Q1 2013
www.businessmonitor.com
VietnaM
infrastructure Report
INCLUDES BMI'S FORECASTS
ISSN 1750-5593
Published by Business Monitor International Ltd.
VIETNAM INFRASTRUCTURE
REPORT Q1 2013
INCLUDES 10-YEAR FORECASTS TO 2021
Part of BMI's Industry Report & Forecasts Series
Published by: Business Monitor International
Copy deadline: October 2012
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Vietnam Infrastructure Report Q1 2013
© Business Monitor International Ltd
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Vietnam Infrastructure Report Q1 2013
CONTENTS
BMI Industry View ............................................................................................................................................ 5
SWOT Analysis ................................................................................................................................................. 6
Vietnam Infrastructure SWOT ............................................................................................................................................................................... 6
Market Overview ............................................................................................................................................... 7
Vietnam ....................................................................................................................................................................................................................... 7
Competitive Landscape ............................................................................................................................................................................................... 9
Table: Vietnam EQS Data ..................................................................................................................................................................................... 9
Building Materials .......................................................................................................................................... 10
Asia ........................................................................................................................................................................................................................... 10
Cement Forecasts ..................................................................................................................................................................................................... 16
Table: Vietnam Cement Production and Consumption Data, 2010 – 2016 .......................................................................................................... 16
Table: Vietnam Cement Production and Consumption Long Term Forecast, 2017 – 2021 ................................................................................. 16
Industry Forecast Scenario ........................................................................................................................... 17
Table: Vietnam Construction And Infrastructure Industry Data, 2010 – 2016 .................................................................................................... 17
Table: Vietnam Construction And Infrastructure Long Term Forecast, 2015 – 2021 .......................................................................................... 18
Construction And Infrastructure Forecast Scenario ................................................................................................................................................. 20
Transport Infrastructure ................................................................................................................................ 26
Table: Vietnam Transport Infrastructure Industry Data, 2010 – 2016 ................................................................................................................ 26
Table: Vietnam Transport Infrastructure Long Term Forecasts, 2015-2021 ....................................................................................................... 28
Transport Infrastructure Outlook and Overview ....................................................................................................................................................... 30
Title: Competitiveness Of Vietnam's Infrastructure ............................................................................................................................................. 30
Table: Vietnam Railway Corporation’s Main Targets ......................................................................................................................................... 34
Major Projects Table – Transport ............................................................................................................................................................................ 39
Table: Major Projects – Transport ...................................................................................................................................................................... 39
Energy And Utilities Infrastructure ............................................................................................................... 54
Table: Vietnam Energy and Utilities Infrastructure Industry Data, 2010 – 2016 ................................................................................................ 54
Table: Vietnam Energy and Utilities Infrastructure Industry Long Term Forecast, 2015-2021 .......................................................................... 56
Energy And Utilities Infrastructure Outlook and Overview ...................................................................................................................................... 58
Major Projects Table – Energy And Utilities ............................................................................................................................................................ 68
Table: Major Projects – Energy and Utilities ...................................................................................................................................................... 68
Residential/Non-Residential Construction and Social Infrastructure ...................................................... 80
Table: Vietnam Residential and Non-residential Building Industry Data, 2010 – 2016 ...................................................................................... 80
Table: Vietnam Residential and Non-residential Building Long Term Forecasts, 2015 – 2021........................................................................... 80
Residential/Non-Residential Building Outlook and Overview................................................................................................................................... 81
Major Projects Table – Residential/Non-Residential Construction And Social Infrastructure ................................................................................. 84
Table: Major Projects – Residential/Non-Residential Construction And Social Infrastructure ........................................................................... 84
Risk/Reward Ratings...................................................................................................................................... 86
Vietnam’s Risk/Reward Ratings ................................................................................................................................................................................ 86
Rewards ............................................................................................................................................................................................................... 86
Risks .................................................................................................................................................................................................................... 86
Regional Overview.................................................................................................................................................................................................... 87
Asia Pacific Infrastructure Risk/Reward Ratings................................................................................................................................................. 87
Table: Asia Infrastructure Risk/Reward Ratings.................................................................................................................................................. 93
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Vietnam Infrastructure Report Q1 2013
Company Monitor ........................................................................................................................................... 94
Cavico Corporation ............................................................................................................................................................................................. 94
Electricity of Vietnam Group (EVN) .................................................................................................................................................................... 97
Global Overview ........................................................................................................................................... 100
Source: Bloomberg ......................................................................................................................................... 106
Methodology ................................................................................................................................................. 107
Industry Forecasts ...................................................................................................................................................................................................107
Construction Industry .........................................................................................................................................................................................108
Data Methodology ..............................................................................................................................................................................................108
New Infrastructure Data Sub-sectors..................................................................................................................................................................108
Construction .......................................................................................................................................................................................................110
Capital Investment ..............................................................................................................................................................................................111
Construction Sector Employment ........................................................................................................................................................................111
Infrastructure Risk/Reward Ratings .........................................................................................................................................................................112
Table: Infrastructure Business Environment Indicators .....................................................................................................................................113
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Vietnam Infrastructure Report Q1 2013
BMI Industry View
BMI View: Construction activity in Vietnam continued to contract in the third quarter of 2012,
prompting us to pencil in a mild contraction for our 2012 construction forecasts. Real growth is now
expected to come in at a negative 0.2% in 2012, compared to our previous forecast of 0.1% real growth.
Despite this downward revision, we remain convinced that a near-term recovery is still on the cards for
Vietnam's construction industry – construction real growth is projected to reach 7.1% in 2013 – as
monetary conditions remain conducive for construction. This recovery will be led by the residential and
non-residential building construction sector as we expect the infrastructure sector to continue facing
difficulties in securing project financing.
The major developments in Vietnam’s infrastructure sector are:
ƒ
In September 2012, Thailand-based Italian-Thai Development signed a memorandum of
understanding (MoU) to draw out the investment plan and technical design for phase 2 of the
Halong-Mong Cai expressway project in the Quang Ninh province. The 134km project, which is
part of the Noi Bai-Halong-Mong Cai expressway project, is expected to cost a total of
US$2.1bn. The expressway is expected to take three years to be completed. In September 2012,
A consortium led by South Korea's engineering and construction company Daelim Industrial
has entered into a contract with Cantho Thermal Power Company Limited for the
construction of a thermal power plant in the south of Vietnam. The contract has a value of
US$335mn, with construction work to be completed by October 2015. The power plant is to be
located in the O Mon district on the Mekong Delta. Daelim Industrial possesses a stake in the
project worth US$285mn, with the plant to have the capacity to generate 330MW of electricity.
Daelim Industrial will be responsible for the plant's design and construction, while its Japanese
partner Sojitz Corporation will supply steam turbines.
ƒ
In October 2012, the deputy director of the railway administration, Nguyen Van Doanh, said that
a total of 20 railway projects were earlier recommended by the Vietnam National Railway
Administration to be developed under the forms of BOT, build-transfer and build-transferoperate, and this list of projects was submitted to the Ministry of Transport in early 2010;
although a lack of investors prevented from starting them. Among the 20 railway projects calling
for investment in 2010-2020, they include the 381km Lao Cai-Hanoi-Hai Phong railway line, the
114km Bien Hoa-Vung Tau route and the 49km railway connecting Trang Bom in Dong Nai
with Hoa Hung in HCM City.
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SWOT Analysis
Vietnam Infrastructure SWOT
Strengths
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Weaknesses
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Opportunities
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Threats
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The country’s strong project pipeline will sustain growth in the sector and add
capabilities for further development, particularly as transport structure improves.
Rapid growth has attracted investment from many of the world’s largest
infrastructure companies.
The poor state of infrastructure in the country provides easy wins for foreign
investors and construction companies.
A hike in electricity prices should stimulate investment in the energy sector.
State-owned companies dominate the infrastructure market. This is especially the
case in the utilities sector, where Electricity of Vietnam (EVN)’s dominant position
has deterred investors.
Vietnam relies heavily on foreign imports and it is estimated that the country
requires 2mn tonnes of steel billets to be imported a year.
The country presents a relatively risky environment for major infrastructure projects,
especially in relation to project finance operations.
Power outages are occurring daily in Vietnam, highlighting the country’s severe
electricity problems.
Demand for urban infrastructure projects in transport and sanitation over our 10year forecast period to 2021 will rise in tandem with urbanisation.
Severe drought is driving demand in electricity generation sources besides
hydropower; i.e. gas-fired and wind-powered plants.
If the government’s attempts to cool the overheating economy are successful,
Vietnam will see a more stable growth trajectory over the long term.
The Vietnamese government's shift in focus – from driving economic growth
towards fighting inflation and addressing macroeconomic imbalances – is expected
to have a cooling effect.
Public spending cuts, tighter credit conditions and aggressive monetary tightening
are likely to keep economic activity depressed.
Lack of energy infrastructure holds downside risk to nearly all projects and presents
a significant bottleneck to development.
Should any significant events occur to highlight Vietnam’s structural difficulties,
uncertainty and downside risks in the business environment could have a negative
impact.
The EU predicts Vietnam will not become a true market economy until 2018.
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Market Overview
Vietnam
Vietnam's emergence as one of the most promising economies in Asia, if not the world, stems largely
from the Communist Party of Vietnam's (CPV) adoption of the Doi Moi market reform policies in 1986.
The gradual but steady shift from a largely agrarian country with a high degree of state ownership and
government intervention to a market economy has stimulated a flow of foreign investment and domestic
entrepreneurship, which are now the prime drivers of growth. For instance, Vietnam attracted foreign
direct investment (FDI) of almost US$14.7bn in 2011, according to Vietnam’s Ministry of Planning and
Investment, although this was a 21% drop from 2010’s recorded figure.
However, Vietnam’s poor infrastructure has long been an impediment to the country’s growth, as its
developing industry is highly dependent on sound infrastructure (especially power and road) to operate.
This infrastructure deficit is expect to worsen further as the combination of rising urbanisation and steady
population and GDP growth is expected to exert considerable pressure on Vietnam's urban transportation
systems. According to a draft national urban development programme approved by the government in
June 2012, Vietnam will strive to achieve an urbanisation rate of 38% with 870 urban areas by 2015 and
45% with 940 urban areas by 2020. It is estimated that the country has an urbanisation rate of 30%.
This urbanisation trend is felt acutely in Hoh Chi Minh City (HCM City) and Hanoi – the country's
largest cities and chief commercial hubs. The capital demand for transport infrastructure development in
HCM CITY is estimated to be US$3-4bn per annum between now and 2020, but the city's budget can
only provide US$500mn per annum, according to a statement from the HCM City government in July
2012. For Hanoi, the city authorities released the city's infrastructure development in July 2012. Under
this plan, the city would need about VND584trn (US$28bn) by 2020, VND324trn (US$15.6bn) of which
would be capital from the central budget and the city budget, with the remainder to be raised from social
resources.
Vietnam does not have the fiscal means to meet its infrastructure deficit. According to the Vietnamese
Ministry of Planning and Investment, there remains a huge deficit between the annual requirement for
infrastructure investment capital, which is estimated at about US$15bn, and the annual mobilised fund of
US$7-8bn.
Vietnam has been making noteworthy efforts to address this shortfall in investment, and the government
has made infrastructure a priority investment area. This has been demonstrated through various demandside policies aimed at boosting macroeconomic growth and a variety of infrastructure spending initiatives.
The use of official development assistance (ODA) to finance infrastructure projects has also achieved
success, with Europe, Japan and the Asian Development Bank becoming frequent co-financers in several
infrastructure projects.
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Improved contract agreements between the Export-Import Bank of the United States (US Exim Bank)
and the Vietnam Development Bank (VDB) are also helping to provide financing for infrastructure
development. In February 2012, the US Exim Bank concluded a business-development mission into
Vietnam and is looking to invest up to US$1.5bn in infrastructure projects such as satellite, thermal power
and renewable energy projects.
Vietnam has also been pushing for the faster implementation and development of public-private
partnerships (PPPs) for upcoming infrastructure projects. While PPPs have the potential to address the
country’s infrastructure needs, this method is wholly predicated upon the creation of a regulatory PPP
framework to govern the sector. This has not been achieved due to an inability by sub-sovereign
governments and state agencies to carry out the necessary project assessments. In November 2010, the
prime minister had launched a mechanism piloting PPP investment model via Decision 71/QD-TTg,
which came into force from January 15 2011. Under this legislation, concerned agencies were tasked to
craft regulations that allow projects to be developed under a PPP model and to evaluate and award
projects for investment under a PPP model. However, progress on these tasks are proceeding very slowly,
and are still uncompleted as of July 2012.
This inability to complete its PPP plans and the poor credit conditions globally were causing project
delays. According to the Ministry of Planning and Investment, 4436 projects were delayed in 2011. These
projects accounted for 11.55% of the total amount of projects being implemented in Vietnam, with most
of them belonging to projects with more than 30% of state-owned investment capital. A total of 3568
projects had to adjust their investment capital; this does not include projects that, according to investment
management laws, are not allowed to adjust their total investment capital, due to price fluctuations and
policy changes.
These difficulties were also pushing the Vietnamese government to seek funds from non-banking sources,
such as project bonds and sovereign wealth funds. This trend is starting to take place, with the
Vietnamese government having granted approval for HCM City to issue bonds for infrastructure projects
in Q212. Meanwhile, the Association of South East Asian Nations (ASEAN), of which Vietnam is a
member, signed a shareholder agreement in April 2012 for the ASEAN Infrastructure Fund, a special
purpose vehicle aimed at providing member countries up to US$4bn for infrastructure development.
A regulatory and legal framework to nurture the development of concessions is also largely absent,
although there are regulatory frameworks under construction. Law firm Duane Morris has identified four
main obstacles that are limiting the participation of the private sector in Vietnamese infrastructure. These
are:
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The weak governance structures of the state-owned companies that dominate the construction
and utilities sectors;
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Difficulty in accessing domestic capital;
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Costly delays for projects, due to the weak regulatory environment;
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The often uncertain support of the government.
Competitive Landscape
Table: Vietnam EQS Data
Latest FY
Earnings
Market
Cap
(US$mn)
Revenue
Growth
(% y-o-y)
Operating
Profit
Growth
(% y-o-y)
Total
Debt/
Ebitda
Interest
Coverage
Ratio
PE Ratio
Vietnam Construction &
IMPO
12/2011
232.9
-4.0
39.8
6.5
1.4
7.1
Songda Urban &
Industrial Zo
12/2011
154.3
-86.3
NA
-45.8
-30.1
NA
HCM City Infrastructure
INV
12/2011
100.4
0.4
-8.4
21.7
0.3
15.8
Becamex Infrastructure
Devel
12/2011
139.3
276.8
117.5
1.5
15.5
8.7
Petrovietnam
Construction Co
12/2011
182.1
26.9
-29.4
10.5
1.0
14.3
Development Invest
Construct
12/2011
104.8
-35.5
-80.9
8.7
2.3
20.4
Kinh Bac City
Development SH
12/2011
152.8
-30.7
-47.4
21.2
0.7
392.9
Cotec Construction JSC
12/2011
70.9
36.5
11.6
0.0
NA
5.1
Name
*exchange rates accurate as of 13/07/2012. Source: Bloomberg
Construction companies in Vietnam are fairly small and are confined to urban and roads infrastructure
projects. The inland waterway transport sub-sector is managed by two state corporations affiliated with
the Ministry of Transport, a state-owned enterprise (SOE) affiliated with the Vietnam Inland Waterway
Authority and some enterprises managed by other ministries, which are operating in support of the power
generation, cement and paper industries.
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Building Materials
Asia
BMI View: Asia will continue to outperform in the production and consumption of building materials,
expanding its share of the global market as regional construction sectors exhibit strong levels of growth
across the board. Although we note that macroeconomic fundamentals and demographic trends will
support long-term growth, the risks weighing on our forecast are increasing in line with the increasingly
muted picture for the world-leading Chinese building materials sector.
Key Views:
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Sound fundamentals - rising per capita incomes, demographic growth, industrialisation and
robust urbanisation - will be the key drivers of Asia's building materials consumption story.
Bearing in mind the continued weakness that we see in Europe (see our online service,
September 28 2012, 'Eurozone Weakness Still Depressing Market'), we forecast that Asia will
continue to expand its share of global total cement and steel production.
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Growth in regional competition will intensify as small firms compete for market share. Over the
long term, this trend will switch to one of increasing consolidation.
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Reflecting these trends, global building materials manufacturers will increasingly look to
enhance their operations to diversify against a slump in developed markets. In the cement
market, this will trigger the emergence of a number of Asian majors - China's Anhui Conch,
Thailand's Siam Cement and Indonesian firms Indocement and Semen Gresik continue to
improve sales volumes vis-a-vis established players such as Holcim and Lafarge.
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Demand for building materials continues to weaken in China as the country faces a systemic reevaluation of fixed capital spending plans. Despite this, we believe growth rates will remain
relatively robust and will benefit in the immediate term from a new round of infrastructure
spending announced by local governments and supported by Beijing.
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However, we note that chronic overcapacity and local government indebtedness pose significant
long term risks to our China forecast, and that these factors may work to drag down demand for
materials through 2013. A heavy landing in China - a scenario which is supported by our country
risk team - would cause a significant downward revision to our Asia building materials forecast.
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Demand in India will support robust growth in the building material consumption over the
medium term, yet challenges such as rising input costs and significant overcapacity will mean
that the outlook for firms in the sector will remain challenging.
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India's cement market will continue to face issues of surplus capacity as smaller firms begin to
undercut the profits of national majors. Over Q212, major firms were fined by the Competition
Commission of India (CCI) for engaging in cartelism and price fixing. Since then the price of
cement has slumped as new firms have entered the market.
Asia Forging Ahead
India/China - BMI's Steel Forecast - Production/Consumption ('000 tons)
Source: BMI, WSA
China - Slowing Yet Consumption Still Strong
We expect a slump in demand for cement and steel to continue to weigh on the country's building
materials sector for the foreseeable future. Both official and private sector data point to a deceleration in
construction spending over 2011, and we expect that, due to deterioration in macroeconomic
fundamentals, this trend will largely continue over 2012, despite the renewed efforts of the government to
bolster infrastructure spending.
Although we believe that the stimulus may support levels of growth experienced over H112 into 2013 as
the government looks to construct a further 7mn housing units, new rail projects get under way and local
governments such as Changsha and Nanjing announce ambitious spending plans, we do not believe that
investments will facilitate a rise in demand sufficient to return the ailing building materials sector back to
peak levels.
We believe that Chinese equities will continue to feel the brunt of a softening in demand, despite market
cement warming towards cement majors on announcement of market warming measures. Although
manufacturers may experience a slight rebound off the back of a renewed round of infrastructure
spending, the longer-term picture remains bleak.
Despite our forecast for a slowing steel production due to a fall in investment in real estate and fixed
capital, figures from the China Iron & Steel Association suggest that output grew by 1.2% month-on-
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month (m-o-m) in August 2012. This is despite the fact that, according to Citigroup, China's steel
stockpiles stand at almost 100m tons. We believe that, if proven true, this trajectory is unsustainable and
reflects structural inefficiencies within China's steel market. If the pattern continues over the long term,
we believe that an increasing surplus of inventories may facilitate a shock leading to a production slump
and a period of painful readjustment for the industry. Previous rounds of stimulus, such as that
implemented in 2008, have only worked to exacerbate the issue of stock-piling, as producers have
historically upped output in excess of actual demand. As we believe that the most recent round of
stimulus spending will have a far smaller impetus on the construction sector, this issue poses a significant
threat to the medium-term performance of firms. According to China Daily, 83% of the nation's steel
producers ran loses over H112. With this in mind, and reflecting a trend that we believe will continue
over the long term, Boashan Iron & Steel Co, China's biggest listed steelmaker, has idled a three million
tonnes per annum (mtpa) plan in Shanghai.
Indian And Chinese Equities Diverging
Anhui Conch Cement & Asia Cement (HK) vs Ultratech Cement & Madras Cements
(India) - 2-Year Share Price Performance (% Change, Rebased October 2010)
Source: Bloomberg
India - Much Demand To Be Met
Overall, it is our view that India will emerge as a regional outperformer over 2012. According to World
Steel Association (WSA) estimates, steel production in the country grew by 5.7% year-on-year (y-o-y) in
2011. In line with robust economic growth, steel production in India has grown by an average of nearly
8% y-o-y since 2007, and in November 2011, India's steel ministry estimated that demand for the metal
could increase by around 9% y-o-y over the following five years.
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The outlook for cement consumption is equally robust, and we expect growth to average nearly 10% y-oy between 2012 and 2016. The country currently has 137 large and 365 mini cement plants, according to
the Cement Manufacturers Association.
Our optimistic outlook is weighed to the upside and could be further buoyed if the government is
successful in gaining the US$1tn in infrastructure investments by 2017 - a sum required to fulfil the goals
outlined by its National Planning Committee. However, risks are abound, and we note that the operating
environment for firms will remain challenging over the medium term.
Over Q212, major firms, such as UltraTech Cement and Shree Cement were fined by the Competition
Commission of India (CCI) for engaging in cartelism and price fixing and, since then, the price of cement
has slumped as new firms have entered the market and undercut the majors.
According the Economic Times, the price of cement in Andhra Pradesh - India's second largest producer
of the material - fell 10% over the first few weeks of September, and is down 25% from the industry's
peak levels of Rs 300 per bag. Overcapacity in the state is now at 60%, and production continues to be
disrupted by poor access to inputs such as sand and the increasing activity of the Telangana independence
movement, which has caused deadlock over the state budget. Across the country, margins have been
further squeezed by a rise in the price of inputs such as gypsum and diesel. However, a fall in the price of
imported coal has gone some way to curb loses.
However, over the medium term, we expect firms to benefit from a renewed infrastructure drive and a
softening of interest rates. We forecast that India's building material consumption growth will overtake
that of all other regional competitors over 2012, and with this in mind believe that the medium term will
witness the expansion of a number of global majors into the country.
An example of this is the expansion of HeidelbergCement in central India. The company has announced
that the firm is to increase its grinding capacity from 3.1 mtpa to 6 mtpa and clinker output capacity from
1.2 mtpa to 3.1 mtpa. The expansion is scheduled to begin in November 2012 and represents the
attraction of central areas such as Uttar Pradesh and Madhya Pradesh, which consistently offer higher
realisation rates to firms.
In contrast to Andhra Pradesh, according to TET utilisation rates in the region stand at around 90-95%.
Fast-growing Indian manufacturer India Cement is also looking to diversify its operations away from
established regions of Andhra Pradesh, Tamil Nadu and Rajasthan and open new plants in Madhya
Pradesh.
Despite growing demand for steel, the land clearance obstacles facing foreign steel players such as
POSCO and ArcelorMittal continue to stall a vast pipeline of projects. Reports in January 2012 that
POSCO may build a smaller steel plant than the mega 12 mpta mill originally planned in India's eastern
state of Orissa are a direct result of the long-running land and environmental disputes that have paralysed
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the project since 2008. While the introduction of a new land bill could, if approved, bring much-needed
speed and clarity to the acquisition process, there remains much opposition to the proposed bill.
Overcapacity And Increased Competition Driving Regional Shift
India - Cement Consumption, Production & Capacity By Region (mn tons)
Source: Cement Manufacturers' Association, BMI
Dynamic and Increasingly Competitive
Indonesia - the continent's third most populous country - the Philippines, Thailand and Vietnam will also
be key growth markets for the consumption of building materials in the region over the coming years.
Moreover, the high interest rates implemented by various Asian countries in 2011 are likely to fall in
2012 as disinflationary, rather than inflationary, pressures take precedence in the face of softening global
activity. This could make it increasingly tenable for cement and steel companies to finance their capital
expenditures through debt and take on new projects in 2012.
We expect cement consumption in the country to grow by an average of 6.2% y-o-y between 2012 and
2016, but note that the robust outlook for infrastructure investment over the coming years, combined with
ongoing improvements in the business environment creates upside risks. Through passing a much-delayed
land bill at the end of 2011 (see our online service, December 16 2011, 'Land Acquisition Bill A Big First
Step'), Indonesia took a major step towards removing a long-term obstacle to investment in the sector.
