will cost an estimated l6 trillion dong-plus ($840 million) and allow for a maximum speed of 100-120 km per hour. Construction is to start this year and be completed by end of 20l2 although this target date seems unlikely to us as land acquisition has far to go. Bien Hoa-Vung Tau Expressway Development Company (BVEC) has asked the transport ministry for approval to build the expressway under the BOT (build-operate-transfer) form. BVEC is owned by a group of large State-owned companies comprising Vietnam Urban and Industrial Zone Development Investment Corporation (Idico), Song Da Corporation, and Bank for Investment and Development of Vietnam. The developer also started expanding National Highway 51 connecting Binh Duong, Dong Nai and Ba Ria-Vung Tau provinces. It has just inked a deal with six commercial banks to fund 2.4 trillion ($125 million) for the 3.3-trillion dong project. The 72.7-km highway, which will be widened into a six-lane road under the BOT form, is expected to meet the rising cargo transport demand between HCM City, Dong Nai and Ba Ria-Vung Tau. My Phuoc-Tan Van expressway that will link Binh Duong and Dong Nai provinces to other nearby province is under construction, according to officials, and is schedule to be completed in 2012. It will be connected to highway 51 from Bien Hoa city to Vung Tau which will take, for example, approximately only over an hour from Becamex's My Phuoc Industrial Park in Binh Duong to get to the port. It will help factories in both provinces to reach the sea port in Vung Tau, the deep-water port complex of Thi Vai-Cai Mep. However, our intellegence source confirmed that site clearance is a real obstacle in key transportation projects. The implementation of these projects is behind schedule in most cases. The expansion project of the National Highway 51 (also called National Highway 51B) delay has substantially increased the prices of construction, compensation expenses for clearance, and other related costs (compensation value will increase under fluctuation of land price today in Vietnam). Port Improvement: Please see our previous reports on ports improvement below: Rail improvement: Please see our previous report on railway improvement, click here. |
