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According to reports in early June, foreign investors have once again raised concerns about Vietnam's infrastructure. Rapid economic growth is placing a heavy burden on existing infrastructure, and investments, tangled in red tape and regulatory obstacles, have not been able to keep pace. The latest concerns were raised during a conference in Ho Chi Minh City, organised by the International Finance Corporation and the Vietnamese Planning and Investment Agency. The country's port infrastructure was once again in the spotlight, with foreign investors urging the government to invest not just in creating maritime hubs, but also in creating a better intermodal transport system to move cargo to and from the ports. The chairman of the American Chamber of Commerce said that delays in construction of supporting infrastructure for ports was also a key issue that hindered operations and raised costs, IntellAsia reported. One example of the latter point is the delay in the development of roads around ports in Ba Ria-Vung Tau province in South Vietnam. This has in turn caused delays in the construction and commencement of operations of the country's new ports. Vietnam still has a cost advantage against China when it comes to manufacturing wages, but much FDI flow is still diverted to southern China because it is much easier to get input goods to factories and finished goods out owing to China's superior infrastructure.
Taking this and other developments such as the downturn in the global economy into consideration, the newly released Vietnam Freight Transport Report concludes that shipping traffic will increase by an annual average of 4.2% in 2009-2013, measured in tonnes per km. A number of factors underpin this forecast. One is sharpness of the contraction in international trade this year: Vietnam's trade will fall by 13.9%. Pulling in the opposite direction however is the still-realistic prospect of a long, export-led boom in Vietnam. Annual GDP growth is likely to average 6.5% in 2009-2013, only a little slower than the 7.8% rate achieved in the preceding five-year period.
Our overall outlook for the nascent freight transport industry across the different modes is bullish despite the recession. Although the next two years will be tough, air freight will grow by an annual average of 7.9% over the next five years. In road haulage, we have trimmed our forecast to take account of the economic slowdown, but we still see turnover running ahead of the general rate of economic expansion in Vietnam. We see road freight growing by an annual average of 7.9% over the next five years, followed closely by pipeline throughput (7.5%), rail (7.0%), and maritime freight (4.2%, as already mentioned).
Full World Trade Organization (WTO) membership, achieved in early 2007, can be seen as supportive of greater freight transport turnover relative to GDP across all modes, particularly so for shipping. We now expect total freight carried growth across all modes, measured in million tonne-km (mntkm), to average 5.0% per annum in 2009-2013.
Under the freight transport rating system, Vietnam achieves a composite score of 54.3 out of a potential maximum of 100. Vietnam's stronger points are freight growth, transport infrastructure growth and the transport intensity index, which measures the dynamism of the country's foreign trade. It is viewed Vietnam as being weaker in the other four categories: economic and political long-term risks, and the country's regulatory and competitive environment (corruption is a particular problem).
According to our latest estimates, the total value of transport and communications GDP will rise to US$6.7bn in nominal terms by 2013, representing 4.5% of Vietnam's GDP.
Vietnam Freight Transport Report Q4 2009: http://www.companiesandmarkets.com/r.ashx?id=J78ZUK555155650
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