This growth potential is attracting the attention of foreign cement companies within the region. In July
2011, Siam Cement announced plans to spend US$219mn on developing its ceramic and construction
material businesses in Indonesia, whilst Anhui is reportedly planning to build plants in South Kalimantan,
East Kalimantan and Papua - investing in a new capacity of 10mtpa. In August 2012, Mexico's Cemex
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announced that it was raising the cement production capacity of its APO plant in the Philippines by
1.5mtpa.
These investments will add welcome new capacity and stimulate increased competition in a market where
significant potential for consolidation exists. Vietnam is another market that looks set for increasing
consolidation. We expect over-capacity, together with high energy and transportation costs, to put
increasing pressure on many of the less competitive and inefficient cement companies.
Finally, we believe that Semen Gresik's announcement in March 2012 that it is in talks with Myanmar's
foreign investment body over plans to build a 1.5mn to 2.5mn tonnes/year cement plant in the country
could provide the firm with an important foothold in the resource-rich frontier market. Myanmar's
reliance on imported cement and the potential for growth driven by demand for mining-related
infrastructure projects could generate significant rewards for foreign players prepared to brave the
political and industry-specific risks (see our online service, March 20 2012, 'Semen Gresik's Seeks
Frontier Foothold').
South East Asia Picking Up Chinese Slack
Asia - BMI's Cement Consumption Forecast (% y-o-y Growth)
Source: USGS, BMI
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Cement Forecasts
Table: Vietnam Cement Production and Consumption Data, 2010 – 2016
Cement production
(including imported clinker),
tonnes
Cement production
(including imported clinker),
tonnes, % y-o-y
2010
2011
2012e
2013f
2014f
2015f
2016f
50,816,923
45,837,500
47,694,500
50,348,760
53,206,724
56,336,812
59,607,235
6.1
-9.8
4.1
5.6
5.7
5.9
5.8
Cement consumption,
tonnes
49,633,422
45,223,301
47,012,275
49,574,510
52,340,442
55,374,453
58,544,698
Cement consumption,
tonnes, % y-o-y
11.3
-8.9
4.0
5.5
5.6
5.8
5.7
1,183,500
614,199
682,225
774,251
866,282
962,359
1,062,537
-64.1
-48.1
11.1
13.5
11.9
11.1
10.4
Cement net exports, tonnes
Cement net exports, tonnes,
% y-o-y
e/f = BMI estimate/forecast. Source: BMI Research, USGS, UN.
Table: Vietnam Cement Production and Consumption Long Term Forecast, 2017 – 2021
2015f
2016f
2017f
2018f
2019f
2020f
2021f
Cement production
(including imported clinker),
tonnes
56,336,812
59,607,235
63,076,952
66,637,578
70,344,120
73,995,195
73,995,195
Cement production
(including imported clinker),
tonnes, % y-o-y
5.9
5.8
5.8
5.6
5.6
5.2
0.0
Cement consumption,
tonnes
55,374,453
58,544,698
61,912,829
65,367,031
68,963,121
72,495,987
72,495,987
Cement consumption,
tonnes, % y-o-y
5.8
5.7
5.8
5.6
5.5
5.1
0.0
Cement net exports, tonnes
962,359
1,062,537
1,164,124
1,270,547
1,380,999
1,499,207
1,499,207
Cement net exports, tonnes,
% y-o-y
11.1
10.4
9.6
9.1
8.7
8.6
0.0
e/f = BMI estimate/forecast. Source: BMI Research, USGS, UN.
© Business Monitor International Ltd
Page 16
Vietnam Infrastructure Report Q1 2013
Industry Forecast Scenario
Table: Vietnam Construction And Infrastructure Industry Data, 2010 – 2016
2010
2011
2012e
2013f
2014f
2015f
2016f
Construction Industry
Value, VNDbn
139,162.0
162,620.0
176,907.1
200,669.0
226,016.2
252,303.6
281,090.3
Construction Industry
Value, US$bn
7.3
7.9
8.4
9.6
11.0
12.4
14.0
Construction Industry
Real Growth, % chg yo-y
10.1
-1.0
-0.2
7.1
6.4
6.4
6.4
Construction Industry,
% of GDP
7.0
6.4
6.1
6.1
6.0
5.9
5.9
Total Capital
Investment, VNDbn
704,401.0
745,494.0
847,631.6
954,642.1
1,075,165.7
1,201,771.8
1,338,833.9
Total Capital
Investment, US$bn
36.8
36.1
40.3
45.9
52.3
59.1
66.6
Total Capital
Investment, % of GDP
35.6
29.4
29.1
28.9
28.5
28.2
27.9
Capital Investment Per
Capita, US$
419.1
406.5
449.1
506.3
571.0
639.5
714.0
Real Capital Investment
Growth, % y-o-y
10.9
-10.4
4.3
5.9
6.0
6.2
6.1
Construction Industry
Employment, '000
2,707.8
2,687.2
2,682.5
2,831.2
2,974.8
3,127.4
3,290.6
Construction Industry
Employment, % y-o-y
7.7
-0.8
-0.2
5.5
5.1
5.1
5.2
Total Workforce, '000
61,842.0
62,824.3
63,694.6
64,449.1
65,116.8
65,719.2
66,294.0
4.4
4.3
4.2
4.4
4.6
4.8
5.0
Infrastructure Industry
Value As % of Total
Construction
46.1
47.0
46.9
46.4
45.9
45.3
44.6
Infrastructure Industry
Value, VNDbn
64,157.4
76,431.4
83,010.8
93,124.8
103,648.6
114,283.7
125,419.9
Infrastructure Industry
Value, US$bn
3.4
3.7
3.9
4.5
5.0
5.6
6.2
Infrastructure Industry
Value Real Growth, %
chg y-o-y
17.6
0.5
-0.4
5.8
5.1
5.0
4.7
Infrastructure Industry
Value as % of GDP
3.2
3.0
2.9
2.8
2.7
2.7
2.6
Construction Industry
Employees as % of total
labour force
© Business Monitor International Ltd
Page 17
Vietnam Infrastructure Report Q1 2013
Table: Vietnam Construction And Infrastructure Industry Data, 2010 – 2016
2010
2011
2012e
2013f
2014f
2015f
2016f
Residential and NonResidential Building
Industry Value As % of
Total Construction
53.9
53.0
53.1
53.6
54.1
54.7
55.4
Residential and NonResidential Building
Industry Value, VNDbn
75,004.6
86,188.6
93,896.4
107,544.2
122,367.6
138,019.9
155,670.4
Residential and NonResidential Building
Industry Value, US$bn
3.9
4.2
4.5
5.2
6.0
6.8
7.7
16.5
-3.8
-0.1
8.2
7.5
7.5
7.8
3.8
3.4
3.2
3.3
3.2
3.2
3.2
Residential and NonResidential Building
Industry Value Real
Growth, % chg y-o-y
Residential and NonResidential Building
Industry Value as % of
GDP
f = BMI forecasts. Sources: Census and Statistics Department/ILO
Table: Vietnam Construction And Infrastructure Long Term Forecast, 2015 – 2021
2015f
2016f
2017f
2018f
2019f
2020f
2021f
Construction Industry
Value, VNDbn
252,303.6
281,090.3
313,160.2
348,229.7
386,859.6
428,148.3
472,493.5
Construction Industry
Value, US$bn
12.4
14.0
15.7
17.4
19.3
21.4
23.6
Construction Industry
Real Growth, % chg yo-y
6.4
6.4
6.4
6.2
6.1
5.7
5.4
Construction Industry,
% of GDP
5.9
5.9
5.8
5.7
5.7
5.6
5.5
Total Capital
Investment, VNDbn
1,201,771.8
1,338,833.9
1,491,527.9
1,658,504.4
1,842,432.5
2,039,020.1
2,250,160.6
Total Capital
Investment, US$bn
59.1
66.6
74.6
82.9
92.1
102.0
112.5
Total Capital
Investment, % of GDP
28.2
27.9
27.6
27.3
27.0
26.6
26.1
Capital Investment Per
Capita, US$
639.5
714.0
792.4
873.9
963.2
1,058.1
1,159.6
6.2
6.1
6.1
5.9
5.8
5.4
5.1
Real Capital Investment
Growth, % chg y-o-y
© Business Monitor International Ltd
Page 18
Vietnam Infrastructure Report Q1 2013
Table: Vietnam Construction And Infrastructure Long Term Forecast, 2015 – 2021
2015f
2016f
2017f
2018f
2019f
2020f
2021f
Construction Industry
Employment, '000
3,127.4
3,290.6
3,464.2
3,642.9
3,829.4
4,013.6
4,197.5
Construction Industry
Employment, % y-o-y
5.1
5.2
5.3
5.2
5.1
4.8
4.6
Total Workforce, '000
65,719.2
66,294.0
66,773.8
67,197.2
67,607.8
68,026.5
68,431.5
4.8
5.0
5.2
5.4
5.7
5.9
6.1
Infrastructure Industry
Value As % of Total
Construction
45.3
44.6
43.9
43.2
42.5
41.8
40.9
Infrastructure Industry
Value, VNDbn
114,283.7
125,419.9
137,594.6
150,536.8
164,441.9
178,861.3
193,385.6
Infrastructure Industry
Value, US$bn
5.6
6.2
6.9
7.5
8.2
8.9
9.7
Infrastructure Industry
Value Real Growth, %
chg y-o-y
5.0
4.7
4.7
4.4
4.2
3.8
3.1
Infrastructure Industry
Value as % of GDP
2.7
2.6
2.5
2.5
2.4
2.3
2.2
Residential and NonResidential Building
Industry Value As % of
Total Construction
54.7
55.4
56.1
56.8
57.5
58.2
59.1
Residential and NonResidential Building
Industry Value, VNDbn
138,019.9
155,670.4
175,565.6
197,692.9
222,417.7
249,287.0
279,107.8
Residential and NonResidential Building
Industry Value, US$bn
6.8
7.7
8.8
9.9
11.1
12.5
14.0
Residential and NonResidential Building
Industry Value Real
Growth, % chg y-o-y
7.5
7.8
7.8
7.6
7.5
7.1
7.0
Residential and NonResidential Building
Industry Value as % of
GDP
3.2
3.2
3.3
3.3
3.3
3.3
3.2
Construction Industry
Employees as % of total
labour force
f = BMI forecasts. Sources: Census and Statistics Department/ILO
© Business Monitor International Ltd
Page 19
Vietnam Infrastructure Report Q1 2013
Construction And Infrastructure Forecast Scenario
In Decline
Construction Industry Value And Infrastructure Share
e/f = BMI estimate/forecast. Source: BMI, Vietnam General Statistics Office
BMI View: Construction activity in Vietnam continued to contract in the third quarter of 2012,
prompting us to pencil in a mild contraction for our 2012 construction forecasts; Real growth is now
expected to come in at -0.2% in 2012, compared to our previous forecast of 0.1% real growth. Despite
this downward revision, we remain convinced that a near-term recovery is still on the cards for Vietnam's
construction industry – construction real growth is projected to reach 7.1% in 2013 – as monetary
conditions remain conducive for construction. This recovery will be led by the residential and nonresidential building construction sector as we expect the infrastructure sector to continue facing
difficulties in securing project financing.
Construction activity in Vietnam is still in negative territory for the third quarter of 2012. The latest data
from the Vietnam General Statistics Office showed that real growth for the construction sector contracted
by 0.9% year-on-year (y-o-y) in Q312, compared with a growth of 5.0% y-o-y in Q311. However, the rate
of decline slowed down significantly in Q312, suggesting that construction activity was picking up for the
quarter. Construction activity in Vietnam had contracted earlier in the year by 3.8% y-o-y in Q212 and
8.3%y-o-y in Q112.
Therefore, even though the lack of growth in Q312 has prompted us to pencil in a mild contraction for our
2012 construction forecasts – construction real growth is forecast to reach a negative 0.2%, compared to
our previous forecast of 0.1% growth – we remain convinced that a robust recovery in Vietnam's
© Business Monitor International Ltd
Page 20
Vietnam Infrastructure Report Q1 2013
construction sector is just around the corner, with construction real growth expected to reach double-digit
levels in Q412.
On The Path To Recovery
Vietnam – Construction Real Industry Value Data (At 1994
Constant Prices), By Quarters, VNDbn And % chg y-o-y
f = BMI forecast. Source: General Statistics Office, State Bank of Vietnam
Our optimistic outlook for Vietnam's construction sector remains primarily driven by the country's
conducive monetary conditions. The benchmark interest rate in Vietnam has stayed at around 10.00%
since July 2012 and this should be favourable for construction activity. Indeed, we believe two indicators
are already suggesting that construction activity is picking-up in Vietnam.
Firstly, inflation for construction materials bottomed out in July and remains on the rise at the end of
September. This, in our opinion, indicates a growing demand for materials to carry out construction work.
Secondly, industrial production expanded by 9.7% y-o-y in September, a significant increase from 4.4%
y-o-y in August and the fastest rate of expansion since February. Industrial production is a measure of
output of the industrial sector (ie, manufacturing, mining, and utilities) and this increase in production
could boost the demand for non-residential buildings such as mining-related facilities and industrial
buildings (ie, factories, warehouses).
© Business Monitor International Ltd
Page 21
Vietnam Infrastructure Report Q1 2013
Monetary Conditions Conducive
Vietnam – Policy Rate, % & Headline CPI – Housing &
Construction Materials, % y-o-y
Source: General Statistics Office, State Bank of Vietnam
2013: Infrastructure Underperformance
We believe that the recovery in Vietnam's construction sector will last well into 2013, with real growth
for the sector forecast to come in at 7.1% for 2013. This recovery will be led by the residential and nonresidential buildings construction sector. Real growth for the building industry is forecast to reach 8.2% in
2013, compared to 5.8% for the infrastructure sector in the same year.
© Business Monitor International Ltd
Page 22
Vietnam Infrastructure Report Q1 2013
Residential And Non-Residential Leads
Vietnam – Construction (And Sum-Components) Industry Value
Real Growth Forecasts
e/f= BMI estimate/forecast. Source: General Statistics Office, State Bank of Vietnam, BMI
This underperformance of the infrastructure sector is primarily due to difficulties in securing financing.
We continue to see evidence of infrastructure projects being delayed by financing shortages. The latest
statistics from the transport ministry's department of planning and investment showed that in mid-2012,
there were around 107 road upgrading projects in need of funds, while only six of the 14 expressways
projects to be developed in Vietnam had reached financial closure by mid-2012. These financing
shortages are not confined to the transport sector. Vietnam's state utility EVN reported in late-June that
they faced a funding gap of around VND185trn (US$8.9bn) for power plant projects between 2011 and
2015.
In our opinion, these financing issues will not be resolved anytime soon due to three factors.
Firstly, the Vietnamese government is heavily burdened by the debts of its state-owned enterprises
(SOEs), and the need to repay this debt is limiting the government's ability to finance infrastructure
projects. Vietnam's budget for capital investment, which is primarily channelled towards infrastructure
development, contracted in September, the first time in seven months. Although the Vietnamese
government plans to raise funds by privatising several SOEs and raising electricity prices, these measures
would require several years of implementation before they could have an impact on project financing.
© Business Monitor International Ltd
Page 23
Vietnam Infrastructure Report Q1 2013
Limited By Debt
Vietnam – Capital Investment By State Budget, VNDbn And %
chg y-o-y
Source: Bloomberg, BMI, General Statistics Office of Vietnam
Secondly, we believe that poor global economic conditions will dampen the demand for riskier assets
such as infrastructure projects in Vietnam. The sector remains fraught with business environment issues
such as slow land clearances, poor planning, corruption, significant red tape, and lack of regulatory
clarity. These issues are a deterrent to foreign investment as they have led to severe delays and cost
overruns for many infrastructure projects in recent years. In September 2012, the transport ministry stated
that in the past three to six years, the implementation cost for transport projects jumped by an average of
180% against their approval cost.
The demand for infrastructure projects in Vietnam is also dampened by a lack of financial viability. Over
the course of 2012, we have noticed several transport infrastructure projects struggle to be financially
viable. A number of airports in Vietnam, particularly in the central provinces, are currently operating way
below capacity despite the rapid rise in the number of visitors in Vietnam, while certain toll roads in
HCM City are forced to reduce their toll fees to attract sufficient commuters to stay viable. While cost
overruns have contributed to this lack of viability, we believe that the transport infrastructure sector could
be oversaturated, as economic activity within Vietnam has not reached levels that are financially viable
for such infrastructure.
© Business Monitor International Ltd
Page 24
Vietnam Infrastructure Report Q1 2013
In Decline
Vietnam – Foreign Claims From European Banks, US$mn And %
chg y-o-y
Source: Bank For International Settlements (October 2012), BMI
Lastly, Vietnam relies significantly on European banks to finance its infrastructure and residential
development. With European banks set to face difficult economic conditions and stricter capital controls
over the coming years, funds from these European sources could decline as European banks look to
strengthen their capital ratios by calling back higher-risk loans and imposing curbs on issuing new loans.
For instance, lending growth from European banks to Vietnam continues to be in decline, falling from
10.5% y-o-y in Q411 to 9.4% y-o-y in Q112, according to data from the Bank Of International
Settlements. Although the Vietnamese government is trying to seek funds from non-banking sources such
as project bonds and sovereign wealth funds, it remains to be seen if they will be sufficient to cover the
decline in credit from European banks.
© Business Monitor International Ltd
Page 25
Vietnam Infrastructure Report Q1 2013
Transport Infrastructure
Table: Vietnam Transport Infrastructure Industry Data, 2010 – 2016
2010
2011
2012e
2013f
2014f
2015f
2016f
Transport Infrastructure Industry
Value As % Of Total
Infrastructure
71.2
68.6
67.8
67.6
67.6
67.5
67.3
Transport Infrastructure Industry
Value, VNDbn
45,677.4
52,406.5
56,306.6
62,908.2
70,077.4
77,147.0
84,380.8
Transport Infrastructure Industry
Value, US$bn
2.4
2.5
2.7
3.0
3.4
3.8
4.2
Transport Infrastructure Industry
Value Real Growth, % chg y-o-y
21.2
-3.9
-1.6
5.4
5.1
4.8
4.4
Transport Infrastructure Industry
Value As Percent Of Total
Construction (%)
32.8
32.2
31.8
31.3
31.0
30.6
30.0
Roads and Bridges Infrastructure
Industry Value As % of Transport
Infrastructure
34.2
48.5
48.3
49.2
49.9
50.4
50.8
Roads and Bridges Infrastructure
Industry Value, VNDbn
15,621.7
25,394.5
27,223.8
30,946.4
34,943.5
38,856.7
42,852.4
Roads and Bridges Infrastructure
Industry Value, US$bn
0.8
1.2
1.3
1.5
1.7
1.9
2.1
Roads and Bridges Infrastructure
Industry Value Real Growth, %
chg y-o-y
34.3
43.9
-1.8
7.3
6.7
5.9
5.3
Roads and Bridges Infrastructure
Industry As % of Total
Infrastructure
24.3
33.2
32.8
33.2
33.7
34.0
34.2
Roads and Bridges Infrastructure
Industry As % of Total
Construction
11.2
15.6
15.4
15.4
15.5
15.4
15.2
Railways Infrastructure Industry
Value As % of Transport
Infrastructure
31.1
20.7
20.4
20.0
19.5
19.2
19.0
Railways Infrastructure Industry
Value, VNDbn
14,205.7
10,843.3
11,493.3
12,594.1
13,699.1
14,824.7
16,015.9
Railways Infrastructure Industry
Value, US$bn
0.7
0.5
0.5
0.6
0.7
0.7
0.8
Railways Infrastructure Industry
Value Real Growth, % chg y-o-y
25.2
-42.3
-3.0
3.2
2.5
3.0
3.0
© Business Monitor International Ltd
Page 26
Vietnam Infrastructure Report Q1 2013
Table: Vietnam Transport Infrastructure Industry Data, 2010 – 2016
2010
2011
2012e
2013f
2014f
2015f
2016f
Railways Infrastructure Industry
As % of Total Infrastructure
22.1
14.2
13.8
13.5
13.2
13.0
12.8
Railways Infrastructure Industry
As % of Total Construction
10.2
6.7
6.5
6.3
6.1
5.9
5.7
Airports Infrastructure Industry
Value As % of Transport
Infrastructure
17.9
11.7
11.9
11.4
11.1
10.7
10.5
Airports Infrastructure Industry
Value, VNDbn
8,176.3
6,113.6
6,687.2
7,190.5
7,758.5
8,284.5
8,854.0
Airports Infrastructure Industry
Value, US$bn
0.4
0.3
0.3
0.3
0.4
0.4
0.4
-19.3
-43.9
0.4
1.2
1.6
1.5
1.9
Airports Infrastructure Industry As
% of Total Infrastructure
12.7
8.0
8.1
7.7
7.5
7.2
7.1
Airports Infrastructure Industry As
% of Total Construction
5.9
3.8
3.8
3.6
3.4
3.3
3.1
Ports Harbours and Waterways
Infrastructure Industry Value As
% of Transport Infrastructure
16.8
19.2
19.4
19.4
19.5
19.7
19.7
Ports Harbours and Waterways
Infrastructure Industry Value,
VNDbn
7,673.8
10,055.1
10,902.3
12,177.2
13,676.4
15,181.1
16,658.5
Ports Harbours and Waterways
Infrastructure Industry Value,
US$bn
0.4
0.5
0.5
0.6
0.7
0.7
0.8
Ports Harbours and Waterways
Infrastructure Industry Value Real
Growth, % chg y-o-y
62.1
12.4
-0.6
5.3
6.1
5.8
4.7
Ports Harbours and Waterways
Infrastructure Industry As % of
Total Infrastructure
12.0
13.2
13.1
13.1
13.2
13.3
13.3
Ports Harbours and Waterways
Infrastructure Industry As % of
Total Construction
5.5
6.2
6.2
6.1
6.1
6.0
5.9
Airports Infrastructure Industry
Value Real Growth, % chg y-o-y
e/f = BMI estimate/forecast. Source: BMI Research
© Business Monitor International Ltd
Page 27
Vietnam Infrastructure Report Q1 2013
Table: Vietnam Transport Infrastructure Long Term Forecasts, 2015-2021
2015f
2016f
2017f
2018f
2019f
2020f
2021f
Transport Infrastructure Industry
Value As % Of Total
Infrastructure
67.5
67.3
67.0
66.6
66.2
65.7
65.4
Transport Infrastructure Industry
Value, VNDbn
77,147.0
84,380.8
92,186.3
100,318.4
108,892.0
117,562.2
126,407.3
Transport Infrastructure Industry
Value, US$bn
3.8
4.2
4.6
5.0
5.4
5.9
6.3
Transport Infrastructure Industry
Value Real Growth, % chg y-o-y
4.8
4.4
4.3
3.8
3.5
3.0
2.5
Transport Infrastructure Industry
Value As Percent Of Total
Construction (%)
30.6
30.0
29.4
28.8
28.1
27.5
26.8
Roads and Bridges Infrastructure
Industry Value As % of Transport
Infrastructure
50.4
50.8
51.1
51.4
51.6
51.7
51.8
Roads and Bridges Infrastructure
Industry Value, VNDbn
38,856.7
42,852.4
47,104.8
51,516.1
56,145.4
60,796.8
65,508.9
Roads and Bridges Infrastructure
Industry Value, US$bn
1.9
2.1
2.4
2.6
2.8
3.0
3.3
Roads and Bridges Infrastructure
Industry Value Real Growth, %
chg y-o-y
5.9
5.3
4.9
4.4
4.0
3.3
2.8
Roads and Bridges Infrastructure
Industry As % of Total
Infrastructure
34.0
34.2
34.2
34.2
34.1
34.0
33.9
Roads and Bridges Infrastructure
Industry As % of Total
Construction
15.4
15.2
15.0
14.8
14.5
14.2
13.9
Railways Infrastructure Industry
Value As % of Transport
Infrastructure
19.2
19.0
18.8
18.7
18.6
18.6
18.6
Railways Infrastructure Industry
Value, VNDbn
14,824.7
16,015.9
17,322.8
18,723.5
20,238.6
21,816.8
23,471.3
Railways Infrastructure Industry
Value, US$bn
0.7
0.8
0.9
0.9
1.0
1.1
1.2
Railways Infrastructure Industry
Value Real Growth, % chg y-o-y
3.0
3.0
3.2
3.1
3.1
2.8
2.6
Railways Infrastructure Industry
As % of Total Infrastructure
13.0
12.8
12.6
12.4
12.3
12.2
12.1
Railways Infrastructure Industry
As % of Total Construction
5.9
5.7
5.5
5.4
5.2
5.1
5.0
© Business Monitor International Ltd
Page 28
Vietnam Infrastructure Report Q1 2013
Table: Vietnam Transport Infrastructure Long Term Forecasts, 2015-2021
2015f
2016f
2017f
2018f
2019f
2020f
2021f
Airports Infrastructure Industry
Value As % of Transport
Infrastructure
10.7
10.5
10.4
10.3
10.3
10.4
10.5
Airports Infrastructure Industry
Value, VNDbn
8,284.5
8,854.0
9,577.0
10,373.0
11,255.3
12,207.7
13,240.2
Airports Infrastructure Industry
Value, US$bn
0.4
0.4
0.5
0.5
0.6
0.6
0.7
Airports Infrastructure Industry
Value Real Growth, % chg y-o-y
1.5
1.9
3.2
3.3
3.5
3.5
3.5
Airports Infrastructure Industry As
% of Total Infrastructure
7.2
7.1
7.0
6.9
6.8
6.8
6.8
Airports Infrastructure Industry As
% of Total Construction
3.3
3.1
3.1
3.0
2.9
2.9
2.8
Ports Harbours and Waterways
Infrastructure Industry Value As
% of Transport Infrastructure
19.7
19.7
19.7
19.6
19.5
19.3
19.1
Ports Harbours and Waterways
Infrastructure Industry Value,
HKDbn
15,181.1
16,658.5
18,181.7
19,705.7
21,252.7
22,740.9
24,186.8
Ports Harbours and Waterways
Infrastructure Industry Value,
US$bn
0.7
0.8
0.9
1.0
1.1
1.1
1.2
Ports Harbours and Waterways
Infrastructure Industry Value Real
Growth, % chg y-o-y
5.8
4.7
4.1
3.4
2.9
2.0
1.4
Ports Harbours and Waterways
Infrastructure Industry As % of
Total Infrastructure
13.3
13.3
13.2
13.1
12.9
12.7
12.5
Ports Harbours and Waterways
Infrastructure Industry As % of
Total Construction
6.0
5.9
5.8
5.7
5.5
5.3
5.1
e/f = BMI estimate/forecast, Source: BMI Research
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Vietnam Infrastructure Report Q1 2013
Transport Infrastructure Outlook and Overview
Roads Dominant
Transport Infrastructure Value, By Industry, VNDbn
e/f = BMI estimate/forecast, Source: BMI, Local news sources, industry sources,
BMI Research (Major Projects Database)
BMI View: The transport sector forms the majority of infrastructure investment in Vietnam throughout
our 10-year forecast period, accounting for 65% in 2021. Vietnam still suffers from a significant deficit in
transportation infrastructure and we believe the Vietnamese government will continue to develop this
sector over the medium term. This is reflected in our forecast for transport infrastructure industry value,
which is expected to grow by an average of 4.8% year-on-year (y-o-y) between 2013 and 2017.
