News Room - Business/Economics

Posted on 05 Feb 2008

Infrastructure needs work in Vietnam

Experts said Vietnam needs to mobilize huge resources to further develop its infrastructure, especially roads and seaports.

Vietnam's infrastructure has developed rapidly in recent years. The country's annual investment in infrastructure, according to the World Bank's Vietnam Development Report 2007, accounts for 9-10% of its GDP. However, the development of infrastructure doesn't meet the requirements of social and economic development. Vietnam needs to increase its investment in infrastructure to 10-11% of GDP, according to the WB.

Overload

Mitsui O.S.K. Lines Vietnam, a Japanese-owned firm, is challenged by the indadequate infrastructure.

A representative of Mitsui OSK said transport fees for a 20 foot container of goods from Hai Phong port to Hanoi (around 106km) by road is $140, not including other fees. Meanwhile, it pays only $180 to transport a similar container from Hai Phong to Hong Kong by sea, a trip that is nine times longer.

"We have only one choice to go from Hanoi to Hai Phong: National Highway 5. Up to 70% of goods from Hai Phong to Hanoi have to travel via this road which is only 18-23m," the Mitsui representative said.

 Traffic jams often occur between 6pm and 6am on National Highway 5 (when trucks and container trucks are allowed to run).

It is estimated that the volume of goods that Japanese companies transport on this road is around 100 40 foot containers per day. The figure is expected to rise by 30-40% this year; if so, National Highway 5 and transport companies will be in quite a jam.

Foreign investors have several times complained to the Vietnamese Government about the road system. A survey of the Japan Bank for International Cooperation (JBIC) in December 2007 regarding Vietnam's investment environment says that poor infrastructure is among five key problems that worry Japanese investors the most.

Former Singaporean Prime Minister Goh Chok Tong, at the groundbreaking ceremony of the Vietnam-Singapore Industrial Zone in Bac Ninh last December, warned that an infrastructure system which is insufficiently invested in and falls behind economic development will be a big hindrance for Vietnam's efforts to attract foreign investment.

Seaport problems

At a meeting on January 11, 2008 of representatives of shipping companies, importers and exporters about seaport-related problems, a number of suggestions were presented.

Gemadept's representative said the building of roads and dredging passages to southern seaports must be the top priority of the Ministry of Transport and the Vietnam Maritime Agency - the group that built the No. 5 port and Thi Vai – Cai Mep port in the southern province of Ba Ria – Vung Tau.

This is the biggest port project in the South, which will directly influence the production and import-export activities of many businesses.

According to Gemadept, one of the biggest shipping companies in Vietnam, the Ministry of Transport and Ba Ria – Vung Tau province must speed up the dredging of the Cai Mep – Thi Vai passage.

Foreign investors, at the business forum held last December before the Consultative Group Meeting 2007, also complained about insufficient seaports.

Paul Hoogwaerts, General Director of Maersk Vietnam, asked the Government to immediately solve problems hindering the development of the Cai Mep port project. He said Vietnam must be ready to develop a "new generation of seaports" in 2015.

Three recommendations that foreign investors raised at the forum are: improving transport conditions to VICT and Cat Lai ports in HCM City, quickly solving problems which bar the construction of the Cai Mep port, and establishing an independent consulting agency which will conduct research on traffic density of the Cai Mep – Thi Vai port.

The southern key economic zone, which hosts the above port groups, accounts for over 70% of the total volume of containers entering and exiting Vietnam.

Previously, Tan Hua Joo, former director of APL Vietnam expressed his concerns about current seaports' inability to support the success of import-export growth targets in 2006-2010.