Title: Competitiveness Of Vietnam's Infrastructure
Rank/133 in
2009/10*
Rank/139 in
2010/11**
Rank/142 in
2011/12***
Rank/144 in
2012/13****
102
117
123
120
Quality of Railroad Infrastructure
58
59
71
68
Quality of Port Infrastructure
99
97
111
113
Quality of Air Transport Infrastructure
84
88
95
94
111
123
123
119
Quality of Roads
Quality of Overall Infrastructure
*Rank out of 133 countries in 2009/10. ** Rank out of 139 countries in 2010/11. *** Rank out of 142 countries in
2011/12. ****Rank out of 144 countries in 2012/13. Source: World Economic Forum, Global Competitiveness Report
2009/10, 2010/11, 2011/12 and 2012/13
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Roads Dominate With....
Within the transport infrastructure sector, the roads and bridges sub-sector leads in terms of contributions
to the total transport infrastructure industry value, accounting for 49% of total value in 2013. Although
most of Vietnam’s national road network is paved (only 26%, or 45,603km out of 171.392km, is
unpaved, as of 2008), surveys indicated that approximately 40% of the network is in a poor or very poor
condition and will require substantial investment to reach a maintainable condition. Vietnam’s Ministry
of Transport and Communications has estimated that the country will require close to US$60bn in the
period up to 2020 to fund new road infrastructure projects. Reaching this investment target will be crucial
to Vietnam’s long-term economic well-being, as roads facilitate the transport of most freight within the
country, with a market share of around 60% of domestic cargo. Combined with increased traffic levels in
Vietnam’s urban areas and growing trade volumes to and from the country, there is a need for roads.
Over the past quarter, there have been several announcements regarding new road projects to be
developed in Vietnam:
ƒ
In July 2012, the Ministry of Transport said that construction work on 24 new roads is expected
to start soon. They include: Ho Chi Minh roadway La Son-Tuy Loan section, Long Thanh-Dau
Giay highway, Da Nang-Quang Ngai highway, BOT and BT highway tunnel over Ca mountain
pass on National Road 1A, Tan Vu- Lach Huyen motorways.
ƒ
In August 2012, Transport Engineering Design Incorporated (TEDI) presented detailed planning
report of the ring road 5 in Hanoi. The 385km project is expected designed in detail between
2012 and 2015, with the US$4.7bn project fully completed by 2030. Ring road 5 is expected to
be divided into four parts: Son Tay-Phu Ly, Phu Ly-Bac Giang; Bac Giang-Thai Nguyen and
Thai Nguyen-Son Tay.
ƒ
In September 2012, Thailand-based Italian-Thai Development signed a MoU to draw out the
investment plan and technical design for phase 2 of the Halong – Mong Cai expressway project
in the Quang Ninh province. The 134km project, which is part of the Noi Bai – Halong – Mong
Cai expressway project, is expected to cost a total of US$2.1bn. The expressway is expected to
take three years to be completed.
However, there are concerns about the viability of toll roads in Vietnam over the near-term. In July 2012,
the Vietnamese government accepted a proposal from the Ministry of Finance to reduce toll fees for
trucks using the Ho Chi Minh City (HCMC)Trung Luong expressway by 25-30%. The approval was given on July 4 2012 and would allow the
finance ministry to finalise the details and determine a date for the toll cut. Once implemented, trucks
weighing over 18 tonnes and 40-feet container trucks would pay around VND448,000-480,000 (US$2223) per trip for using the 61.9km expressway, compared with the current fee of VND640,000 (US$31).
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The decision to cut toll fees is because traffic volumes fall sharply in the HCMC-Trung Luong
expressway once it required commuters to pay a toll fee in February 2012.
We believe that this toll cut in one of the highways linking Vietnam's most economically developed cities
reflects our concerns about the viability of building toll roads in Vietnam. The approval of the toll cut not
only suggests that the sector could be oversaturated, but that economic development within Vietnam has
not reached levels that are financially viable for such tolls roads.
This lack of financial viability for toll roads in Vietnam is collaborated with anecdotal evidence regarding
the HCMC-Trung Luong Expressway. According to the association, heavy trucks – the main vehicle used
by transport companies – have to pay a toll fee of VND320,000-640,000 for a round trip on the
expressway. However, these companies only earn a profit of VND300,000-400,000 for each transport trip
within 100km.
Costly To Build
Investment Cost of Expressways In Vietnam, US$mn per km
Source: Vietnam The Business Times (May 3 2012).
We believe that this lack of viability and the need for unattractive toll fees are due to the high cost of
construction for expressways within Vietnam. According to anecdotal evidence from the Vietnamese
Business Times, the cost of constructing an expressway in Vietnam is about 1.5-2 times higher than
neighbouring countries such as China, Indonesia, Malaysia and Thailand. The HCMC-Trung Luong
expressway, for example, costs around US$9.9mn per km, higher than an average expressway in China
(US$6mn/km) and the US (US$8mn/km).
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We believe there are several factors contributing to this high construction cost for toll roads:
ƒ
High inflation and domestic interest rates.
ƒ
The lack of project management expertise to complete road projects within budget, resulting in
site clearance delays and cost overruns.
ƒ
Corruption, with anecdotal evidence suggesting that 30% of a project's value is pocketed by the
contractor in order to pay bribes to relevant parties.
ƒ
Deficiency in regulations and government institutions that effectively balance the need to
safeguard the public interest with the need for expeditious provision of land for infrastructure
development. The current regulation – Decree 69/2009/ND-CP – only gives district-level
people's committees, not the central government, the right to hire companies to settle site
clearance and compensation issues.
ƒ
A lack of specialised government institutions that can mediate between developers and
landowners about compensation. Combined with the perceived potential for corruption at the
district level, these deficiencies do not provide landowners with the assurance that they are
receiving the fair amount of compensation for their land. As a result, they are unwilling to sell
their land, causing delays in site clearances and cost overruns for road projects. Site clearances
have been repeatedly reported by local media sources as the key reason for holding up major
road projects in Ho Chi Minh City, and they include the 14km Tan Son-Nhat Binh Loi outer ring
road project, the 245km Noi Bai-Lao Cai expressway, the 55km HCM City-Long Thanh-Dau
Giay Highway and the widening of the Hanoi Highway.
This lack of viability, combined with poor global economic conditions, makes it difficult for Vietnam to
raise financing for its road projects. These projects include the Ben Luc-Long Thanh expressway, the
Danang-Quang Ngai expressway, the Dau Giay-Phan Thiet expressway project, the National Highway 1
expansion project, the Trung Luong-My Thuan expressway project, the La Son – Tuy Loan expressway
project, the Rach Chiec Bridge No 2 on the Eastern Ring Road and the road linking the East-West
Highway with the HCM City-Trung Luong Expressway.
....Railways
Railways accounted for around 20% of Vietnam's total transport infrastructure industry value in 2013,
according to BMI. Vietnam’s rail network stretches for 2,347km, but only 178km is standard gauge
(1.435m gauge). The network has 1,790 bridges totalling 45km and 11.5km of tunnels. The principal axis
is Hanoi-Ho Chi Minh City (1,726km). Other lines emanating from Hanoi are to Hai Phong (102km), Lao
Cai (296km) and Dong Dang (162km).
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Vietnam had previously planned to build a US$56bn north-south high-speed railway line, but this was
rejected by the Vietnamese National Assembly in June 2010. BMI views this as a positive and
encouraging move in light of the serious concerns regarding the prohibitive price tag and worries about
the misallocation of resources. The hefty cost and potential inflationary effects on Vietnam's foreign debt
were the main grounds for opposition. Having said that, Japan announced in September 2012 that it
remains keen to assist Vietnam in building this north-south high-speed railway line by 2030.
Table: Vietnam Railway Corporation’s Main Targets
Upgrading north-south railway routes and improving the running speed of passenger trains and freight trains to 100120kph and 100kph, respectively.
Upgrading west-east railway corridor so that the maximum speed of passenger trains and freight trains is 80-100kph
and 60-80kph, respectively.
Paying more attention to the development of new routes between Ho Chi Minh City-Vung Tau, Ho Chi Minh City-Can
Tho, Thap Cham-DaLat, Yen Bai-Tuyen Quang-Bac Thai, Lien Chieu-Dung Quat, etc.
Carrying out surveys and preparing to link the railway network to Singapore-Kunming route is aimed at fulfilling
missing links such as Ho Chi Minh City-Phnom Penh city and Cambodia-Vietnam.
Source: Vietnam Railways
The government has since looked at improving its existing railway network, In June 2012, the
Vietnamese government approved Vietnam Railway Corporation 's railway development plan for the
2012-2015 period. The plan will involve a total investment of VND200trn (US$9.5bn), with VND195trn
(US$9.28bn) to be directed towards the upgrading and construction of new railway lines and connecting
them to major ports, industrial zones and tourist attractions. The plan entails the upgrading of the northsouth Thong Nhat railway. Preparations are to be concluded to build railway routes connecting HanoiHCM City, and the double tracking of the Lao Cai-Hanoi-Hai Phong and Hanoi-Dong Dang corridors.
The detailed plan for the construction of a new 191km railway line from HCM City to Can Tho is also
expected to be completed in 2013.
By 2015, Hanoi Railway Station is expected to emerge as the centre of the country's system. The station
will join the other means of transport and boast a multi-functional service centre. The upgraded facilities
and services are to have an annual transportation capacity of 13.7mn tonnes of freight and 17.7mn
passengers.
However, just like the roads, the railway sector suffers from a lack of financing. In October 2012, the
deputy director of the railway administration, Nguyen Van Doanh, said that a total of 20 railway projects
were earlier recommended by the Vietnam National Railway Administration to be developed under the
forms of BOT, build-transfer and build-transfer-operate and this list of projects was submitted to the
Ministry of Transport in early 2010, but a lack of investors prevented from starting them. Among the 20
railway projects calling for investment in 2010-2020, they include the 381km Lao Cai-Hanoi-Hai Phong
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railway line, the 114km Bien Hoa-Vung Tau route and the 49km railway connecting Trang Bom in Dong
Nai with Hoa Hung in HCM City.
Urban Railways
As most of the railway projects in Vietnam are at an early stage, we believe that it would urban railways
projects that will drive our railways infrastructure industry value forecasts over the short to medium term.
BMI believes these urban railway projects will be crucial to Vietnam's economic and social development,
as the country attempts to deal with rapid urbanisation, while successfully managing a booming economy.
The combination of rising urbanisation and steady population growth is exerting considerable pressure on
Vietnam's urban transportation systems. This urbanisation trend is felt acutely in Hoh Chi Minh City and
Hanoi, the country's largest cities and chief commercial hubs. Both cities are home to approximately 16%
of the country's total population and traffic conditions have worsened. Congestion occurs frequently at
road junctions during rush hour and average traffic speeds vary from around 10-30km/h in both cities.
There is much scope for traffic conditions to worsen further. Not only could there be a fundamental shift
to cars due to rising incomes – for example, 90% of the vehicles in HCM City are motorcycles – but
Vietnam is also looking to accelerate the urbanisation rate in the country. According to a draft national
urban development programme approved by the government in June 2012, Vietnam will strive to achieve
an urbanisation rate of 38% with 870 urban areas by 2015 and 45% with 940 urban areas by 2020. The
country is estimated to currently have an urbanisation rate of 30%.
The development of an urban railway system will therefore help alleviate many of the problems
associated with congestion. No other system can carry more people and run on such a dependable
schedule at a lower cost, and we expect Vietnam to continue to push forward with urban railway projects.
As of May 2012, the government transport plan for Hanoi to 2030 includes eight urban railways, with a
total length of 284km, and six subway lines, linking key parts of Hanoi and its outlying areas. Meanwhile,
Ho Chi Minh City aims to complete around six metro lines with a total length of 120km by 2020.
Some of these urban railway plans have moved forward (such as the US$2.25bn Ben Thanh-Suoi Tien
Metro line 1 in Ho Chi Minh City), but just like the roads sector, several have also faced delays despite
generous financing from foreign countries and multinational development banks. These projects are
mainly suffering from slow site clearances (such as the Cat Linh Street-Ha Dong District railway line in
Hanoi) and cost overruns (such as the Nhon-Hanoi Station urban railway line No. 3).
Ports
Although roads and railways are dominating transport infrastructure, we highlight that ports, harbours and
waterways will see their share increase significantly over the coming years. Vietnam's dense river and
canal network – which measures 17,702km – provides the country with a highly developed inland
waterway system, but it’s port infrastructure is poor by international standards. Vietnam's seaport network
comprises of many small and medium-sized entities, with inefficient distribution. Most ports in the
northern part of Vietnam are dispersed and small in scale, while most big ports are located on rivers, such
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as Hai Phong and Ho Chi Minh City, with limited depth at the entrance. Some ports are located in big
cities, thus making it difficult to connect with other modes of transport due to traffic congestion. With the
exception of several new or upgraded ports, most have been operating for many years and lack
investment. The loading and unloading equipment in some ports is obsolete, leading to low productivity.
The average productivity of a Vietnamese port is only 2,500 tonnes/m per wharf, which is less than half
of the productivity of other ports in the region. In June 2011, the Vietnam Marine Department stated that
the country was home to 266 large and small-scale seaports, but was only able to handle 100mn tonnes of
cargo and no large vessels.
BMI anticipates increasing investment into Vietnam's port infrastructure, as it is a sector crucial to the
country's economic growth. There are two major factors central to our view:
ƒ
The country needs to upgrade its ports to avoid major bottlenecks, which would constrain the
country's export led-growth and investment. Vietnam's port infrastructure ranked only 111th out
of 142 countries in the 2011/12 competitiveness report published by the World Economic
Forum.
ƒ
Vietnam is becoming increasingly important, not just to growing Intra-Asian trade, but also on
the global stage. An increasing number of shipping companies are choosing Vietnam as their
port of call as they ply the east-west trade route. Vietnam's ports are gradually graduating from
feeder stop-offs on the major routes to boasting direct services on both the Asia-US and AsiaEurope services.
Vietnam is keen to address this deficit, but lacks the necessary fiscal strength to meet the required
investment. As such, it is looking to public-private partnerships (PPPs) to develop its port sub-sector.
Vietnam’s Ministry of Planning and Investment has been tasked with submitting draft regulations on
PPP-infrastructure projects. There are 23 proposed PPP projects relating to seaport development and
services, involving a total investment of US$3.3bn. Twelve of the proposed projects involve seaport
construction. PPPs could make Vietnam's master plan for port development, which calls for total cargo
volume throughput to increase to 500-600mn tonnes a year by 2015 and 800-1,100mn tonnes by 2020,
more achievable.
Under the plan, Vietnam needs about US$4bn to build an additional 15-20km of wharves by 2020.
According to Nguyen Chi Hung of the Vietnam Maritime Administration, the development of projects
that allow ports to handle larger vessels and meet international-standards will take priority. These include
the Van Phong Port, which can handle 9,000-15,000 20-foot equivalent units (TEU) container ships, and
Ba Ria-Vung Tau Port, which can handle 4,000-8,000TEU ships.
Activity in the maritime sector is mainly concentrated on boosting the capacity of the southern economic
zone, especially in the Thi Vai River area. Major global port operators with interests in the region include
Hutchison Port Holdings, Singapore’s PSA International, Saigon Port, Denmark’s Maersk and
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France’s Compagnie Maritime d'Affrètement-Compagnie Générale Maritime (CMA CGM). These
companies have all been involved in the operation and development of major Vietnamese ports in the Thi
Vai River.
The Vietnamese government also has major plans to boost the combined port capacity in the Mekong
Delta provinces, from 15.7mn tonnes in 2010 to 28mn tonnes in 2020. According to plans developed by
the government in September 2011, the expansion in capacity will focus on river ports and seaports
located on the Tien and Hau rivers, which are the main tributaries of the Mekong River.
New sea ports will also be constructed in the Ca Mau peninsula (part of the Mekong Delta region) and in
the Gulf of Thailand. These include the Nam Can seaport in the Ca Mau province, as well as the Hon
Chong, Bai No and Binh Tri ports in the Kien Giang province. These ports, once completed, will also be
able to receive vessels of 5,000-10,000DWT.
However, Vietnam’s difficult business environment continues to slow project implementation. In July
2011, construction work on the US$3.6bn Van Phong International Port in Vietnam's southern central
province of Khanh Hoa was suspended, because initial feasibility studies for the port project did not
sufficiently assess the site's geology. This resulted in inconsistencies in pile design during the
construction phase. Although the project investor Vinalines had signed a deal with Netherlands-based
Rotterdam Port for the port’s construction, the lack of financial strength in Vinalines has finally foreced
the government to suspend the project in September 2012. The Transport ministry has since directed the
Vietnam Maritime Administration to set up plans to call for domestic and foreign investments in the
construction of the port under any appropriate forms.
Another business environment issue that is hindering the growth of the port sub-sector is the lack of
coordination in developing the different types of infrastructure (roads, ports, airports, railways). Two
ports in Ho Chi Minh City – the US$17.5mn Phu Huu Port and the US$19.1mn Phu Dinh Port – have
been left unused for several years due to lack of access to key roads. These ports are connected to streets
that are either often flooded, too narrow for container trucks or lack access to highways.
A shortage of qualified logistics staff is also an issue, where according to the Vietnam Freight Forwarders
Association (July 2012), only 40% of the demand for qualified logistics staff is met.
Lastly, access to financing remains an issue, despite a sharp decline in Vietnam's interest rates. In June
2012, Formosa Plastics Group (FPG) was reported to be facing difficulties in obtaining funds for its steel
and seaport project in Vietnam's Central Ha Tinh province. This is due to lending limitations at foreign
bank branches in Vietnam, as a foreign bank is not permitted to lend more than 15% of its own equity for
a single borrower. This lending limitation comes under the Law on Credit Institutions, which became
effective on January 1 2011. Formosa Ha Tinh, which is also the investor of the US$8.9bn project, is
working on the first phase, which entails the construction of a 14-berth Son Duong port, a hotel for
workers, a 427-room guest house and office buildings. The investor requires US$3bn to be mobilised
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from a foreign bank outside Vietnam and US$3bn from foreign bank branches in Vietnam. The investor,
which is using its own capital for the construction work, is planning to start commercial operations by
end-2015.
Airports
Although the airport infrastructure sub-sector accounts for the smallest portion of transport infrastructure,
the government has ambitious plans to modernise and expand the country’s airport infrastructure, which
consists of 44 airports. This willingness by the government to get projects under way provides grounds
for optimism, and this has attracted foreign investors to the sector. In April 2011, US-based ADC-HAS
presented a proposal to the Vietnamese Ministry of Planning and Investment with regard to investing in
seven airports in the country's central region – Chu Lai, Phu Bai, Da Nang, Tuy Hoa, Quy Nhon, Pleiku
and Cam Ranh airports.
However, the lack of demand for air travel in the near term and the stiff competition from other airports in
Asia to serve as regional hubs could make it difficult for these new airports to be financially viable.
In March 2012, Vietnam announced that it was in the search for foreign investors to help construct two
international airports: the US$1.2bn Van Don International airport in the northern province of Quang
Ninh and the US$10bn Long Thanh International airport in the southern province of Dong Nai. The two
airports are part of a strategy to compete with neighbouring airports in Thailand and Singapore.
According to Nguyen Cong Hoan, a director for the Vietnamese airport operator Airports Corporation
of Vietnam, foreign investors have already expressed interest in the Van Don airport. However, he did
not provide specific details of investors.
Both airports are part of the government's strategy to develop as many as six international airports, which
include locations such as Cam Ranh, Chu Lai, Danang and Hue. The Long Thanh airport is the
centrepiece of this expansion, as it is the largest greenfield airport project in Vietnam (and possibly in
Asia), with an eventual annual passenger capacity of 100mn per year, a 5mn tonne cargo capacity and
four runways.
While there are compelling factors driving the government to build new airports – to meet a growing
demand to travel within Vietnam's population and to unlock the growth potential of its tourism sector –
these airports could struggle to be financially viable if their aim is to serve as regional transit hubs. Not
only is there a lot of competition from other airports in Asia to serve as regional hubs, but these airports
already have well-established airlines using them as their main point of transit.
Several airports in Vietnam, particularly in the central provinces, are already operating way below
capacity, despite the rapid rise in tourists. The Dong Hoi airport incurred losses of VND6.9bn
(US$332,000) in 2010 and VND9bn (US$432,000) in 2011. This suggests that the demand for new
airports is not broad-based throughout Vietnam, with air traffic in certain regions still immature.
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Another reason for this lack of usage could be due to the small number of runways that are able to handle
international flights. Most of the international flights in Vietnam are handled by just three of the country's
21 airports, while only nine of these have runways with a length of more than 3,047m, which is a standard
requirement to handle international flights for wide-body aircraft. This suggests that Vietnam could need
to upgrade the runways in its existing airports, rather than construct new airports. As of September 2012,
Vietnam continues to find difficult in securing financing for its airport projects and is still seeking
investment capital from different sources.
Major Projects Table – Transport
Table: Major Projects – Transport
Project Name
Value
(US$mn)
Capacity/
Length
Companies
Timeframe
Status
Airports
Quang Tri Airport – Gio
Linh District Airport
Passenger terminal,
Danang International
Airport
Cam Ranh International
Airport expansion
Noi Bai International
Airport extension
(includes T2 terminal)
Phu Quoc International
airport, Duong To
Commune
Chu Lai International
Airport
Long Thanh international
airport (Passenger
terminal, runway, parking
place), Dong Nai
province
Phu Bai International
Airport upgrade, Thu
Thien-Hue Province
na
na
2009-2015
Planning stage –
Approved in
February 2009
74
6mn
passengers
/year
Middle Airports Corp.,
Louis Berger Group,
Airport Consultants B.V.
and National
Construction Consultants
2006 –
December
2011
Completed, Two
years behind
schedule
(December 2011)
590
5.5mn
passengers/
yr
na
2009 – 2020
Project approved,
US$9.5mn terminal
completed in late2009 (Nov 2011)
960
10mn
passengers
/year
Northern Airports
Corporation (NAC),
Taisei, Hoa Binh
Construction and Real
Estate Corporation
September
2012 –
November
2014
Contract awarded
(September 2012);
US$759mn ODA
loan from Japan
810
7mn
passengers/
yr
Southern Airports
Corporation
2009 – Q4
2012
Under Construction,
Construction on
terminal started in
end-Jan 2012
1000
4mn
passengers
/year
Garuda Asea, Airis
International
-2025
MoU for feasibility
study approved
6700
100mn
passengers
/year
Japan Airport
Consultants, Airports
Corporation of Vietnam
2015-2020
At planning stage,
finalising investment
plan (August 2012)
595
5mn
passengers/
year
2011 – 2020
At planning stage,
government to
arrange financing
for 2012 (Nov 2011)
27
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Middle Airports Corp.
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Vietnam Infrastructure Report Q1 2013
Table: Major Projects – Transport
Project Name
Tien Lang International
Airport, Hai Phong
Pleiku Airport (two-phase
upgrade), Gia Lai
Da Nang International
Airport terminal
expansion
Seven PPP airport
projects (Chu Lai, Phu
Bai, Da Nang, Tuy Hoa,
Quy Nhon, Pleiku and
Cam Ranh)
International airport,
Haiphong, Northern
Vietnam
Quang Ninh International
airport, Doan Ket
commune, Van Don
region, Quang Ninh
province
Vung Tau airport
expansion
Van Don International
airport, 45km from Ha
Long Bay, Quang Ninh
province
Lao Cai international
airport
Value
(US$mn)
Capacity/
Length
Companies
Timeframe
Status
na
80mn
passengers
/year
na
2010-
At planning stage
105
500000
passengers
/year
na
2011-2030
(first phase)
At planning stage
64.5
6mn
passengers
/year
Da Nang International
Airport
na
Completed;
Opening in May
2011
na
na
na
2011-
Proposal for
projects send to
Vietnamese Ministry
of Planning and
Investment (MoPI)
by ADC-HAS
na
100mn
passengers/
yr
na
2011-
Project announced
2013 – 2015
Preparation to be
finalised by 2012,
Project site moved
to Doan Ket
commune (Jan
2012)
2011 -
At planning stage,
received approval
for new project site
(September 2011)
Airports Corporation of
Vietnam
March 2012
-
Project announced,
at planning stage,
Foreign interest
expressed (Mar-12)
na
na
January
2012 – 2020
At planning stage,
project announced
(January 2012)
2009-2015
Second phase
under construction
250
na
1200
62.6
2-5mn
passengers/
yr
na
na
Joinus, Korea Airports
Corporation
na
Ports
Cai Cui port project
32
60000
tonnes
Can Tho City People's
Committee/Vietnam
Shipping Line Corp
(Vinalines)
Saigon International
Terminal, Phu My 1
Industrial Park
163
na
China Harbour
Engineering Company
2009-2011
Completed
Deep water Port at Khe
Ga Cape, Binh Thuan
Province
250
35mn tonnes
/year
Vinacomin
2009-2020
At planning stage
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Table: Major Projects – Transport
Project Name
Value
(US$mn)
Capacity/
Length
Companies
Ben Dam deep water
transhipment port, Con
Dao district, Vung Tau
city
300
10mn tonnes
/year
Trai Thien Sea Transport
Investment and
Development Joint Stock
Company
Saigon-Hiep Phuoc port
337
8.7mn
tonnes /year
na
Hai Phong International
port
Van Phong International
Entreport, Khanh Hoa
Province
Cai Mep-Thi Vai
International Port
(includes roads
connecting National
Highway 51 to the Cai
Mep port)
My Thuy deep water port
Son Duong deep water
port, part of Vung Ang
Economic Zone, Ha Tinh
Province
Gemalink Cai Mep
Container Terminal (first
phase)
Lach Huyen deepwater
port PPP project (four
container wharves), east
of Hanoi
Cai Lan International
Container Terminal
Dong Lam cement port
Timeframe
Status
April 2009 -
Licence awarded
(April 2009);
Delayed due to
disputes (April
2010)
2009-2020
Under Construction
2012-2016
Japanese-Vietnam
agreement for the
port's development
signed in November
2010
50000
tonnes
Vinalines
12,00015,000TEU
Vietnam National
Shipping Lines
(Vinalines), Portcoast,
Nippon Koei, Rotterdam
Port , SK E&C
October
2009 – 2015
Construction
suspended;
Seeking investors
(September 2012)
700
100000
tonnes
Civil Engineering
Construction Joint Stock
Co. No.6 and Truong Son
Corp
October
2008 –
December2012
Under construction
(March 2012);
1100
50000
tonnes
Marine Consultant Co.
and Quang Tri province
2010-2020
Approved in
October 2008
1200
30mn
tonnes/yr
Formosa Plastics Group,
Formosa Ha Tinh Steel,
Samsung C&T
November
2008 – end2015
Under construction,
facing financing
difficulties (June
2012)
300
1.2mn
TEU/yr
Gemalink, CMA-CMG,
Dealim-SAMWHA
2010 – 2013
(first phase)
Under construction,
construction tempo
slowed (June 2012)
60mn tonnes
/yr
Vietnam National
Shipping Lines
(Vinalines), Molyto, Mitsui
O.S.K. Lines (MOL),
Nippon Yussen Kaisha
(NYK), Itochu, Japan
ODA [Sponsor]
Q4 2012 –
2016
Under construction,
tender for package
6 delayed (August
2012)
720000 TEU
Cai Lan Port Investment
Joint Stock Company,
Carrix, Cordiant Capital
2010-2011
Completed;
US$127mn funding
secured
71mn tonnes
International Transport
Development And
Investment Joint Stock
2010-2017
Licence granted;
first phase to be
completed by 2013
800
3600
1800
na
64
© Business Monitor International Ltd
Page 41
Vietnam Infrastructure Report Q1 2013
Table: Major Projects – Transport
Project Name
Value
(US$mn)
Capacity/
Length
Companies
Timeframe
Status
2010-2030
Ongoing
development,
Phase II and III to
be completed in
2020 and 2030
Cua Lo port expansion,
Nghe An
490
18mn tonnes
International
Transportation
Development and
Investment
Tan Cang-Cai Mep
deepwater container
trans-shipment terminal,
Ba Ria-Vung Tau
province
204
1.8mn TEU
/year
Mitsui OSK Lines (MOL),
Hanjin and Wan Hai
- March
2011
Completed
Port facility, Nghe An
province
365
na
Kobe Steel
2011-2013
At planning stage
1000
3.5mn
tonnes /year
(first phase)
Vietnam Coal and
Mineral Industries (TKV)
April 2012 –
2014 (first
phase)
Undergoing site
clearance (Mar-12);
works delayed since
Aug-10
Ke Ga deep-water port
(three-phase), Tan
Thanh Commune, Ham
Thuan Nam District, Binh
Thuan Province
Waterway transport
(corridors and river
ports) upgrade project
(includes Viet Tri –
Quang Ninh corridor,
Lach Giang estuary, Phu
Tho port, Ninh Binh
port), northern delta, Bac
Ninh province
201.5
na
Word Bank [Sponsor]
December
2011 -
First two bidding
package under
construction,
US$171.5bn loan
from World Bank
(December 2011)
Deepwater port, Mekong
Delta region
1000
na
OGL Mineral and Coal
Mining Company
May 2012 -
At planning stage
107.5
na
Binh Duong Construction,
Consulting and
Investment JSC, Nam
Tan Uyen Industrial Park
JSC, U&I Logistics JSC.
2012 – 2014
(first stage);
2018
(second
stage)
US$37.5mn first
stage under
construction (May
2012)
180
na
Oshima Shipbuilding
company
June 2012 –
2016
Investment licence
granted (June 2012)
181
12mn
tonnes/yr
China Communication
Construction [EPC], EVN
June 2012 –
Q3 2014
EPC contract
awarded (June
2012)
na
Nikken Sekkei Civil
Engineering Ltd, Port and
Waterway Engineering
Consultants Company
August 2012
-
At design phase,
design consultant
contract signed
(August 2012)
Thanh Phuoc Port, Tan
Uyen District, Binh
Duong province
Two-phase shipyard
project, Thinh Dong
Commune, Cam Ranh
city
Port project, part of
Duyen Hai coal-fired
power centre, Tra Vinh
province
Dung Quat II Port, part of
Dung Quat Economic
Zone, Quang Ngai
province
na
© Business Monitor International Ltd
Page 42
Vietnam Infrastructure Report Q1 2013
Table: Major Projects – Transport
Project Name
Da Nang port upgrading
project phase 2
Value
(US$mn)
Capacity/
Length
Companies
na
445
Timeframe
Status
na
Japan Transport
Cooperation Association
(JTCA), Japan Port
Consultants Ltd (JPC)
and Japan Overseas
Coastal Area
Development Institute
(ACDI), JICA [Sponsor]
September
2012 -
At planning stage,
seeking ODA funds
from JICA
(September 2012)
na
Vietnam Railway
Corporation (VRC)
2010-2015
At design stage
na
October
2011 – June
2015
Under construction,
delayed by land
clearance (July
2012)
2010 – 2016
Under construction;
ODA loans of
US$386.5mn from
France, the
remaining financing
from EIB and Hanoi
September
2012 – end2017
US$420mn contract
awarded for surface
works, land
acquisition not
completed, Under
construction
(September 2012)
Rail
Saigon My Tho Railway
Cat Linh (Dong Da
District) – Yen Nghia (Ha
Dong District) urban
railway line No. 2A,
Hanoi
Hanoi Urban Railway
Line 1 (Gia Lam – Hanoi
railway station – Ngoc
Hoi), Hanoi
Metro line 1 (Ben Thanh
Market [District 1] – Suoi
Tien [outlying District 9]),
Ho Chi Minh City
Metro line 2 (Ben Thanh
[District 1] – Thu Thiem
Pennisula [District 2] –
Tham Luong [District
12]), Ho Chi Minh City
North-South (Ho Chi
Minh City – Hanoi)
railway rehabilitation
project
Subway project no 5
(First phase running from
the Bay Hien crossroads
to the Saigon bridge), Ho
Chi Minh City
419
1070
2250
1370
1800
1850
© Business Monitor International Ltd
13.08km
15km
na
19.7km
(2.6km
underground
)
Sumitomo [EPC], Traffic
Works Construction
Corporation No. 6
(Cienco 6) [EPC], Vincom
Joint Stock Company,
Japan [Sponsor],
European Investment
Bank [Sponsor], GS E&C
[EPC]
11.3km
(9.3km
underground
)
Asian Development Bank
(ADB) [Sponsor],
European Investment
Bank [Sponsor], Tedi
South [Design],
Obermeyer Planen &
Beraten [Design], ILF
Beratende Ingenieure
[Design], Poyry [Design]
August 2013
– 2017
Design and site
clearance phases
underway (June
2012); Design
phase: February
2012 – August 2013
na
Vietnam Railway
Corporation, Japan
International Cooperation
Agency
August 2012
-
At planning stage
(August 2012)
na
GEV, HCMC's Urban
Railway Management
Board, Spanish
government –
US$698.7mn [Sponsor]
2011-
Spanish firms pulled
out due to financial
constraints, lacking
US$239mn (April
2012)
Page 43
Vietnam Infrastructure Report Q1 2013
Table: Major Projects – Transport
Value
(US$mn)
Capacity/
Length
Companies
Timeframe
Status
Monorail line 2 (between
East-West Highway and
National Road No 50),
Ho Chi Minh City
350
14km
Italian Thai Development
2011-
MOU signed
Monorail line 3 (between
Quang Trung street to
Tan Thoi Hiep ward), Ho
Chi Minh City
200
8.5km
Italian Thai Development
2011-
MOU signed (March
2011)
2500
24km (19km
underground
)
Italian Thai Development
April 2012 -
Pre-feasibility study
for BOT project
underway (April
2012)
1430
12.5 km
(8.5km of
aerial track
and 4km of
underground
track)
Systra, Vietnam Bank for
Industry and Trade; ADB
[Sponsor], EIB [Sponsor],
France [Sponsor]
September
2010 – Q3
2015
Under construction,
potentially delayed
due to lack of
financing (July
2012)
October
2011 – 2020
Awaiting
government
approval in Q411
(Oct 2011)
May 2012 –
2017
At tendering stage,
land acquisition not
completed (May
2012)
June 2012 -
At planning stage,
initial design
rejected by HCM
CITY authorities
(June 2012)
April 2013 –
2016
US$500mn loan
from ADB received
for underground
section (May 2012)
June 2012 –
2015
Received
government
approval,
preparations being
finalised (June
2012)
Project Name
Metro line 4 (Nguyen
Van Linh – Ben Cat
Bridge [District 12]), Ho
Chi Minh City
Urban railway line No. 3
project (Nhon [Liem
district] – Hanoi railway
station [Hoan Kiem
district]), Hanoi
Nam Thang Long-Tran
Hung Dao urban railway
line project, Hanoi
Underground section
(Ben Thanh Market – Ba
Son Shipyard), part of
Metro line 1, Ho Chi
Minh City
National railway project
(involves Hoa Hung
railway station and
District 3 [Hao Hung] –
Binh Chanh District [Tan
Kien] track section), Ho
Chi Minh City
Underground MRT
Section (Thu Thiem New
Urban Area [District 2] –
An Suong Coach Station
[District 12]), part of
Mass Rapid Transit
(MRT) line 2
Railway development
plan (includes
construction of Hanoi –
HCM City railway line,
Lao Cai – Hanoi – Hai
Phong line, Hanoi –
Dong Dang line)
na
na
na
na
9300
© Business Monitor International Ltd
11.5km
2.6km
na
9.3km
na
Hanoi Urban Railway
Management Board
na
na
ADB [Sponsor]
Vietnam Railway
Corporation
Page 44
Vietnam Infrastructure Report Q1 2013
Table: Major Projects – Transport
Capacity/
Length
Companies
9630
Metro line 3A/3B [Ben
Thanh Market [District 1]
– Tan Kien, Cong Hoa
Crossroads [Tan Binh
District] – Hiep Binh
Phuc [Thu Duc District]),
Ho Chi Minh City
Project Name
Value
(US$mn)
Timeframe
Status
191km
Southern Transport
Design and Consulting
JSC
June 2012 -
At planning stage,
detailed plan to be
completed by 2013
(June 2012)
na
23km
na
August 2012
-
At planning stage
(July 2012)
Metro line 5 (Sai Gon
Bridge [District 2] – Can
Giuoc Bus Station
[District 8]), Ho Chi Minh
City
na
17km
na
August 2012
-
At planning stage
(August 2012)
Metro line 6 (Ba Queo
[Tan Binh District] – Phu
Lam [District 6]), Ho Chi
Minh City
na
6km
na
August 2012
-
At planning stage
(August 2012)
September
2012 – late
2014
At pre-construction
stage, seeking
financing, first
phase contract
signed (September
2012)
Ho Chi Minh City – Can
Tho railway line
National Highway 20
upgrade BT project (Dau
Giay [Dong Nai province]
– NH-27 [Lam Dong
province])
345
268km
Cuu Long Traffic
Investment, Development
and Management Joint
Venture and Mekong
East Co, Petroleum and
Construction Joint Stock
Company, Construction
Materials No 1
Underground
interchange/terminals for
lines 1, 2, 3A, 4 and,
District 1, Ho Chi Minh
City
429
na
JICA [Sponsor]
July 2012 -
At planning stage
(July 2012)
Technical design
completed (July
2012)
Urban railway line No. 1
(Giap Bat-Gia Lam),
Hanoi
na
na
JICA
July 2012 –
2017
Urban railway line No. 2
(Nam Thang Long-Trn
Hung Dao), Hanoi
na
na
JICA
July 2012 -
At planning stage
(July 2012)
Urban railway line No. 5
PPP project (West LakeBa Vi District), Hanoi
na
na
JICA
July 2012 -
At feasibility study
stage (July 2012)
na
September
2012 -
At planning stage,
seeking investor
(September 2012)
na
September
2012 -
At planning stage,
seeking investor
(September 2012)
Trang Bom (Dong Nai) –
Hoa Hung (HCM City)
railway line project, Ho
Chi Minh City
Bien Hoa-Vung Tau
railway line, Ho Chi Minh
City
528
720
© Business Monitor International Ltd
49km
114km
Page 45
Vietnam Infrastructure Report Q1 2013
Table: Major Projects – Transport
Project Name
Lao Cai-Hanoi-Hai
Phong railway line
Value
(US$mn)
Capacity/
Length
Companies
Timeframe
Status
At planning stage,
seeking investors
(September 2012)
na
381km
na
September
2012 -
Song Bung 4 access
road
1
na
Cavico Corp.
2009- 2010
Completed
1A National Highway
(Ngoc Hoi – Cau Gie
section)
50
24km
Hanoi Department of
Transportation
-2009
Completed
Roads & Bridges
Tran Thi Ly- Nguyen Van
Troi bridge
86
0.731km
na
2010-2014
Approved in
January 2009 – To
be completed in
2014
Mu Loi Bridge
88
na
na
2009-2012
Project approved in
September 2008
196
42km
Becamex IDC
Corporation
2009-2013
Under Construction
6
Cienco4, Japan
International Cooperation
Agency (JICA)
2011 – 2013
Under construction
(August 2012)
June 2008 –
late-2013
Project stalled due
to delays in site
clearances (June
2012)
2009-2015
Construction of the
first phase due to
commence in Q409
2009-2012
Under construction
(Third and Final
stage)
2010 – late2013
Under construction,
significantly behind
schedule due to
land clearances
(September 2012)
June 2010 –
2014
Under construction,
significantly behind
schedule, delayed
due to site
clearances (August
2012)
My Phuoc-Tan Van
Expressway
Ring Road No. 3, Hanoi,
Phase II
Tan Son Nhat
International Airport –
Binh Loi – Outer Ring
Road BT project, Ho Chi
Minh City
Highway to link Cai Mep
and Phuoc An ports
Nhat Tan Bridge
(includes access roads),
package No.3, Hanoi
Four-lane Noi Bai [Hanoi
Airport] – Lao Cai
[Chinese border]
highway
Ho Chi Minh City-Long
Thanh-Dau Giay
(National Highway 1)
expressway, part of
North South Highway
280
383
350
423
952
1180
© Business Monitor International Ltd
13.7km
GS Engineering and
Construction
21.3km
na
3900km
IHI, Sumitomo Mitsui
Construction, ImportExport Construction
Corporation (Vinaconex),
245km
Vietnam Expressway,
POSCO E&C [package
A1, A2, A3], Keangnam
[A4, A5], Doosan [A6],
Guangxi RBEC,
Vinaconex, Asian
Development Bank
[Partial sponsor]
55km
Vietnam Expressway
Corporation (VEC),
Japan Bank for
International Cooperation
[Sponsor], Asian
Development Bank
[Sponsor], Hashin
Construction
Page 46
Vietnam Infrastructure Report Q1 2013
Table: Major Projects – Transport
Project Name
Six-lane Hanoi [Gia Lam]
– Hai Phong [Dinh Vu
dam] expressway project
Ca pass tunnel BOT
project (Dong Hoa [Phu
Yen province] – Van
Ninh [Khanh Hoa
province] section), part
of National Highway 1A
Ben Luc-Long Thanh
expressway, part of
North-South Highway
Road linking East-West
Avenue with the Trung
Luong Expressway, part
of 217km south coastal
corridor project
Value
(US$mn)
1500
750
1600
1
Capacity/
Length
Companies
105.5km
Vietnam Infrastructure
Development and
Finance Investment Joint
Stock Company (VIDIFI)
[BOT], PSJ Holdings,
Cienco 1 Company and
Infrastructure
Development and
Finance Investment
Company, GS E&C,
Citibank Japan
[Sponsor], Sumitomo
Mitsui Bank [Sponsor]
13.4km
Hanoi Construction Corp,
Mai Linh Group JSC, Hai
Thach Investment JSC. A
Chau (Asia) JSC
57.8km
Vietnam Expressway
Development Company,
JICA [Sponsor, ADB
[Sponsor]
Timeframe
Status
2009 – 2014
Under construction,
packages 13-55%
completed,
significantly behind
schedule (June
2012)
Q2 2012 –
Q2 2016
Received
government
approval (January
2012)
Q2 2013 –
2017
Construction
delayed to 2013
due to cost
escalations
(September 2012)
2.7km
na
2010 – 2013
Project approved
(October 2010);
Seeking financing
(June 2012)
2010-2014
Under construction
2010-2012
Under construction
Deo Ca tunnel
500
11.125km
Hanoi Construction, BOT
Hai Thach Investment,
Mai Linh Group
Thai Ha Bridge
102
na
Construction Corp No 1
Road project between
uyen Van Cu and Ngoc
Thuy Roads in Hanoi
12
3km
na
2011-2013
Received
government
approval
Fifth bidding package for
Ho Chi Minh City – Long
Thanh – Dau Giay
expressway, part of
North-South Highway
43
13.9km
Pumyang-Sungjee
Construction
2010-2013
Under construction
8
4.3km
na
2011-2014
Investment finalised
in Q410
32.3km
Transport Engineering
Design Incorporated, Cuu
Long CIPM
November
2011 – 2014
US$441.6mn loan
from Vietnamese
government (Nov
2011)
Road linking Phuc Tho
and Son Tay district
My Thuan-Can Tho
Expressway project,
Southwest Vietnam
441.6
© Business Monitor International Ltd
Page 47
Vietnam Infrastructure Report Q1 2013
Table: Major Projects – Transport
Project Name
Design and consultancy
contract for Ben LucLong Thanh expressway
Upgrading of the
provincial road No 39B,
Thai Binh province
New and existing
highways, railway,
maritime projects
Value
(US$mn)
10
106
Capacity/
Length
Companies
Timeframe
Status
na
Katahira, Nippon,
Vietnam Expressway
Investment and
Development Company
2010-2012
Contract awarded
29km
Tasco Joint Stock,
Agribank, Maritime Bank,
Southeast Asia Bank
2010-2013
US$92.3mn loan
pledged by banks
34900
na
na
2010-2020
Awaiting
government
approval
Ring road No. 4, Hanoi
1970
98km
na
2010-2015
Plans submitted
National Road No 25
expansion (ie Phu Yen
section, 21.5km; Gia Lai
section)
113
57.5km
na
2010-2014
Project approved
(December 2010)
2010-2012
Contract signed
A 530.5m bridge linking
the east side of Hanoi
with the Van Giang
district across the Bac
Hung Hai river
26
0.53km
Viet Hung Urban
Development and
Investment, Utracon
Overseas, Ultracon
Vietnam Company
Hoa An Bridge over
Dong Nai River
56
1.30km
na
2010-2013
Construction
underway
19m
Vietnam Road
Corporation [Sponsor]
December
2010 – May
2012
Under construction
(January 2011)
30km
Central Japan
Expressway, Vietnam
Expressway Investment
and Development
Company (VEC)
2011-
Under negotiations
for a JV
na
Duc Long Gia Lai Group,
Vietnam Commercial
Joint Stock Bank for
Industry and Trade
(VietinBank-CTG)
2010-2022
Credit contract
signed; BOT
contract announced
in September 2010
50.3km
Vietnam Expressway,
Japan International
Cooperation Agency
(JICA) [Sponsor]
2006 – June
2012
Completed (June
2012)
2011-
US$200mn loan for
project by Korea
Eximbank, the rest
from Australian and
ADB
Kon Brai Bridge, Kon
Tum province (Part of
National Highway No 24)
Overhaul of Phap VanCau Gie expressway
National Road No 14
crossing, Dak Nong
province
Six-lane Cau Gie – Ninh
Binh expressway project
first phase, connects
National Highway 1A (in
Hanoi) and Highway
No.10 (Nam Dinh
province)
Vam Cong Bridge
164
87
50
430
500
© Business Monitor International Ltd
na
na
Page 48
Vietnam Infrastructure Report Q1 2013
Table: Major Projects – Transport
Project Name
Ring roads 3 and 4,
connecting Ho Chi Minh
City with the Ben LucLong Thanh and Bien
Hoa-Vung Tau highways
Road upgrading project,
northern provinces
Hoa Vang District
(Danang) – Quang Ngai
Expressway (involves
65km Danang-Tam Ky
section and 74km Tam
Ky-Quang Ngai section),
part of North-South
Highway
Six-lane Ninh Binh –
Thanh Hoa [Nghi Son]
road project
Rach Gia section, part of
924km southern coastal
corridor project, Chau
Thanh District, Kien
Giang Province
Minh Luong – Thu Bay
section
Nhieu Loc-Thi Nghe
flyover no. 1 project
Six-lane Dau Giay-Phan
Thiet expressway PPP
project (parallel to NH-1),
Dong Nai Province
Thu Bay – Kenh section,
part of 924km Southern
Coastal Corridor Project
Value
(US$mn)
8000
170
1470
2800
82
50
na
1130
47.3
© Business Monitor International Ltd
Capacity/
Length
Timeframe
Status
2011-
(Ring road 3);
197.6km (Ring road
4) – Vietnamese
Ministry of
Transport to start a
procedure to call
2011 – 2017
First phase to finish
in 2017 -US$80mn
loan from ADB
Q2 2013 –
2016
Construction
delayed due to
costs escalations
(September 2012)
2011 -
Under tendering
process (July 2011);
30% Financing from
government, 70%
from private
investors
May 2011 -
Under construction
(May 2011);
Financing from
ADB, Korea,
Australia, Vietnam
May 2011 -
Under construction
(May 2011); –
(including 2 bridges
over Cai Lon and
Cai Be rivers), part
of 217km
Bach Khoa Construction
Consultant Corporation
2011 -
Initial report
submitted to
Transport Ministry
(July 2011); Design
completed by 2011
101km
Binh Minh Import Export
Production and Trading
Group (Bitexco)
end-2012 –
2014 (first
phase); 2020
(second
phase)
Feasibility study
completed, received
government
financing for land
acquisition
(September 2012)
31km
Ssangyong Engineering
and Construction, Korea
Exim Bank [Sponsor]
September
2011 -
Contract awarded
(September 2011);
Financing from
Korea Exim Bank
100km
Companies
na
300km
na
139km
Project Management Unit
85, Nippon Koei, Nippon
Engineering Consultants,
Chodai and Thai
Engineering Consultants,
JICA [Sponsor], World
Bank [Sponsor]
126.7km
na
21km
na
na
na
Financing from ADB,
Korea, Australia, Vietnam
Page 49
Vietnam Infrastructure Report Q1 2013
Table: Major Projects – Transport
Project Name
Two overpasses, part of
Ho Chi Minh City-Long
Thanh-Dau Giay
(National Highway 1)
expressway
Duong Dong – Cua Lap
road, connecting Phu
Quoc Airport
Four-lane elevated
highway, Vinh Binh
bridge (Thuan An
commune) to My Phuoc
town (Ben Cat district),
southern Binh Duong
province
Gia Loc-Tu Ky section,
Package EX5 of six-lane
Hanoi-Hai Phong
expressway project, Hai
Duong province
Package EX4, EX5 &
EX6, part of six-lane
Hanoi-Hai Phong
expressway project, Hai
Duong province
Noi Bai International
Airport to Nhat Tan
Bridge connecting road
construction project
Southern Coastal
Corridor Project
(Vietnam – Thailand)
Ring Road No. 2 (from
Nhat Tan Bridge to
ending point of Cau Giay
Crossroad), Hanoi
Mekong Delta
connectivity (first phase)
project (includes Vam
Cong Bridge, Cao Lanh
Bridge and 23.5km of
roads)
Value
(US$mn)
Capacity/
Length
Companies
Timeframe
Status
33.8
800m &
680m
IDICO Investment
Consultancy Joint Stock
Company
Q411 – mid2012
BOT contract
signed (September
2011)
October
2008 -
50% completed
(September 2011);
Originally
completed by
November 2009
16
800
169
na
7km
508 Company, Civil
Engineering Construction
Company No 5
31.5km
na
2012 – 2014
Received
government
approval
(September 2011)
15.3km
Vietnam Infrastructure
Development and
Finance Investment Joint
Stock Company (IDIFI),
Guangdong Provincial
Changda Highway
Engineering
2012 – 2015
Contract awarded
(September 2011)
Vietnam Infrastructure
Development and
Finance Investment Joint
Stock Company (VIDIFI)
2012 – 2015
EX5 awarded by
VIDIFI, EX4 & EX6
awarded by
September and
October
respectively (Sep
2011)
At planning stage
(May 2012)
40km
83
12.1km
JICA [Sponsor]
May 2012 –
September
2014
47.3
31km
Ssangyong Engineering
and Construction
2011 -
Contract awarded
(September 2011)
March 2012
– 2015
Under construction;
US$155mn loan
from World Bank
(Mar-12)
October
2011-
Technical
consultancy service
agreement signed;
US$751mn from
AusAID, ADB and
Vietnamese
government
304.7
751
© Business Monitor International Ltd
2km
29.3km
World Bank, Global
Environmental Facility
Australian Agency for
International
Development (AusAID),
the Asian Development
Bank (ADB)
Page 50
Vietnam Infrastructure Report Q1 2013
Table: Major Projects – Transport
Project Name
Road tunnel beneath Ca
mountain pass, between
Dong Hoa (Phu Yen
province) and Co Ma
Pass in the Van Ninh
district (Khanh Hoa
province)
Saigon Bridge No. 2 BT
project, links Binh Thanh
District and District 2 in
Ho Chi Minh City
Six-lane road widening
BOT project, Hanoi –
Can Tho section, part of
2300km National
Highway 1
Ho Chi Minh Road, NH-2
(Pac Bo [Cao Bang
province] – Dat Mui [Ca
Mau province])
La Son [Thua Thien-Hue
province] – Tuy Loan
[Danang city] highway
BT project, part of NorthSouth Highway
National Highway No 1
expansion BOT project,
Thanh Hoa – Vung Ang
(Ha Tinh province) – Can
Tho section
Bac Luan 2 bridge
connecting Mong Cai
(Quang Ninh) and
Dongxing (Guangxi)
Vinh Thinh Bridge, part
of National Highway No
2C, Hanoi
Value
(US$mn)
749
71.5
6000
690
(Second
phase)
1000
4300
na
137
Capacity/
Length
Companies
Status
14.5km
na
May 2012 -
Project announced,
construction to start
in May 2012 (Feb
2012)
987m
HCM City Infrastructure
Investment Joint Stock
Co (CII)
mid-April
2012 –
October
2012
Under construction
(April 2012);
Seeking financing
(June 2012)
Vietnam government
[Sponsor]
June 2012 –
end-2016
At planning stage,
Awaiting
government
approval (June
2012)
3183km
na
2000 – 2007
(first phase);
2015
(second
phase)
First phase
completed; Second
phase under
construction (Mar12)
81.7km
Volunteer Youth Group,
Construction Corp No 1,
Truong Son Construction
Corp, Truong Thinh
Group Joint Stock Co,
Son Hai Group Co Ltd,
Traffic Works
Construction Corp No 8,
Van Tuong Co Ltd
Q3 2012 –
2015
At tendering
process, companies
shortlisted, seeking
financing (June
2012)
March 2012
-
At planning stage,
seeking government
approval,
government funds
fully disbursed, in
need of additional
funds (May 2012)
March 2012
-
Agreement signed
between Vietnam
and China (March
2012)
1760km
1057km
na
Vietnam government
[Sponsor]
na
5.5km
Thang Long, South
Korea [Sponsor]
December
2011 -
Under construction,
US$130mn ODA
loan from South
Korea (December
2011)
January
2012 – early2013
Under construction
(January 2012)
2010 – 2013
Land acquisition
delayed (April 2012)
Four-lane Buu Hoa –
Hiep Hoa bridge, Dong
Nai province
29
1.5km
Vietnam Railway
Corporation (VRC)
Provincial Road 10, Long
An Province
na
na
na
© Business Monitor International Ltd
Timeframe
Page 51
Vietnam Infrastructure Report Q1 2013
Table: Major Projects – Transport
Project Name
Value
(US$mn)
Capacity/
Length
Companies
Timeframe
Status
Beltway No. 2 (An Lap
intersection to Nguyen
Van Linh Parkway)
na
na
na
April 2012 -
Design work
completed, Land
acquisition not
completed (April
2012)
Nguyet Vien-Thanh Hoa
Bridge
na
na
na
May 2012 -
At planning stage
National Highway 61B
(Vi Thanh District [Hau
Giang Province] – Can
Tho City [Mekong Delta])
165
47.5km
na
- May 2012
Completed (May
2012)
Ha Long City – Mong Cai
City expressway project,
part of Noi Bai – Halong
– Mong Cai expressway,
Quang Ninh province
Ha Long – Hai Phong
Highway BOT project,
Quang Ninh province
First overhead road
project (Cong Hoa
Intersection – Nguyen
Huu Canh Street), Ho
Chi Minh City
Second overhead road
project (To Hien Thanh
Street – Belt road No. 2),
Ho Chi Minh City
Third overhead road
project (To Hien Thanh
Street – District 7), Ho
Chi Minh City
Fourth overhead road
project (Binh Phuoc
Junction – Cong Hoa
Intersection), Ho Chi
Minh City
2100
134km
Italian-Thai Development
Q1 2013 –
2015
MOU signed for
feasibility study
phase 2
(September 2012)
na
25km
na
June 2012 -
MOU signed (June
2012)
June 2012 -
At planning stage,
seeking Financing
(June 2012)
June 2012 -
At planning stage,
seeking Financing
(June 2012)
June 2012 -
At planning stage,
seeking Financing
(June 2012)
June 2012 -
At planning stage,
seeking financing
(June 2012)
714
328
817
547
8.4km
10.2km
na
7.7km
na
na
na
na
Sa Huynh – Dung Quat
coastal road project,
Quang Ngai central
province
269
na
na
2012 -
Under construction,
cost increased by
100% (June 2012)
Tan Vu-Lach Huyen
expressway project, part
of Lach Huyen port
project
630
15.63km
Japan ODA [Sponsor]
December
2012 -
At planning stage
(May 2012)
54km
Cuu Long Corporation for
Investment, Development
and Project Management
of Infrastructure
2013 -
At planning stage,
seeking financing
(August 2012)
Trung Luong – My
Thuan – Can Tho
expressway project
1000
© Business Monitor International Ltd
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Vietnam Infrastructure Report Q1 2013
Table: Major Projects – Transport
Project Name
Value
(US$mn)
Ring Road No. 5 (Son
Tay-Phu Ly, Phu Ly-Bac
Giang; Bac Giang-Thai
Nguyen and Thai
Nguyen-Son Tay), Hanoi
84 bridge upgrading
project
Six-lane Nha Trang City
[Khanh Hoa Province] –
Phan Thiet City [Binh
Thuan Province] PPP
expressway project, part
of north-south Highway
North-South Highway
4700
Capacity/
Length
385km
Companies
Timeframe
Status
Transport Engineering
Design Incorporated
(TEDI)
September
2012 – 2015
(detailed
planning);
2030
At detail planning
stage (September
2012)
September
2012 -
US$376mn loan
from JICA, at prefeasibility study
stage (September
2012)
376
na
Japan International
Cooperation Agency
(JICA) [Sponsor]
3500
235km
na
September
2012 -
At feasibility-study
stage (August 2012)
na
2010 – 2015
(136km); –
2020
(793km); –
2020
(1018km)
Certain sections
under construction
(August 2012)
22800
1811km
Source: BMI. na=not available.
© Business Monitor International Ltd
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Vietnam Infrastructure Report Q1 2013
Energy And Utilities Infrastructure
Table: Vietnam Energy and Utilities Infrastructure Industry Data, 2010 – 2016
2010
2011
2012e
2013f
2014f
2015f
2016f
28.8
31.4
32.2
32.4
32.4
32.5
32.7
Energy And Utilities
Infrastructure Industry
Value, VNDbn
18,480.0
24,024.9
26,704.2
30,216.6
33,571.2
37,136.7
41,039.1
Energy and Utilities
Infrastructure Industry
Value, US$bn
1.0
1.2
1.3
1.5
1.6
1.8
2.0
Energy and Utilities
Infrastructure Industry Value
Real Growth, % chg y-o-y
9.5
11.3
2.1
6.8
4.9
5.4
5.5
Energy and Utilities
Infrastructure Industry Value
As Percent Of Total
Construction (%)
13.3
14.8
15.1
15.1
14.9
14.7
14.6
Power Plants and
Transmission Grids
Infrastructure Industry Value
As % Of Total Energy and
Utilities
89.8
89.6
89.5
89.6
89.5
89.4
89.3
Power Plants and
Transmission Grids
Infrastructure Industry
Value, VNDbn
16,591.7
21,523.5
23,904.7
27,066.5
30,039.4
33,204.3
36,665.7
Power Plants and
Transmission Grids
Infrastructure Industry
Value, US$bn
0.9
1.0
1.1
1.3
1.5
1.6
1.8
Power Plants and
Transmission Grids
Infrastructure Industry Value
Real Growth, % chg y-o-y
10.0
11.0
2.1
6.9
4.7
5.3
5.4
Power Plants and
Transmission Grids
Infrastructure Industry Value
As % of Total Infrastructure
25.9
28.2
28.8
29.1
29.0
29.1
29.2
Power Plants and
Transmission Grids
Infrastructure Industry Value
As % of Total Construction
11.9
13.2
13.5
13.5
13.3
13.2
13.0
Energy and Utilities
Infrastructure Industry Value
As % Of Total Infrastructure
© Business Monitor International Ltd
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Vietnam Infrastructure Report Q1 2013
Table: Vietnam Energy and Utilities Infrastructure Industry Data, 2010 – 2016
2010
2011
2012e
2013f
2014f
2015f
2016f
3.2
2.3
2.3
2.1
2.0
1.9
1.8
Oil and Gas Pipelines
Infrastructure Industry
Value, VNDbn
594.9
563.3
602.7
641.3
679.2
715.8
754.5
Oil and Gas Pipelines
Infrastructure Industry
Value, US$bn
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Oil and Gas Pipelines
Infrastructure Industry Value
Real Growth, % chg y-o-y
-25.1
-24.0
-2.0
0.1
-0.4
0.2
0.4
Oil and Gas Pipelines
Infrastructure Industry As %
of Total Infrastructure
0.9
0.7
0.7
0.7
0.7
0.6
0.6
Oil and Gas Pipelines
Infrastructure Industry As %
of Total Construction
0.4
0.3
0.3
0.3
0.3
0.3
0.3
Water Infrastructure Industry
Value As % Of Total Energy
and Utilities
7.0
8.1
8.2
8.3
8.5
8.7
8.8
Water Infrastructure Industry
Value, VNDbn
1,293.3
1,938.1
2,196.7
2,508.8
2,852.6
3,216.5
3,618.9
Water Infrastructure Industry
Value, US$bn
0.1
0.1
0.1
0.1
0.1
0.2
0.2
Water Infrastructure Industry
Value Real Growth, % chg
y-o-y
27.9
31.2
4.3
7.9
7.5
7.5
7.5
Water Infrastructure Industry
As % of Total Infrastructure
2.0
2.5
2.6
2.7
2.8
2.8
2.9
Water Infrastructure Industry
As % of Total Construction
0.9
1.2
1.2
1.3
1.3
1.3
1.3
Oil and Gas Pipelines
Infrastructure Industry Value
As % Of Total Energy and
Utilities
e/f = BMI estimate/forecast, Source: BMI Research
© Business Monitor International Ltd
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Vietnam Infrastructure Report Q1 2013
Table: Vietnam Energy and Utilities Infrastructure Industry Long Term Forecast, 2015-2021
2015f
2016f
2017f
2018f
2019f
2020f
2021f
32.5
32.7
33.0
33.4
33.8
34.3
34.6
Energy And Utilities
Infrastructure Industry
Value, VNDbn
37,136.7
41,039.1
45,408.3
50,218.5
55,550.0
61,299.1
66,978.3
Energy and Utilities
Infrastructure Industry
Value, US$bn
1.8
2.0
2.3
2.5
2.8
3.1
3.3
Energy and Utilities
Infrastructure Industry Value
Real Growth, % chg y-o-y
5.4
5.5
5.6
5.6
5.6
5.3
4.3
Energy and Utilities
Infrastructure Industry Value
As Percent Of Total
Construction (%)
14.7
14.6
14.5
14.4
14.4
14.3
14.2
Power Plants and
Transmission Grids
Infrastructure Industry Value
As % Of Total Energy and
Utilities
89.4
89.3
89.3
89.3
89.3
89.3
89.3
Power Plants and
Transmission Grids
Infrastructure Industry
Value, VNDbn
33,204.3
36,665.7
40,550.5
44,838.3
49,602.1
54,752.7
59,797.5
Power Plants and
Transmission Grids
Infrastructure Industry
Value, US$bn
1.6
1.8
2.0
2.2
2.5
2.7
3.0
Power Plants and
Transmission Grids
Infrastructure Industry Value
Real Growth, % chg y-o-y
5.3
5.4
5.6
5.6
5.6
5.4
4.2
Power Plants and
Transmission Grids
Infrastructure Industry Value
As % of Total Infrastructure
29.1
29.2
29.5
29.8
30.2
30.6
30.9
Power Plants and
Transmission Grids
Infrastructure Industry Value
As % of Total Construction
13.2
13.0
12.9
12.9
12.8
12.8
12.7
Energy and Utilities
Infrastructure Industry Value
As % Of Total Infrastructure
© Business Monitor International Ltd
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Vietnam Infrastructure Report Q1 2013
Table: Vietnam Energy and Utilities Infrastructure Industry Long Term Forecast, 2015-2021
2015f
2016f
2017f
2018f
2019f
2020f
2021f
1.9
1.8
1.8
1.7
1.6
1.5
1.5
Oil and Gas Pipelines
Infrastructure Industry
Value, VNDbn
715.8
754.5
795.2
838.2
883.4
931.1
981.4
Oil and Gas Pipelines
Infrastructure Industry
Value, US$bn
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Oil and Gas Pipelines
Infrastructure Industry Value
Real Growth, % chg y-o-y
0.2
0.4
0.4
0.4
0.4
0.4
0.4
Oil and Gas Pipelines
Infrastructure Industry As %
of Total Infrastructure
0.6
0.6
0.6
0.6
0.5
0.5
0.5
Oil and Gas Pipelines
Infrastructure Industry As %
of Total Construction
0.3
0.3
0.3
0.2
0.2
0.2
0.2
Water Infrastructure Industry
Value As % Of Total Energy
and Utilities
8.7
8.8
8.9
9.0
9.1
9.2
9.3
Water Infrastructure Industry
Value, VNDbn
3,216.5
3,618.9
4,062.6
4,542.0
5,064.4
5,615.3
6,199.4
Water Infrastructure Industry
Value, US$bn
0.2
0.2
0.2
0.2
0.3
0.3
0.3
Water Infrastructure Industry
Value Real Growth, % chg
y-o-y
7.5
7.5
7.3
6.8
6.5
5.9
5.4
Water Infrastructure Industry
As % of Total Infrastructure
2.8
2.9
3.0
3.0
3.1
3.1
3.2
Water Infrastructure Industry
As % of Total Construction
1.3
1.3
1.3
1.3
1.3
1.3
1.3
Oil and Gas Pipelines
Infrastructure Industry Value
As % Of Total Energy and
Utilities
e/f = BMI estimate/forecast, Source: BMI Research
© Business Monitor International Ltd
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Vietnam Infrastructure Report Q1 2013
Energy And Utilities Infrastructure Outlook and Overview
Slowly Overshadowed
Energy And Utilities Infrastructure Value And Share Of Infrastructure Value
e/f = BMI estimate/forecast, Source: BMI, Local news sources, industry sources, BMI Research
(Major Projects Database)
BMI View: The energy and utilities sector is seeing rising levels of growth, with BMI forecasting
average annual industry value growth of 5.6% between 2013 and 2017.
Although the total investment in the transport sector will continue to overshadow spending on energy and
utilities, the value of the power plants and transmission grids sub-sector will increase, with real growth
averaging 5.6% annually between 2013 and 2017. Vietnam's power consumption is expected to rise
sharply, in light of both positive economic and demographic growth. The government will therefore need
to step up the country’s power generation to meet growing demand and avoid the real risk of persistent
electricity shortages, which could in turn deter foreign manufacturers from using the country as an export
base and force them to direct investment elsewhere.
The government has since announced ambitions plans for the sector. Under the government's Power
Development Plan 7, the government has set a target of developing 75,000MW of power generation
capacity by 2020, with coal-based plants taking up 48% of this investment. This plan is expected to
require an investment capital of US$48.8bn.
Vietnam does not have the fiscal strength to finance this ambition plan, and we believe that investor
demand is vital for it to succeed. However, private investment has been limited, due to the bureaucratic
obstacles and rigidity of the internal market. EVN enjoys a monopoly over distribution in Vietnam's
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Vietnam Infrastructure Report Q1 2013
electricity market. A unified tariff is applicable across the country, and artificially low, capped prices
have long made it unprofitable for foreign infrastructure companies to invest in the power sector, mainly
because most of the equipment for power stations has to be purchased from other countries at global
market prices. They have also been deterred by an onerous negotiating process for pricing and
distribution contracts.
Addressing those two issues is clearly within the government’s reach and could boost activity in the
market, helping to mitigate some of the risks to future growth inherent in the over-reliance on EVN’s
investment programme. In early 2006, the country’s Prime Minister, Phan Van Khai, approved EVN's
master plan for the development of a three-step competitive power market by 2022. This will be restricted
to power generation up to 2014, expanding to the wholesale market between 2015 and 2022, followed by
the retail sector.
Bottom-Up Restructuring
Vietnam's Power Development Roadmap
Source: Electricity Regulatory Authority of Vietnam
Vietnam officially launching its competitive generation market (CGM) on July 1 2012, marking the first
phase of its power market development roadmap. The roadmap spans over 10 years and is projecting the
introduction of an electricity wholesale market in 2014 and an electricity retail market by 2022. Under the
CGM, independent power producers (IPPs) would forward their asking prices to the Electric Power
Trading Company (EPTC). These EPTCs would purchase the electricity via a competitive cost-based
pool and sell it to distribution companies and large consumers at regulated prices.
To liberalise the power sector further, Vietnam's Minister of Industry and Trade, Vu Huy Hoang, granted
approval to establish three power generation companies in June 2012: Genco 1, Genco 2 and Genco 3.
These companies are to take over power generating plants directly under EVN. Genco 1 will manage
hydropower plants, such as Dai Ninh, Ban Ve and Song Tranh. Meanwhile, Uong Bi Thermal Power in
Northern Quang Ninh Province will serve as a backbone for Genco 1, which will also acquire EVN's
shares in the Quang Ninh thermal power plant and some other thermal project management boards
throughout the country. Genco 2, which is the upgrade of Can Tho Thermal Power, will manage the
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Vietnam Infrastructure Report Q1 2013
Quang Tri and An Khe KaNak hydropower plants and the Thu Duc, Hai Phong and Pha Lai thermal
power plants. The establishment of Genco 3 is based on Phu My Thermal Power and 11 affiliates,
including the Vinh Tan thermal power plant and the Buon Kuop hydropower plant. These three
companies will remain under EVN, which will also appoint their personnel.
EVN Still Dominating Power Generation
Vietnam – 2010 Installed capacity mix by owners, %
Source: Vietnam Institute of Energy 2011.
Growing Foreign Participation In Coal Sector
The first ever PPP in Vietnam's power generation sector gained momentum in May 2009. Malaysia's
JAKS Resources reportedly signed a memorandum of understanding (MoU) with the Vietnamese
government for the construction and operation of the Hai Duong thermal power station. This is a
significant milestone for Vietnam as it indicates that opportunities to fill the investment gap left by stateowned EVN are proliferating for independent power producers (IPPs).
Since then, foreign involvement in the sector has significantly accelerated, with the largest project a
U$10.6bn deal signed between Russian and Vietnamese authorities to construct Vietnam's first 2000MW
nuclear power plant in the Ninh Thuan province.
The coal generation sector has also been receiving significant attention from foreign investors. The Mong
Duong 2 plant in particular is representative of this growing liberalisation in the Vietnamese utilities
sector, as it is one of Vietnam's first foreign-backed BOT (build-operate-transfer) coal-fired plants. Aside
from being built and operated by foreign companies, the project is financed by foreign banks. Besides the
Mong Duong 2 plant, three other coal-fired plants (Phu My 3, Mhy My 2.2 and Hai Duong) are being
implemented by foreign independent power investors under BOT contracts. Sembcorp Utilities is the
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Vietnam Infrastructure Report Q1 2013
latest company to potentially develop a power plant in Vietnam under a BOT format. In April 2012,
Sembcorp Utilities secured in-principle approval for the construction of a 1,200MW power plant in
Dung Quat Economic Zone in Quang Ngai, Vietnam. The company is evaluating the feasibility of this
project.
Besides BOT contracts, the Vietnamese government is keen to award foreign players EPC (engineering,
procurement, construction) contracts for thermal (gas- and coal-fired) power plants and announced in
September 2011 that it is in talks with foreign companies over the construction of a further 12 power
plants in the country. Some of the foreign companies that have won such projects are: Chinese consortium
CHENGDA, DEC, SWEPDI and ZEPC for the Duyen Hai 3 coal-fired power plant in August 2011;
Hyundai Engineering & Construction for the Mong Duong 1 coal-fired plant in September 2011;
Wuhan Kaidi Electric Power for the Thang Long coal-fired power plant in December 2011; PHI
Group for the Hai Lang coal-fired power plant in December 2011; Toyo Ink Group for the Song Hau 2
coal/diesel oil plant in January 2012; Trisun International Development for a US$400mn plasmaconverted gas plant for power generation in Ho Chi Minh City; and Daelim Industrial for the O Mon 1
gas-based power plant in September 2012.
Vietnam is also reliant on foreign players to provide equipment for coal-fired power plants. In May 2012,
a joint venture (JV) comprising South Korea's Daelim Industrial and Japan's Sojitz Corporation has
been awarded a US$826mn contract to provide plant equipment for the 1,200MW Thai Binh 2 coal-fired
power plant. The JV signed the contract with PetroVietnam Construction Joint Stock , the construction
subsidiary of state-run oil and gas company PetroVietnam. Under the terms of the agreement, the JV
would install and test-run boilers, turbines and two generators for the US$1.6bn Thai Binh 2 plant,
according to the Vietnamese government, cited by Reuters. This followed with US-based Babcock &
Wilcox, being awarded a US$300mn equipment contract for the project in August 2012. In February
2012, PVC had signed a US$1.6bn contract with state utility Electricity of Vietnam (EVN) to provide
engineering, procurement and construction (EPC) services for the Thai Binh 2 plant. If completed, the
Thai Binh 2 plant would be the largest conventional thermal power plant in northern Vietnam. The plant
is expected to become operational by 2016.
The country is also keen for foreign companies to develop a domestic power equipment manufacturing
industry in Vietnam. In July 2012, the Vietnamese government had selected three thermal power plants
that are to use locally manufactured power equipment, reports Intellasia. Through the use of local power
equipment, the government is aiming to increase the capacity of domestic power equipment
manufacturers and end low-quality power equipment imports, which arrive mostly from China. The three
plants in question are: the Vinacomin-invested Quynh Lap 1 in Central Nghe An province; the
PetroVietnam-invested Song Hau 1 in Southern Hau Giang province; and the PetroVietnam-invested
Quang Trach 1 in Central Quang Binh province.
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The pilot plan to use locally manufactured power equipment is expected to encourage domestic and
foreign manufacturers that have established facilities in Vietnam to boost their investment in the country.
The statement was made by Dao Phan Long, the deputy president of the Vietnam Association of
Mechanical Industry. Tran Viet Ngai, the chairman of the Vietnam Energy Association, said that Chinese
contractors have participated in 20 thermal power projects in Vietnam. Surveys have found that the
weakness of contracts has led to problems in the implementation and operation of these projects.
Hydropower: Indispensible, But Problematic
Hydropower provides more than a quarter of Vietnam’s electricity. There is a stable stream of investment
into increasing hydropower capacity, as elevated coal prices in Asia render coal plants costly to operate.
However, hydropower has proven to be an unreliable source of electricity, largely due to the severe
droughts that have plagued Vietnam. As a result, Vietnam is reliant on electricity imports from China to
meet the shortfall, although this is an expensive option.
The environmental effects caused by hydropower plants are also increasingly becoming a concern. In
June 2012, the Vietnamese Department of Industry and Trade announced that local authorities had
rejected 52 substandard hydroelectricity projects since the start of 2012. Environmental concerns, such as
deforestation and the destruction of natural landscapes, have been cited as reasons for the decision. The
country has 1,021 hydropower projects, with a combined capacity of 24,246MW, located in over 36
provinces and cities.
In October 2012, nine hydropower projects planned in the Vietnamese province of Thua Thien Hue were
cancelled by the provincial People's Committee in late-September. These nine are part of 21 small- to
medium-capacity plants planned in the province for completion by 2020, with a total combined capacity
of 357MW. Reasons given for the cancellation included: poor economic feasibility, a lack of progress,
and environmental concerns.
Nuclear Still In The Works
Vietnam has taken the first step towards nuclear. Vietnam's nuclear ambitions stretch back to the 1980s,
when the country first considered developing the technology. According to the country's nuclear power
development plan, Vietnam is planning to construct 10-13 nuclear reactors in eight different sites by
2030, bringing the country's total nuclear capacity to 15,000MW.
This ambition appears to be in process of being achieved as, in November 2011, Vietnam signed two key
agreements – one loan agreement and one consultancy agreement – with Russia for the construction of its
first nuclear power plant, the 2000-megawatt (MW) Ninh Thuan 1 nuclear project. A Russian consortium
will conduct an 18-month feasibility study on the project, which includes the selection of the project site.
Atomstroyexport, a subsidiary of Russian state nuclear holding company Rosatom, will begin
constructing the plant in 2014, which is to become operational in 2020.
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Similarly, in September 2011,
a Japanese consortium, known
as the International Nuclear
Vietnam Electricity Generation Capacity Mix,
2012e
Energy Development of Japan
(INEDJ), signed an agreement
with Vietnamese state utility
Electricity of Vietnam (EVN)
to jointly develop the Ninh
Thuan 2 nuclear power project
in Vietnam. As part of the
agreement, nuclear plant
operator Japan Atomic Power
will conduct a US$26mn
feasibility and environmental
study on the project and report
the results, which includes an
assessment on tsunamis, to
e/f = BMI estimate/forecast, Source: UN Data, EIA, BMI
EVN by March 2013. Japan Atomic will also provide consulting to EVN on the preparation of necessary
documentation for site approval for Vietnam's Ninh Thuan 2 nuclear plant, according to The Wall Street
Journal.
Despite concerns over Vietnam’s readiness to adopt nuclear power, the country is at a more advanced
stage than other developing countries and already has cooperation agreements in place with South Korea,
Japan, the US, Canada, China and France. Vietnam has also passed an Atomic Energy Law – which has
been in effect since 2009 – and a national nuclear safety commission responsible to the Prime Minister,
which was established in July 2010. However, even in its most optimistic outlook, the Vietnamese
government does not expect nuclear capacity to come online before 2020.
South Korean companies are also keen to build nuclear power plants in Vietnam. In March 2012, South
Korea signed an agreement with Vietnam to check the viability of building a nuclear power plant. South
Korea was expected to initiate the feasibility studies in April 2012 and these are scheduled to be
concluded in mid-2013.
ADB To Support Underinvested Transmission Network
Vietnam's electricity transmission network is in a poor condition and suffers from high levels of
electricity wastages, due to an inefficient grid system. We estimate that electricity losses in Vietnam due
to transmission and distribution made up 10.3% of total output in 2011. Significant investment is
therefore required to address these transmission losses and meet future demand for grids. According to
the National Power Transmission Corp (June 2012), total demand for investment capital to develop the
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electricity transmission network to 2020 reaches about US$10bn. Transmission projects have so far
borrowed only US$4bn worth of ODA and commercial loans; the remaining US$6bn has not been
arranged.
Vietnam is looking to change this. In November 2011, the National Power Transmission Corporation
(NPT) announced that Vietnam will develop 300-350 power transmission projects in the period up to
2015. This would require an annual investment of US$1bn and the country is seeking foreign investment.
The Asian Development Bank has since agreed to provide some of the financing.
In February 2012, the ADB and The State Bank of Vietnam signed documents for the first tranche of a
US$730mn loan facility to be provided by the ADB to improve the electricity transmission network of
Vietnam. The loan will be used to finance the Power Transmission Investment Programme, which is
designed to fulfil the increasing electricity demand of the industrial sector and households. The ADB is
expected to provide the funds in four tranches, with the programme scheduled to be completed in June
2020. The first payment of US$120.5mn will be provided through ordinary capital resources and will
have a term of 25 years. The funds from the first tranche will be utilised to build 648km transmission
lines, with a voltage of 500 kilovolt (kV) and 100km transmission lines with 220kV voltage.
In May 2012, Vietnamese state-operated power company HCMC Power Corporation has asked the
Saigon municipal government to allow it to install power lines underground, reports The Saigon Times.
HCMC needs to invest VND17tn (US$816mn) in development by 2015, but has an annual budget of just
VND600bn (US$28mn). The company has therefore proposed to install underground power lines in order
to cut costs, comprising 18km of medium-voltage power lines and 43km of low-voltage power lines. The
entire city's power network is expected to be underground by 2025. However, structural changes need to
be made before there is sufficient investment to meet the long-term demand for grids. Vietnam’s
electricity transmission price remains low, averaging at 6.58% of electricity prices during the 2008-2012
period. This is much lower than the global average price and needs to be raise to 10-12% of electricity
prices.
In July 2012, General Electric signed an equipment supply contract worth US$16.5mn with the Power
Transmission Company No. 4, a subsidiary of the National Power Transmission Corporation, to double
Vietnam’s existing power transmission capacity. GE’s series capacitor banks will be installed as part of
the upgrade of the 500-kV Pleiku–Phu Lam transmission line to increase power capacity from 1,000 amps
to 2,000 amps, according to the contract signed in Hanoi at the witness of U.S. Secretary of State Hillary
Rodham Clinton, cited from the Saigon Times.
Droughts Driving Demand For Water Treatment Services
Vietnam has significant potential for large-scale water treatment facilities and we are forecasting real
growth in the water infrastructure industry to average 7.5% per annum between 2013 and 2017. Despite
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Vietnam Infrastructure Report Q1 2013
the presence of the Mekong River, Vietnam faces severe droughts periodically, with the drought in early
2010 reportedly one of the country's worst in 100 years, according to Time Magazine.
We believe that these droughts have the potential to increase in severity over the long term. Rapid
industrialisation throughout Vietnam is polluting the country's water supply at an increasing rate and
reducing the availability of potable water.
Driving Demand For Water Treatment Services
Vietnam – Real GDP and Organic Water Pollutant Emissions Data
f= BMI forecast. Source: BMI, World Bank, Vietnam General Statistics Office
Many countries located along the Mekong River, such as China and Laos, are also keen to utilise the
river's hydropower potential for electricity generation, damming up major tributaries further up the
Mekong River. These countries have questionable environmental licensing regulations; thus, it is unclear
if water resources used for electricity supply are environmentally sustainable. This creates significant
potential for severe environmental consequences and further reduces the availability of clean water supply
to Vietnam. Consequently, large-scale water treatment facilities are needed to make up for this decline in
water supply, and we have seen the country offer several projects under a PPP framework.
Urbanisation in major Vietnamese cities is also rapidly contaminating their water sources, while at the
same time increasing their demand for potable water. Hanoi, for example, is reliant on ground water to
meet its water needs, with clean water demand estimated to be around 550,000m3 per day, according to
local media reports. With urbanisation and economic growth, this demand for potable water is expected to
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Vietnam Infrastructure Report Q1 2013
surge to 1-1.5mn m3 per day. This would create a deficit in clean water resources and necessitate the use
of surface water resources, which are potentially contaminated.
Various multilateral financial institutions are keen to finance these water utility projects, with the ADB
having already agreed to provide US$1bn in funds to improve the country's water supply system between
2011 and 2020. Indeed, the urban water supply projects in Vietnam are now mainly funded by ODA
capital and developed by local State-owned water supply companies, said Tran Tuong Lan, head of the
Department for Infrastructure and Urban Centers under the Ministry of Planning and Investment.
Most of the country’s large-scale water utility projects are located near the main cities, Hanoi and Ho Chi
Minh City.
Vietnam has also recognised the need to improve its water infrastructure, and we have seen Vietnam offer
several large-scale water utility projects (mainly water treatment facilities) under a public private
partnership (PPP) framework. According to the Vietnam Ministry of Construction, there are around 15
large-scale urban water supply projects worth US$500mn that are in need of investment across Vietnam.
In addition, there is also a significant deficit in wastewater treatment facilities among Vietnam's industrial
parks. In August 2012, the Vietnam Department of Environmental Crime Control (under the Ministry of
Public Security) said that only 143 out of the 232 industrial parks in Vietnam have wastewater treatment
facilities. With Vietnam set to take a tougher stance on pollution, this could prompt companies to develop
the necessary wastewater treatment facilities.
Under the law on administrative sanctions to come into force on July 2013, the maximum penalty for
environmental violations will quadruple from the current VND500mn to VND2bn. In addition, the
Ministry of Public Security is coordinating with the Ministry of Natural Resources and Environment to
revise the 2005 Environment Protection Law and map out an Ordinance on the Vietnam Environment
Police, expected to be issued in the third quarter of 2013.
Several foreign investors have expressed an interest in Vietnam's water utilities sector, particularly
Japanese and Philippines companies. For example, Japan-based clean water companies Metawater and
TSS are believed to be building the Bay Mau wastewater treatment plant in Hanoi, a project financed by .
Japan's ODA coordinator, Japan International Cooperation (JICA). Another notable example is the
recent acquisitions by Philippine conglomerate Ayala Group. In May 2012, Ayala, through its subsidiary
Manila Water, had acquired stakes in two Vietnamese water utility companies. The company bought a
10% stake in Nha Be Water Supply, a company that supplies potable water to a district in Ho Chi Minh.
Manila Water also bought a 49% stake in Kenh Dong Water Supply, the owner of the 300,000m3/day
Thu Duc Water Treatment Plant. This makes Manila Water the largest foreign investor in Vietnam's water
utilities sector.
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Vietnam Infrastructure Report Q1 2013
There are however many investors still deterred from Vietnam's water utilities sector and we believe
some of the reasons are:
ƒ
The inability for investors to determine the price of water sold to customers, which is currently
set by Vietnamese authorities. Given that most countries do not allow the private sector to set the
price of water, we believe this issue has more to do with Vietnam's lack of regulatory capacity to
address and manage downside risks for private investors.
ƒ
The lack of incentives to attract investors to the sector. According to the HCMC Institute of
Development Studies (cited by the Saigon Times), private companies enjoy corporate income tax
reductions and exemptions, but unlike state-owned enterprises, they do not have priority access
to preferential loans. This is particularly important at the moment due to poor credit conditions
globally.
ƒ
The lack of clarity regarding the PPP framework for water utility projects. The Vietnamese
government had launched a pilot PPP mechanism in November 2010, but specific regulations for
the different types of infrastructure (including water) have yet to be completed by their
respective agencies .
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Vietnam Infrastructure Report Q1 2013
Major Projects Table – Energy And Utilities
Table: Major Projects – Energy and Utilities
Project Name
Value
(US$mn)
Capacity/
Length
Companies
Timeframe
Status
400km
Vietsovpetro Joint
Venture Co,
PetroVietnam
Construction Joint Stock
Corp and PetroVietnam
Technical Services Joint
Stock Corp
2009-2011
Construction started
(November 2009)
2010-2014
PetroVietnam to
prepare feasibility
study (March 2010)
Oil & Gas Pipelines
B-O Mon natural gas
pipeline
2nd Nam Con Son gas
pipeline
800
400km
PetroVietnam
441
293km
PetroVietnam
Construction and
PetroVietnam Equipment
Assembly, Metal
Structure
2011 – 2013
Contract awarded
by Petrovietnam
Gas (July 2011)
Nghi Son 1 thermal power
plant, Thanh Hoa province
981
600MW
Marubeni, Electricity of
Vietnam
2010-2014
Construction
underway
Danang hydropower plant
74
170MW
Geruco Song Con
Hydropower
2010-2013
Under construction
1200MW
Tan Tao Energy
Corporation, China
Harbour Engineering
Company [EPC]
Q1 2010 –
end-2013
Under construction
PetroVietnam
mid-2009 –
November
2011
Completed
(November 2011)
Shanghai Electricity
Corporation-China [EPC]
August 2010
– late-2013
(first
turbine);
June 2014
(second
turbine)
Under construction
(July 2012)
Project approved in
principle (August
2010)
Under construction
Nam Con Son 2 pipeline
project, southern Vietnam
na
Power Plants &
transmission grids
Kien Luong Coal-fired
Power Complex (Phase 1),
Kien Luong Province
Nhon Trach 2 gas-based
power plant, Ong Keo
Industrial Park, Dong Nai
province
Vinh Tan 2 thermal power
plant, part of Vinh Tan
Electric Centre, Tuy Phong
districts, Binh Thuan
province
2500
470
1300
760MW
1244MW
Two wind farms, Binh
Thuan Province
440
200MW
Saigon Invest Group
August 2010
-
Coal power plant BOT
project, Binh Thuan
province
1750
1200MW
China Southern Power
Grid Corp
September
2010 – 2014
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Vietnam Infrastructure Report Q1 2013
Table: Major Projects – Energy and Utilities
Project Name
Value
(US$mn)
Capacity/
Length
Companies
Timeframe
Status
Muong Kim hydropower
plant
37
13.5MW
Hanoi Electrical
Equipment
-2010
Completed –
Started commercial
operations
(September 2010)
Wind farm in Thuan Bac
district, Ninh Thuan
Province
500
200MW
Trung Nam Investment
and Construction
2010-2012
Construction
underway
192
144MW
Dakdrinh Hydropower
Joint Stock Company,
Construction Corp No 1
2007 December
2011
Completed without
foreign guidance
(Oct 2011)
3
3MW
Duc Long Gia Lai Group
(DLG)
2010-
Currently underway
2000MW
EVN, Rosatom,
Atomstroyexport, E4
Group , Kiev Scientific
Research and Designing
Institute (JSC KIEP),
EnergoProjectTechnolog
y (LLC EPT)
2014-2020
US$8bn loan from
Russia, consultancy
agreement for 18month feasibility
study signed(Nov
2011)
January
2012 – 2018
BOT project
received
government
approval (Jan 2012)
Dak R'Tih hydropower
plant, Gia Nghia town, Dak
R'Lap district, Dak Nong
province
Dak Sepay hydropower
plant in Bai Tho spring
Ninh Thuan 1 nuclear
power plant
Song Hau 2 coal-fired
power plant (Song Hau
Thermo Power Complex),
Hau Giang province
Ninh Thuan 2 nuclear
power plant
Mong Duong 2 coal-fired
BOT power plant project,
Quang Ninh province
Wind power project in Vinh
Tan and Vinh Phuoc, Soc
Trang Province
Huoi Quang hydropower
plant project
10600
2000MW
PetroVietnam, Toyo Ink
Group
2000MW
International Nuclear
Energy Development
Corporation of Japan,
Japan Atomic Power
2014-2022
US$26mn feasibility
and environmental
study to be
completed by March
2013 (Sep 2011)
2100
1200MW
AES, Posco Power,
China Investment
Company (CIC), Doosan
Heavy Industries &
Construction, Hoa Binh
Construction and Real
Estate Trading Joint
Stock Co (HBC)
September
2011 – 2015
Under construction,
40% completed
(September 2012)
na
300MW
EAB Group, Trasesco
2011-
At the development
stage
520MW
Electricity of Vietnam,
French Development
Agency (AFD)
2010-2015
Received
US$100mn
financing from AFD
2500
14400
na
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Vietnam Infrastructure Report Q1 2013
Table: Major Projects – Energy and Utilities
Project Name
Phu Quy wind power plant,
Binh Thuan Province
Dak Mi 2 Hydropower
plant
Value
(US$mn)
17
128
Capacity/
Length
Companies
6MW
PetroVietnam Power
Corporation, Electronics
and Informatics Corp
(VEIC), Viettronics
Construction JSC
(VIETCT), Amec
Technologies Joint Stock
Co
Timeframe
Status
2010-
First phase under
construction;
Financing secured
with OceanBank
and HSBC
96MW
Song Da 9.01
2010- 2013
Contract signed –
First turbine
expected 2013
2010-2012
Construction
underway
Song Chay 5 hydropower
plant project, Then Phang
Commune, Xin Man Dist,
Ha Giang province
21
16MW
Song Da 5 Investment,
Construction and Energy
Development Joint Stock
Co
Son La hydropower power
plant, Muong La district,
Son La province
2900
2400MW
Electricity of Viet Nam
(EVN) [Sponsor]
2005 –
August 2012
Completed
1200MW
Petrovietnam,
Petrovietnam Technical
Services Corp
2011-2014
Construction
underway
Long Phu 1 coal-fired
power plant, Soc Trang
Province
Lai Chau hydropower
plant, Lai Chau province
Thang Long coal-fired
circulating fluidised bed
power plant, Guangninh
province
Vung Ang 2 coal-fired
power plant, Ky Anh
District, Ha Tinh Province
1.1mn-volt ultra high
voltage (UHV) electric
power transmission project
near Ho Chi Minh City
Nam Cong 2 and Nam
Cong 3 power plants in
Attapeu, Laos
Hydropower plant
1200
1200MW
Electricity of Vietnam
(EVN), Song Da Group
2011-2017
Under construction;
Facing payment
delays (June 2011);
First phase
completed by March
2016
303
600MW
Wuhan Kaidi Electric
Power, Thang Long
Thermoelectric,
Vinacomin
2012 – 2015
EPC contract
signed (Dec 2011)
1700
1200MW
Vapco, Hung Nghiep
Formosa Ha Tinh Co.
2012 – 2020
At planning stage
(July 2012)
na
na
Tokyo Electric Power
(TEPCO)
2011-
Feasibility study
completed in
February 2011
135
111MW
Hoang AnhAttapeu
Electric
2011-2013
Licence Granted
na
Sumitomo Mitsui
Financial Group
[Sponsor], Nippon Export
and Investment
Insurance of Japan
[Sponsor], Chugoku
Power Co
February
2011 -
Sumitomo Mitsui
Financial Group has
agreed to US$51
mn loan (February
2011)
1831
62.5
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Vietnam Infrastructure Report Q1 2013
Table: Major Projects – Energy and Utilities
Project Name
Nghi Son 2 coal fired
power plant, Thanh Hoa
province
Phu My 2.2 thermal power
station
Cong Thanh coal-fuelled
power plant, Nghi Son
Economic Zone, Thanh
Hoa
Value
(US$mn)
Capacity/
Length
Companies
Timeframe
Status
2000
1200MW
Marubeni Corp, Vietnam
National Coal-Mineral
Industries Group
(Vinacomin)
2011-2016
Undergoing
negotiations
na
715MW
Electricity of France
(EDF)
2011-
EDF selected as
investor
619
600MW
Cong Thanh Corporation
2011- 2014
Under construction
2
75MW
Southern Region
Hydropower, Mien Dong
2011-2012
Construction
contract awarded
2007 – May
2012
First unit completed,
Second unit
completed by end2012 (May 2012)
Da M'bri plant, Lam Dong
province
A Luoi Hydropower, Thua
Thien Hue Province
155.5
170MW
Cavico, Central
Hydropower
2008 – late2012
Under construction;
First generator into
operation (August
2011)
Hua Na hydropower plant,
Que Phong district, Nghe
An province
286
180MW
Hua Na Hydropower
Joint Stock Co, Lilama 35
Joint Stock Co
A solar and wind power
development, Ninh Thuan
province
249
124.5MW
na
2011-
Received
investment licences
51MW
Central Region WindPower, Phuong Mai
Windpower
Q2 2011-
Under construction
2012 -2014
At planning stage;
Document
submitted to
Vietnamese
government
2011-2019
Seeking formal
government
approval
2011-
Construction
approved – Planned
production
capability of 124
million kWh of
electricity per year
2009-2012
Under construction,
first 220MW unit
operational (July
2012)
2 wind power projects –
Nhon Hoi Economic Zone,
Binh Dinh province
Thermo power plant, Nhon
Hoi Economic Zone, Binh
Dinh province
Thermoelectric power
plant, Hau Giang
Waste-to-power treatment
plant, Binh Phuoc
Mao Khe coal-fired power
plant, Quang Ninh
province
60
972
2500
60
577
© Business Monitor International Ltd
1400MW
2000MW
STFE
TOYO
na
Suc Song Xanh
440MW
Vinacomin, BNP Paribas
[Sponsor], Bank of China
[Sponsor]
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Vietnam Infrastructure Report Q1 2013
Table: Major Projects – Energy and Utilities
Project Name
Duyen Hai 2 coal-fired
power plant, Tra Vinh
province
Quang Trach 1 coal-fired
power plant, Quang Binh
province
Song Tranh 4 hydropower
plant, Quang Nam
province
Trung Son hydropower
project, Quan Hoa, Thanh
Hoa province
Hai Phong 1 thermo power
plant
Hai Phong 2 thermo power
plant
Dadrinh hydropower plant,
along Tra Khuc River,
Quang Ngai Province
Solar power generation
plant, Quang Binh
province
Undersea (110KV) power
cable project (Ha Tien
Township – Phu Quoc
Island), Kien Giang
province
Hai Duong coal-fired
power plant, northern
Vietnam
Value
(US$mn)
1500
Capacity/
Length
1200MW
Companies
Janakuasa
2250
1200MW
PetroVietnam, EPF
Power, JPAWORR,
Sumitomo [Sponsor]
77
48MW
na
260MW
World Bank [Sponsor], 47
Construction JSC (C47),
Samsung C&T
Corporation
411
na
na
170
14
112
2260
© Business Monitor International Ltd
300MW
300MW
125MW
na
Hai Phong Thermo
Power Joint Stock Co
Dakdrinh Hydropower
Joint Stock Co.,
Petrovietnam
Timeframe
Status
2011-2014
To start
construction in
2011; Project fully
financed by
Huadian
Engineering
early-2013 –
2015
Under construction,
seeking funds,
selected to use
local power
equipment (July
2012)
2011- 2014
Under construction
H2 2011 –
Q2 2017
Under construction,
main construction
contract awarded
(September 2012)
- Q2 2011
Generator No 1 and
2 joined national
grid (Q211)
-September
2013
Third generation to
start in April 2013;
Fourth generator,
September 2013
2011 – 2014
Under construction;
US$178 credit
contract signed with
Credit Agricole
Corp.
na
na
2011 – 2013
US$12mn loan
approved from
Korea Eximbank
(June 2011)
56km
EVN Southern Power
[Sponsor], World Bank
[Sponsor], Prysmian
Powerlink SRL Group
[EPC]
May 2012 –
late-2013
EPC contract
awarded (May
2012)
Q2 2013 –
Q2 2017
Under construction;
25-year BOT
contract awarded;
Key agreements
(BOT, land, PPA)
signed (Aug 2011)
1200MW
Jaks Resources Berhad,
Meiya Power, Island
Circle, JAKS Pacific
Power
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Vietnam Infrastructure Report Q1 2013
Table: Major Projects – Energy and Utilities
Project Name
Wind Farm, Bac Lieu, Cuu
Long province, Mekong
Delta
Value
(US$mn)
247
Capacity/
Length
Companies
Timeframe
Status
99.2MW
Cong Ly Construction,
General Electric (GE),
Trade and Tourism
September
2010 –
September
2013
Under construction;
GE to provide
turbines (Jul 2011);
PPA signed (August
2012))
2011 -
In discussion with
Tra Vinh province
People's Committee
(July 2011)
Wind power plant, Duyen
Hai District, Tra Vinh
province.
na
30MW
EAB Group, General
Trading Production and
Services Joint Stock Co
(Trasesco
Wind power project, Tram
Hanh Commune, Da Lat
City, Lam Dong province
na
300MW
na
2011 – 2013
At planning stage
(July 2011)
Ninh Loan wind power
plant, Duc Trong District,
Lam Dong province
na
na
na
2011 – 2013
Under construction
(July 2011)
2011 – 2013
BOO agreement
signed; US$15.5mn
equipment contract
awarded to
Dongfang Electric
(July 2011)
2011 – 2015
Under construction,
selected to use
local power
equipment (July
2012)
2011 – 2015
EPC awarded by
EVN; 85% financed
by Chinese banks
(August 2011)
Dakrinh hydropower plant,
Kon Turn province
Song Hau 1 coal-fired
power plant, Hau Giang
province
Duyen Hai 3 coal-fired
power plant, Tra Vinh
province, southern region
of Vietnam
Vung Ang 1 coal-fired
power plant, Ha Tinh
province
Mong Duong 1 coal-fired
power plant, near Cam
Pha Town, northern
Quang Ninh Province
Srepok 4A hydropower
plant
Son My Power Centre
(LNG) BOT project, Ham
Tan District
205
na
1300
1600
125MW
1200MW
Dakdrinh Hydropower
Joint Stock Co, PV
Power, PetroVietnam
PetroVietnam,
Petrovietnam Technical
Services Corp
1245MW
CHENGDA, DEC,
SWEPDI, ZEPC
1200MW
Petrovietnam, LILAMA
Corporation [EPC],
Toshiba, Sojitz, JBIC
[Sponsor], Sumitomo
Mitsui [Sponsor]
August 2011
– July 2012
Under construction;
Steam turbine
generators from
Toshiba, Sojitz
(November 2011)
Under construction;
EPC contract
awarded (Sep
2011); US$930mn
loan from ADB
1700
1080MW
Hyundai Engineering &
Construction
October
2011 –
August 2015
(first turbine)
na
64MW
Buon Don Hydropower
Joint Stock Co
2011 – late2012
Under construction
(Sep 2011)
October
2011 – 2019
Feasibility study
prepared for
1950MW Son My 1
power plant (Oct
2011)
4670
© Business Monitor International Ltd
3000MW
International Power,
Sojitz, Pacific
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Vietnam Infrastructure Report Q1 2013
Table: Major Projects – Energy and Utilities
Project Name
Thermoelectric plant,
Ganh Dau Commune
Hydropower plant, Song
Bac River, Ha Giang
province
O Mon 4 combined cycle
gas-based power plant,
part of O Mon thermal
power complex, Can Tho
city
Integrated gasification
combined cycle system
coal-fired power plant, Hai
Lang District, Quang Tri
Economic Zone, central
Vietnam
Power Transmission
Investment Program
(involves building 648km
of transmission lines in
first tranche)
Coal-fired power plant,
Dung Quat Economic
Zone, Quang Ngai
Province
Waste plasma-converted
gas-fired power plant first
phase, Ho Chi Minh City
O Mon 1 gas-based power
plant, part of O Mon
thermal power complex,
Can Tho city
Pleiku-My Phuoc-Cau
Bong 500KV Transmission
Line
Dak Nong-Phuoc LongBinh Long 220KV
Transmission Line
Value
(US$mn)
344
50
Capacity/
Length
Companies
Timeframe
Status
200MW
Phu Quoc Investment
and Development
Management Board
October
2011 -
Received
government
approval (Oct 2011)
November
2011 – end2012
Under construction
(Nov 2011);
US$50mn loan from
Sumitomo Mitsui
Bank
42MW
Song Bac Hydroelectric
793.5
720MW
Can Tho Thermal Power
Company, Asian
Development Bank
(ADB)
2011 – June
2016
US$309.9mn loan
from ADB,
US$370mn from
KfW Bankengruppe
(Nov 2011)
na
3600MW
PHI Group, Sao Nam
Group
December
2011 -
MOU signed (Dec
2011);
December
2011 – June
2020
US$730mn loan
from ADB, first
tranche of
US$120.5mn
approved (Dec
2011)
730
338
400
na
447
67
© Business Monitor International Ltd
860km
Asian Development Bank
(ADB), National Power
Transmission
Corporation
1200MW
Sembcorp Industries
June 2012 -
Feasibility study
underway;
Received license
(June 2012)
na
Trisun International
Development, Kien Giang
Composite KGC
Company
March 2012
-
Project awarded
(Mar-12)
660MW
Can Tho Thermal Power
Company Limited,
Daelim Industrial [Design
and Construction], Sojitz
Corporation [Steam
Turbines], JICA
[Sponsor]
September
2012 –
October
2015
Under construction
(September 2012)
na
National Power
Transmission Corp (NPT)
September
2011 – end2012
Under construction;
US$200mn from
ADB, US$192mn
from Vietcombank,
US$74mn from
VDB
na
National Power
Transmission Corp (NPT)
September
2011 – end2012
Under construction;
US$45mn from
BIDV
Page 74
Vietnam Infrastructure Report Q1 2013
Table: Major Projects – Energy and Utilities
Project Name
Ba Thuoc 2 hydropower
plant project
Value
(US$mn)
72
Capacity/
Length
Companies
Timeframe
Status
na
Hoang Anh-Thanh Hoa
Hydropower Joint Stock
Co, Hoang Anh Gia Lai
Group
September
2009 – 2012
Under construction
February
2012 – 2014
Contract awarded
(February 2012)
2011 – 2015
At planning stage
Song Bung 4 hydropower
EPC project, Bung River
24
156MW
Alstom, Hydrochina
Huadong Engineering
Corp
Dong Nai 5 Thermo coalfired power plant
na
300MW
Vinacomin
481
300MW
An Khanh Thermo Power
Joint Stock Co., Bank of
China [Sponsor]
early-2012 –
2016
Investment licence
received (October
2011); Site
clearance underway
na
100MW
An Khanh Thermo Power
Joint Stock Co.
2011 -
Under construction
(December 2011)
1200MW
Tan Tao Energy
Corporation, China
Harbour Engineering
Company [EPC]
June 2010 –
early-2014
Contract awarded in
2010
2000MW
Tan Tao Energy
Corporation, China
Harbour Engineering
Company [EPC]
June 2010 -
Contract awarded in
2010
An Khanh 2 coal-fired
power plant, Tan Phu
Commune, Pho Yen
District, Thai Nguyen
province
An Khanh 1 coal-fired
power plant, An Khanh
Commune, Dai Tu District,
Thai Nguyen province.
Kien Luong Coal-fired
Power Complex (Phase 2),
Kien Luong Province
Kien Luong Coal-fired
Power Complex (Phase 3),
Kien Luong Province
Thermal power plant, Ly
Son Island, Quang Ngai
province
Phuong Mai Wind Power
Plant No 1, Nhon Hoi
Industrial Park, Binh Dinh
Province
Grid revamping project;
8km of medium-voltage
power lines and 43km of
low-voltage power lines
Thai Binh 2, coal-fired
power plant, Thai Binh
province
na
na
na
na
na
- April 2012
Project suspended
due to
environmental
concerns (April
2012)
60.25
30MW
Clean Energy, CP
Phuong Mai Wind Power
April 2012 –
April 2013
Under construction
(April 2012)
816
na
HCMC Power
Corporation
May 2012 –
2015
At planning stage
(May 2012)
1200MW
PetroVietnam Power
Corporation,
PetroVietnam
Construction Joint Stock
Corporation [EPC],
Toshiba, Sojitz
[Equipment], Daelim
Industrial [Equipment],
Babcock & Wilcox Beijing
Company (BWBC)
August 2012
– end-2015
US$300mn
equipment subcontract awarded
(August 2012)
1600
© Business Monitor International Ltd
Page 75
Vietnam Infrastructure Report Q1 2013
Table: Major Projects – Energy and Utilities
Project Name
Mekong Delta Wind Power
Centre, Vinh Trach Dong
Commune
Undersea power cable
project (Sa Ky Port – Ly
Son Island), Quang Ngai
Province
Solar farm, Binh Thuan
province
Value
(US$mn)
Capacity/
Length
Companies
500MW
Vietnam Development
Bank [Sponsor], ExportImport Bank of the United
States [Sponsor]
14.4
na
1000
Timeframe
Status
June 2012 –
2015
Under construction
(June 2012); US$1
loan received
(October 2011)
26km
Power Engineering
Consulting Joint Stock
Company 2
June 2012 -
Surveying activities
completed (June
2012)
50MW
ACO Group
July 2012 -
At planning stage
(July 2012)
January
2012 – 2016
Under construction,
selected to use
local power
equipment (July
2012)
Q1 2013 -Q4
2015
At planning stage
(July 2012)
Quynh Lap 1 coal-fired
power plant, Central Nghe
An province
1500
1200MW
Vinacomin, No 1
Construction Consultancy
JSC
Da Nhim hydropower plant
expansion project
na
80MW
Da Nhim-Ham Thuan-Da
Mi Hydropower JSC
Vinh Tan 1 thermal power
plant BOT project, part of
Vinh Tan Electric Centre,
Tuy Phong districts, Binh
Thuan province
Waste power generation
project, Hanoi
1900
29.5
na
China Southern Group
July 2012 -
At documentation
stage, BOT contract
yet to be signed
(July 2012);
Undergoing land
acquisition process
(August 2012)
na
Hitachi Zosen
Corporation, Japanese
New Energy and
Industrial Technology
Development
Organisation [Sponsor],
Hanoi government
[Sponsor]
August 2012
-
Contract awarded
(August 2012)
Vinh Tan 3 thermal power
plant BOT project, part of
Vinh Tan Electric Centre,
Tuy Phong districts, Binh
Thuan province
na
na
Vinacomin
August 2012
-
At planning stage,
undergoing land
acquisition process
(August 2012)
O Mon 2 gas-based power
plant, part of O Mon
thermal power complex,
Can Tho city
na
720MW
Can Tho Thermal Power
Company
August 2012
– 2015
At planning stage
(August 2012)
O Mon 3 gas-based power
plant, part of O Mon
thermal power complex,
Can Tho city
na
700MW
Can Tho Thermal Power
Company
August 2012
– 2015
At planning stage
(August 2012)
August 2012
-
Seeking
government
financing (August
2012)
Nam Chien hydropower
plant BO project, Son La
province
na
© Business Monitor International Ltd
200MW
Song Da Group
Page 76
Vietnam Infrastructure Report Q1 2013
Table: Major Projects – Energy and Utilities
Project Name
Geothermal power plant,
Dakrong District, Quang
Tri province
Nong Son coal-fired power
plant, Quang Nam
province
Pleiku-Phu Lam 500kV
transmission line, part of
North-South power
transmission
Value
(US$mn)
na
Capacity/
Length
Companies
Timeframe
Status
September
2012 -
Received
government
approval
(September 2012)
2008 -
Construction halted,
55% completed
(September 2012)
25MW
na
na
China National Heavy
Machinery Corporation
(CHMC), Vinacomin
[Sponsor]
na
500km
Power Transmission
Company No. 4, General
Electric (GE), US Exim
Bank [Sponsor]
2012 – Q3
2013
US$16.5mn
equipment supply
contract signed
(July 2012)
na
na
na
-2015
Site selected
(August 2010)
2011 -
Contract awarded;
Construction due to
begin (May 2012)
2011 -
Plan approved by
the government in
2010
253.3
Water
Thanh My Loi wastewater
treatment
Song Hau 1 water
treatment plant PPP
project, Can Tho City
Song Hau 2 water
treatment plant, An Giang
Province
na
na
na
na
PetroVietnam
na
Song Hau 3 water
treatment plant, An Giang
Province
na
na
na
2011 -
Plan approved by
the government in
2010
Wastewater treatment
plant, Binh Duong
95
6mn m3
/year
na
2011-mid
2013
Under construction
2011-2014
US$85mn loan from
ADB and French
government; The
rest from
Vietnamese
government
Water supply and irrigation
system project, south of
Vietnam
Yen So PPP wastewater
treatment plant, Hoang
Mai District, Hanoi
Water pipeline system
project (Binh Thai
intersection [Thu Duc
District] – Dien Bien Phu
Street near Saigon
Bridge), Ho Chi Minh City
Phuc Hoa water resource
project
329
300
154
60
© Business Monitor International Ltd
na
Asian Development Bank
(ADB)
200,000
m3/day
Gamuda, Gamuda Land
Vietnam Co., Japan
International Cooperation
Agency (JICA), Hanoi
Water Drainage
Company
2008-2012
Under construction,
almost completed
(June 2012)
10km
Asian Development Bank
[Sponsor], Saigon Water
Corporation (Sawaco)
June 2012 –
late-2014
US$138mn loan
from ADB (June
2012)
2011 – 2014
US$60mn
supplementary
financing provided
by ADB
na
na
Page 77
Vietnam Infrastructure Report Q1 2013
Table: Major Projects – Energy and Utilities
Project Name
Value
(US$mn)
Capacity/
Length
Companies
29
Timeframe
Status
13300
m3/day
Japan International
Cooperation Agency
(JICA), Metawater, TSS,
Hanoi Water Supply,
Sewerage, Environment
Investment Construction
October
2011 -
US$192.4mn loan
signed with JICA
(Jul 2011); To form
JV with Vietnam
company (Sep
2011)
144
84000 m3
/day
Hanoi Water Drainage
Company
July 2012 -
At planning stage
(July 2012)
Yen Xa water treatment
plant, Hanoi
288
275000 m3
/day
Hanoi Water Drainage
Company, ODA
[Sponsor]
July 2012 -
At planning stage
(July 2012)
Seven water supply
projects, Ho Chi Minh City
240
na
Saigon Water Supply
Corporation (Sawaco)
September
2011 – 2015
Under construction
(September 2011)
September
2011 – late2012
Received approval
from Tay Ninh
provincial People's
Committee
(September 2011)
July 2011 -
MOU for second
phase signed with
JICA (July 2011)
Bay Mau PPP wastewater
treatment plant under
Second Hanoi Drainage
Project For Environmental
Improvement, Vietnam
Phu Do wastewater
treatment plant, Hanoi
Sewage treatment plant,
Ben Rong commune, Go
Dau district, Tay Ninh
Binh Hung wastewater
treatment plant second
phase, Binh Chanh
District, Ho Chi Minh City
14.4
na
300tonnes/
day
Vietnam Green
Environment Company
512000
m3/day
Center of Urban Flood
Control, Japan
International Cooperation
Agency (JICA)
Garbage and wastewater
treatment PPP project, Da
Nang city
190
na
JFE Engineering, Nihon
Suido Consultants
November
2011 -
Working group
established for
feasibility study
(Nov 2011)
Tra Bong water supply
project, Binh Son district,
Quang Ngai province
197
200000m3/
day
Anh Phat Water Supply
Group Joint Stock Co
April 2012 –
Q4 2013
Under construction
(April 2012)
2003 – June
2012 (first
phase)
US$317mn first
phase under
construction (April
2012); Second
phase to cost
US$470mn
Nhieu Loc-Thi Nghe Canal
Basin environmental
sanitation project
Kenh Dong water
treatment BOT project, Ho
Chi Minh City
787
na
World Bank [Sponsor],
Asian Development Bank
[Sponsor]
na
200000
m3/day
Kenh Dong Water Supply
Joint Stock Co, Ayala
Corp, Manila Water
2003 – H2
2012
Under construction
(April 2012)
- June 2012
Completed (June
2012)
2012 – late2014
Under construction
Water pipeline system
project (Binh Thai
intersection – Thu Duc
water plant), Ho Chi Minh
City
na
12.4km
Asian Development Bank
(ADB), Saigon Water
Corporation (Sawaco)
Thu Duc 3 water treatment
plant, Ho Chi Minh City
na
na
na
© Business Monitor International Ltd
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Vietnam Infrastructure Report Q1 2013
Table: Major Projects – Energy and Utilities
Value
(US$mn)
Capacity/
Length
Nhieu Loc-Thi Nghe
wastewater treatment
plant (second phase),
Thanh My Loi Ward,
District 2, Ho Chi Minh City
na
850000m3/
day
Western West Lake waste
water treatment plant,
Hanoi
144
20
Project Name
Ha Dong waste water
treatment plant (first
phase), Hanoi
Green waste treatment
plant, Thu Thua district,
Long An Province
Companies
Timeframe
Status
na
July 2012 -
Received HCM City
approval (July
2012)
61400m3/d
ay
na
July 2012 -
At planning stage
(July 2012)
20000m3/d
ay
ODA [Sponsor]
July 2012 -
At planning stage
(July 2012)
August 2012
– 2022
At planning stage;
Design, feasibility,
geological study
completed (August
2012)
40000
tonnes/yr
Vietnam Waste Solutions
Co. (VWS)
9
30000m3/d
ay
Saigon Infrastructure
Real Estate Investment
(SII), HFIC Investment
Joint Stock Company,
Tuan Loc Company
2013 – 2014
At planning stage,
project announced
(August 2012)
Water supply project, Van
Phong Economic Zone,
Khanh Hoa Province
4.8
30000m3/d
ay
na
September
2012 -
At planning stage
(September 2012)
Son Tay water treatment
plant, Hanoi
12
9000m3/da
y
na
July 2012 -
At planning stage
(July 2012)
700
water supply project,
Pleiku, Gia Lai province
Source: BMI. na=not available.
© Business Monitor International Ltd
Page 79
Vietnam Infrastructure Report Q1 2013
Residential/Non-Residential Construction and Social
Infrastructure
Table: Vietnam Residential and Non-residential Building Industry Data, 2010 – 2016
2010
2011
2012e
2013f
2014f
2015f
2016f
Residential and NonResidential Building Industry
Value As % of Total
Construction
53.9
53.0
53.1
53.6
54.1
54.7
55.4
Residential and NonResidential Building Industry
Value, VNDbn
75,004.6
86,188.6
93,896.4
107,544.2
122,367.6
138,019.9
155,670.4
Residential and NonResidential Building Industry
Value, US$bn
3.9
4.2
4.5
5.2
6.0
6.8
7.7
Residential and NonResidential Building Industry
Value Real Growth, % chg
y-o-y
16.5
-3.8
-0.1
8.2
7.5
7.5
7.8
Residential and NonResidential Building Industry
Value as % of GDP
3.8
3.4
3.2
3.3
3.2
3.2
3.2
e/f = BMI estimate/forecast, Source: BMI Research
Table: Vietnam Residential and Non-residential Building Long Term Forecasts, 2015 – 2021
2015f
2016f
2017f
2018f
2019f
2020f
2021f
Residential and NonResidential Building Industry
Value As % of Total
Construction
54.7
55.4
56.1
56.8
57.5
58.2
59.1
Residential and NonResidential Building Industry
Value, VNDbn
138,019.9
155,670.4
175,565.6
197,692.9
222,417.7
249,287.0
279,107.8
Residential and NonResidential Building Industry
Value, US$bn
6.8
7.7
8.8
9.9
11.1
12.5
14.0
Residential and NonResidential Building Industry
Value Real Growth, % chg
y-o-y
7.5
7.8
7.8
7.6
7.5
7.1
7.0
Residential and NonResidential Building Industry
Value as % of GDP
3.2
3.2
3.3
3.3
3.3
3.3
3.2
e/f = BMI estimate/forecast, Source: BMI Research
© Business Monitor International Ltd
Page 80
Vietnam Infrastructure Report Q1 2013
Residential/Non-Residential Building Outlook and Overview
BMI View: Vietnam's robust economy, which is forecast to grow at an average rate of 7.2% year-onyear (y-o-y) between 2013 and 2017, is to be a driving force for residential and non-residential building
sector growth. Rising trade activity will drive demand for industrial buildings, while rising incomes
among Vietnamese consumers will drive demand for housing and commercial construction projects, such
as malls and hotel development. We also believe that there is upside potential to our long-term forecast in
Vietnam's residential and non-residential building sector and are forecasting real growth for the sector to
average 7.8% y-o-y between 2013 and 2017.
We expect the residential and non-residential building sector to see a significant recovery in 2013. Real
growth for the sector is forecast to reach 8.2% in 2013, compared to a contraction of 0.1% in 2012. Our
optimistic outlook for Vietnam's buildings sector is primarily driven by the country's conducive monetary
conditions. The benchmark interest rate in Vietnam has stayed at around 10.00% since July 2012 and this
should be favourable for construction activity.
Recovering After 2012
Residential And Non-residential Building Industry Data
e/f = BMI estimate/forecast, Source: BMI, Vietnam General Statistics Office
However we believe this recovery will be driven by the non-residential buildings sector, rather than the
residential building sector. Large inflows of foreign capital into the real estate market, poor economic
conditions in Vietnam and loose monetary policy in recent years have led to an oversupply in the
residential building sector. According to Vietnamese investment group Dragon Capital in a recent
economic forum held in late-September, above 35,000 apartments are currently available for sale in
Hanoi and Ho Chi Minh City each. This excess supply have seen land and real estate prices fall
significantly and consistently since mid-2011.
© Business Monitor International Ltd
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Vietnam Infrastructure Report Q1 2013
To compound the problem, many of the real estate companies have taken on large amounts of debt to fuel
their building activity in previous years. With a sizeable part of their real estate stock unsold, many of
them are facing difficulties repaying their loans and are unable to take on new projects. According to the
HCM City Department of Construction, the city currently is has planned for over 1,100 apartment
projects. If completed, these projects will provide the market with around 380,000 apartments. However,
only 195 projects, or 17% of the total number, have been completed at the end of September. Out of the
815 unfinished projects, 158 projects have not completed investment procedures, 122 projects have yet to
get off ground and the remaining 14 have been suspended. A survey carried out by the department (cited
from Intellasia) showed that many projects had fallen far behind schedule due to 'prolonged hardship of
the real estate market, lateness in site clearance, investment formalities and financial problems of
investors'.
In Hanoi, it is reported that hundreds of urban and residential projects in the Ha Tay Province and Vinh
Phuc’s Me Linh District failed to start construction despite receiving government approval. In the Me
Linh District, it is believe that there are as many as 110 projects ready to start construction, with
significant portions of the land cleared. However, all of these projects are now sit abandoned.
Although the aggressive rate cuts taken by the government in 2012 could reignite demand for housing, the
scale of the oversupply makes this unlikely. According to Dragon Capital, the current apartments in stock
could take 7 years to be fully absorbed by the market unless demand stimulus measures are executed.
There are currently plans to carry out such a stimulus, but it remains to be seen if they will be enacted.
During a real estate conference in June 2012, the Vietnamese government is planning to increase public
investment disbursements that will indirectly revive the real estate sector. The government is also
planning to launch a fund subsidised by the state budget for the poor to buy houses, and a fund for middle
and higher income earners to save their own money to buy houses.
Besides stimulus measures, other upside risks for the residential sector is Vietnam's attractive
macroeconomic and population fundamentals. Rising incomes among Vietnamese consumers and rapid
urbanisation rates will boost demand for housing and commercial construction projects, such as malls and
hotels, over the coming years. Meanwhile, the country's private consumption growth is expected to
remain resilient, while the unemployment rate will remain at historical lows over the long term. These
factors would also ensure that the demand for housing and commercial projects remains robust. Lastly,
the demand for affordable houses is still outstripping supply, as residential development has largely
focused on high-end customers.
Non-Civil Building To Outperform
We believe that the main driver of growth for the residential and non-residential building sector is the
non-residential building sector. We believe an increase in trade activity could boost the demand for
energy-related facilities and industrial buildings (ie, factories, warehouses). A key sector is the
petrochemicals industry. Around nine petrochemicals projects are at the planning stage and are expected
© Business Monitor International Ltd
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Vietnam Infrastructure Report Q1 2013
to be completed by 2025, with foreign investment to be sought for six of the plants managed by
PetroVietnam. The country is racing to meet growing demand for petrochemicals – to reach about 5.4mn
tonnes per year by 2020 – and a supply shortfall is expected to remain, even after the completion of the
planned projects. The projects include a facility with 1mn tonnes per year polyethylene, 500,000 tonnes
polypropylene and 400,000 tonnes PVC capacity, according to the director of PetroVietnam’s Research
and Development Centre for Petroleum Processing, Phan Minh Quoc Binh, as quoted by Plastics News.
One of the largest project is the Long Son petrochemical complex. In February 2012, Siam Cement
Group (SCG), QPI Vietnam, PetroVietnam and Vietnam National Chemical Corporation
(Vinachem) signed a joint venture agreement to invest in a US$4.5bn petrochemical complex in Southern
Vietnam. Under the deal, SCG is to acquire a 46% stake in the project. The company has said that the
complete details regarding investment in the project and how it will be financed are scheduled to be
finalised in 2013. The fully integrated complex, which will use ethane, propane and naphtha as feedstock,
will be situated on Long Son Island at Ba Ria-Vung Tau province. The complex, which is likely to start
commercial operations within four years, will have an annual production capacity of 1.4mn tonnes of
olefins.
Tourism – Gambling On A Trend
Another key driver of growth in the non-residential buildings sector is the tourism sector. We expect
tourism – both domestic and regional – to become a growing source of value creation for the sector, as
disposable income levels rise across the Asia Pacific region and short-haul travel becomes more
accessible to an expanding middle-class population. The rising popularity of integrated gaming resorts
across the region epitomises this growing trend, with casinos fast becoming a pre-requisite for many
would-be tourism developments. In August 2011, foreign investors were invited to bid for a planned
US$4bn tourism complex on Phu Quoc Island, having been given the go-ahead by the Vietnamese
government, with the government aiming to transform the island into a trade and tourism hub. While
there are casinos in many Vietnamese hotels that are open to foreign tourists, these are deemed too small
in scale to attract the kind of numbers required to compete with the likes of Macau's multibillion dollar
developments.
The Vietnamese government has therefore set a US$4bn minimum investment threshold for its 135
hectare (ha) project, which will include a 30,000 m2 casino with a 30-year operating licence, as well as
five- or six-star hotels. The government plans to make the island a special administrative and economic
region – Macau has a similar status bestowed upon it – which will presumably allow it to function outside
the country's gambling laws. The island is expected to attract two to three million visitors per year by
2020.
However, it has not been all smooth-sailing. In September 2012, Genting Malaysia, a subsidiary of
Genting Group, withdrew from a US$4bn resort project in the Quang Nam province. The project was to
© Business Monitor International Ltd
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Vietnam Infrastructure Report Q1 2013
be jointly developed with VinaCapital, but the Malaysian gaming conglomerate chose to pull out because
the Vietnamese government does not allow Vietnamese to enter gaming facilities.
Major Projects Table – Residential/Non-Residential Construction And
Social Infrastructure
Table: Major Projects – Residential/Non-Residential Construction And Social Infrastructure
Project Name
Value
(US$mn)
Capacity/
Length
Companies
Timeframe
Status
2010-
At planning stage –
1st hotel to open in
2012
Commercial Construction
Eight ibis hotels in Vietnam's
major cities
na
na
Accor, Benthanh
Group
Six tourism construction
projects, Nhon Hoi economic
zone, Binh Dinh
518
na
na
2011-
Projects approval
received
4000
21000000
sq m
Genting Group
2011-
Government approval
received
na
Ryobi Kiso Holdings,
Ryobi Kiso Holdings,
Phu Cuong
2011 -
Contract (foundation
works) awarded
476
na
Thanh Do
Construction and
Investment
2011 – 2012
Under construction
(August 2011)
4000
1350000
sq m
na
August
2011 –
2020
At tendering stage
(August 2011)
549 units
Ssangyong
Engineering, Keppel
Land
September
2011 -
Contract awarded
(September 2011)
Good Choice
January
2007 –
October
2011
Investment license
revoked (Oct 2011)
Tourism and entertainment
resort, Chu Lai Open Economic
Zone (OEZ)
SSG Tower, Ho Chi Minh City
Empire Residences and Resort
project (include 5-star hotel),
Ngu Hanh Son District
Casino resort (include 30,000sq
m casino and five-star hotels),
Phu Quoc Island
Three condominiums, Ho Chi
Minh City
Wonderland World Vung Tau
complex (includes a five-star
hotel, 4 four-star hotels, an
entertainment centre), Nguyen
An Ninh Ward, Vung Tau city
Ecotourism centre (includes
20km bridge), Southern Hon
Khoai Island, Ngoc Hien District,
Ca Mau Province
11
57.9
1300
na
143
na
na
July 2012 -
At planning stage,
project announced
(July 2012)
na
na
Korea Eximbank
2010-
US$6mn loan signed
2000
35000000
sq m
Sanderson Group
November
2011 – April
2014
Under construction
(Nov 2011)
Education
Ayunpa secondary school, Ca
Mau general Hospital
Happyland Vietnam
Entertainment Complex project
(includes US$600mn Happyland
theme park project and
US$140mn Movie World), Ben
Luc District, Long An Province
© Business Monitor International Ltd
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Vietnam Infrastructure Report Q1 2013
Table: Major Projects – Residential/Non-Residential Construction And Social Infrastructure
Project Name
Value
(US$mn)
Capacity/
Length
Companies
Timeframe
Status
138
na
AFD
2011-
US$29mn loan from
French AFD agreed
500 beds
Clearance
Compensation
Corporation
April 2012 mid-2014
BT contract signed
(April 2012)
200000bpd
Petrovietnam
Construction, Mitsui
Chemicals, Idemitsu
Kosan, Kuwait
Petroleum
International (KPI)
October
2011 –
2015
Request 70%
financing from JBIC
(Feb 2011); Financing
from IFC (Oct 2011)
2011-H2
2012
Under construction;
commission of
US$300mn module
factory postponed
(Nov 2011)
Healthcare
Social development project
(educational and healthcare
buildings), Ho Chi Minh City
Orthopaedic hospital BT project,
Binh Chanh District,Ho Chi Minh
City
54
Industrial Construction
Nghi Son refinery, Thanh Hoa
province
5800
Solar cell factory, Dong Nam
Industrial Park, Hoa Phu
Commune, Cu Chi Dist, HCM
City
238MW
First Solar Group, First
Solar Vietnam
Manufacturing Co Ltd
390
120MW
120MW per year –
Indochina Energy &
Industry Company
Limited (ICE)
May 2011 -
Under construction;
First to have capacity
of 30MW per year
na
120MW
Indochinese Energy
Company
2011- 2013
120MW /year – Under
construction
4500
1.4mn
tonnes/yr
Siam Cement Group
(SCG), QPI Vietnam,
PetroVietnam,
Vietnam National
Chemical Corporation
(Vinachem)
2013-2016
Vinachem to withdraw
from project, Land
acquisition and EPC
tender to be
completed by end2012 (July 2012)
Residential developments and
manufacturing projects
291
na
CapitaLand,
KeppelLand, PepsiCo
2010-
contract signed
Development of 60mn square
metres of residential space
(public housing)
19700
600000
units
na
2015-2020
At planning stage
na
Daewoo Engineering
& Construction, Hi
Brand Vietnam,
Inpyung
2011- 2013
Contract awarded
1000
Solar modules manufacturing
plant, Chu Lai Open Economic
Zone
Solar panel manufacturing plant,
Quang Nam province
Petrochemical complex, Long
Son Island, Ba Ria-Vung Tau
province
Residential Construction
Commercial-residential complex,
Hanoi
188
Source: BMI. na=not available.
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Vietnam Infrastructure Report Q1 2013
Risk/Reward Ratings
Vietnam’s Risk/Reward Ratings
Vietnam has achieved a score of 54.5 in BMI’s Asia Pacific infrastructure risk/reward ratings (RRRs). It
remains firmly in the lower half of the rankings and is ninth out of 13 countries; however, the country is
actually one of the fastest-moving business environments in the region. Rapid expansion has raced ahead
of the regulatory environment and the country is a clear outperformer among the emerging SEA countries
in terms of rewards. That said, corruption and heavy delays to project development continue to represent
significant downside risk.
Rewards
Industry Rewards
Vietnam’s score in this category is higher than the regional average. This is indicative of a dynamic
market and reflects our view that Vietnam will continue to be one of the most active and attractive
infrastructure markets in the region. The long-term risks to the market are generally to the upside. Based
on BMI's Key Projects Database, around 200 infrastructure projects with a combined value of around
US$200bn are currently listed as under construction or under consideration in Vietnam. The country
achieves a relatively high score for sector growth in this category.
Country Rewards
In terms of country structure components, which include financial and labour market infrastructure,
Vietnam wallows with middling scores, still below the regional average. The predominant cause is a lack
of sufficient financial infrastructure. Lending in Vietnam is characterised by poor lending standards and
dominated by the four state-owned banks, while gaining access of foreign capital can be difficult. These
poor lending standards have also resulted in very high loan to deposit ratios in Vietnam’s banking sector.
In the event of a liquidity shortage, or insolvency triggered by economic stress, a financial crisis would be
a plausible scenario, further restricting funding to the construction sector. There are some risks to the
upside, as the banking sector witnesses a raft of privatisations and increased involvement from foreign
development banks – something that may liberalise the sector.
Risks
Industry Risks
Industry risks represent the largest hurdle for Vietnam at present, scoring only 40 in this category. This is
indicative of structural weaknesses in the infrastructure sector, which in turn pose long-term risks to
investors. The transparency of the tendering process is rated very poorly, scoring only three out of 10.
The competitiveness in the infrastructure and construction sector remains limited and road building, as
well as the energy and utilities sector, is dominated by state-owned firms. The ports and urban railways
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sector is where there is the greatest level of foreign investor penetration in the infrastructure sector and we
have seen growing foreign private participation in the power plant and transmission sector.
Country Risk
Corruption is prevalent in Vietnam, resulting in poor scores within the country risk ratings. Investors see
official corruption as one of the biggest hindrances to running a business in Vietnam, with anecdotal
evidence suggesting that 30% of a project's value is pocketed by the contractor to pay bribes to relevant
parties. For example, at the end of 2011, the World Bank (WB) banned Vietnam's Social and
Environmental Development and its Managing Director, Nguyen Xuan Doan, for five years, following
allegations of fraud among WB-finance water supply projects. Joint ventures (JVs) with state-owned
enterprises are particularly prone to corruption and graft, though surveys indicate that while corruption
affecting businesses is fairly prevalent, the amounts involved are usually quite small. Rapid economic
growth provides opportunities for graft to grow more quickly than government systems evolve. Vietnam
scored 2.7 out of 10 in BMI’s rating for corruption and also rates poorly for its external risks and legal
framework.
Regional Overview
Asia Pacific Infrastructure Risk/Reward Ratings
BMI View: The risk/reward scores for Asia's infrastructure sector continue to be adversely affected by
the ongoing slowdown in global economic activity. Although this has dampened the demand for
infrastructure in some countries, it has prompted several others to boost their project pipeline, while
providing a more conducive credit climate for construction growth. Overall, the potential for returns in
Asia's infrastructure sector remains robust, reinforcing the region's status as the world's most
concentrated infrastructure and construction market.
There remains a substantial disparity in the demand for infrastructure throughout Asia, translating into a
significant divergence in rewards and risks among the Asia Pacific infrastructure markets. A 40-point
differential exists between the top and bottom countries in BMI's risk/reward infrastructure regional
ratings table. This wide dispersion presents investors with a range of rewards for different risk appetites.
The key findings from this quarter's update on the Asia Pacific infrastructure risk/reward ratings (RRRs)
can be summarised as follows:
ƒ
Economic activity across Asia continues to soften. Although this has dampened the demand for
infrastructure, it has prompted countries such as Hong Kong and Malaysia to boost the project
pipeline to offset the economic slowdown.
ƒ
Furthermore, this decline in economic activity is allowing Asian countries to loosen their
monetary policies and create a more positive credit climate for construction growth.
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Vietnam Infrastructure Report Q1 2013
ƒ
Despite poorer economic conditions for infrastructure, the most populous countries in the region
continue to present sufficient scope in rewards to overcome risks. However, policy inertia
remains a problem in India and Indonesia, suggesting that risks at a grass-roots level will remain
considerable for these countries.
ƒ
Emerging South East Asian (SEA) countries continue to offer greater rewards for their level of
risk, but there are growing risks for these export-oriented economies due to weakening external
demand.
ƒ
Similarly, the more developed countries in the region continue to present the most attractive
business environment, but the decline in external demand is dampening rewards in their
respective infrastructure markets.
Global Downturn Impacts All
Asian Countries - Infrastructure BE Risk/Reward Ratings, Scores out of 100
* Higher Score = Lower Risks. Source: BMI
China, India and Indonesia: Rewards Sizeable
Asia's largest economies - China, India and Indonesia - continue to head the group in terms of industry
rewards. The combination of high industry values, positive long-term macro fundamentals, large fiscal
expenditure on infrastructure and expectations of relatively high growth in construction and infrastructure
industry value underpin the high scores in this category. Furthermore, disinflationary pressures and a
significant slowdown in economic growth have provided their respective governments with the leeway to
loosen their monetary policies in 2012, making it increasingly tenable for infrastructure companies to take
on new projects in 2012 by financing capital expenditures through debt.
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China's economy is experiencing a significant slowdown and this has prompted the government to carry
out a series of pro-growth policies aimed at arresting the growth downturn. Some of these policies are
directed towards boosting growth in the infrastructure sector, including boosting access to financing for
infrastructure projects, creating incentives to encourage greater private sector participation and
accelerating the approval of new infrastructure projects such as airports, renewables and railways.
In September 2012, the National Development and Reform Commission approved railway projects worth
a total of US$110bn. The figure is nearly twice the amount announced in July 2012, though this seems to
be a longer-term spending plan, with the projects included still in the feasibility stages.
However, we believe that these policies are not going to boost infrastructure spending to levels seen in
previous years, thus limiting the upside potential for China's reward score.
Reform Process At Risks
China, India And Indonesia - Infrastructure Rewards (LHS) And Risks (RHS) BER,
Scores out of 100
* Higher Score = Lower Risks. Source: BMI
India has massive plans to plug its infrastructure deficit, with the government aiming to raise US$1trn in
infrastructure investment over the 12th Five-Year Plan period (FY2012/13-FY2016/17). These planned
investments, along with the release of several initiatives to accelerate and enhance the flow of long-term
financing for infrastructure projects, lead us to believe that there are significant rewards to be realised in
India.
However, repeated failures to carry out the necessary reforms to accelerate project execution (e.g. land
acquisition, environmental clearances, coal supply, electricity tariff hike) have created a non-conducive
investment climate for the private sector. The momentum to carry out reforms by the government has
taken a turn for the worse, with the ruling United Progressive Alliance (UPA) coalition having been
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rocked by the withdrawal of its second largest member, the All-India Trinamool Congress (TMC). The
populist TMC was staunchly opposed to the reforms introduced by the UPA in mid-September 2012, and
its complete withdrawal leaves the UPA short of an absolute majority in the lower house of parliament
(Lok Sabha). This could prompt Prime Minister Manmohan Singh to backtrack on reform or in a worstcase scenario, be forced to announce early general elections well ahead of the 2014 constitutional
deadline.
As for Indonesia, the country continues to present vast opportunities across the entire infrastructure
spectrum. However just like India, the country's political landscape is hindering the push for regulatory
reforms. The presidential elections in 2014 represents a key risk to the reform process as Indonesian
President Susilo Bambang Yudhoyono is constitutionally prohibited from standing for a third term. We
have already noticed a growing trend towards nationalism within the current government and the likely
presidential candidates.
Therefore, even though President Yudhoyono has finally signed the long-awaited regulation on land
acquisition, we remain concerned that the government might not enact reforms in other pertinent business
environment issues. For example, the private sector remains wary of providing long-term financing for
infrastructure projects and companies, due to a continuing lack of legal rights to safeguard private
interests. Indonesia also suffers from significant red tape and a lack of institutional capacity to resolve
contract disputes.
Vietnam Growing Attractive
Emerging South East Asia (ex Indonesia) - Infrastructure Rewards (LHS) And Risks
(RHS) BER, Scores out of 100
* Higher Score = Lower Risks. Source: BMI
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South East Asia: Large Pipelines, Loose Monetary Policy
The risk/reward scores for emerging SEA countries are facing downside pressure, as we continue to see
evidence of a decline in global economic activity. We have once again revised down the rewards scores
for Vietnam (58.5 to 56.9) and the Philippines (48.6 to 46.9).
That said, there is a silver lining. The decline in global economic activity has improved monetary
conditions in these countries, as disinflationary pressures have provided leeway for policymakers to adopt
monetary easing measures (e.g. cut interest rates) to support economic and infrastructure growth. We
have already seen Vietnam and the Philippines slash interest rates to levels predicted by our country Risk
team, and we believe that Thailand and Malaysia could follow suit.
Furthermore, we continue to expect emerging SEA countries to offer greater rewards relative to their
level of risk over the coming years. These countries exhibit varying levels of infrastructure deficits and
many have launched multi-billion dollar infrastructure programs to address these shortfalls.
Malaysia's rewards scores, for example, continues to growth in strength despite the poor external
environment. The country's 10-year investment plan continues to provide a lot of greenfield opportunities,
prompting us to improve Malaysia's rewards score from 51.7 to 55.0. Several large-scale infrastructure
projects, particularly in terms of railways and the power sector, reached key milestones in 2012 and are
on track to be awarded and/or start construction.
Rising Rewards In HK
Nearly Developed Countries In Asia - Infrastructure Rewards (LHS) And Risks
(RHS) BER, Scores out of 100
* Higher Score = Lower Risks. Source: BMI
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Nearly Developed Markets: Boosting Pipeline To Offset Slowdown
Disinflation is also taking hold in Asian countries that are nearing developed market status in terms of
their infrastructure market maturity. However, monetary easing measures are unlikely to overcome a
general decline in economic activity (their export-oriented economies leaves them highly vulnerable to
the deleterious effects of a languorous global economy), resulting in a net decrease in the demand for
infrastructure and a decline in the amount of fiscal funding for infrastructure. We have revised down our
rewards scores for Taiwan (from 51.9 to 50.3) this quarter because a deep economic slowdown in China,
Taiwan's main trading partner, is creating an increasingly dour investment climate for construction.
Hong Kong is also affected by this slowdown in external demand, but its rewards score has improved
again this quarter, from 54.3 to 57.5. This is because Hong Kong's plans to boost land supply for
construction and to improve the city's transport links are moving into full swing, creating numerous
project opportunities for infrastructure. We also expect the third round of quantitative easing by the US
Federal Reserve to increase the demand for speculative investments in Hong Kong, including real estate.
This could in turn, drive property developers to increase the supply of buildings to meet demand, further
driving the demand for infrastructure.
As a whole, these countries continue to offer the best business environments for realising investment
returns. Countries such as Singapore, Hong Kong, Taiwan and South Korea are highly developed in terms
of their legislative and regulatory environments and present very little in the way of risk to sponsors and
financiers. The average score for risks in these developed markets is 78.2 out of 100, significantly higher
than the remaining nine Asian markets, which have an average of 50.3. This risk score reflects their high
degree of policy continuity - a major criterion to project execution and viability.
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Table: Asia Infrastructure Risk/Reward Ratings
Rewards
Risks
Industry
Rewards
Country
Rewards
Rewards
Industry
Risks
Country
Risk
Risks
Infrastructure
RR Rating
Regional
Ranking
South Korea
50.0
88.9
63.6
70.0
77.5
74.5
66.9
1
China
72.5
60.9
68.4
40.0
67.8
56.7
64.9
2
Singapore
35.0
86.2
52.9
90.0
88.6
89.2
63.8
3
Hong Kong
40.0
90.1
57.5
85.0
71.9
77.1
63.4
4
India
75.0
45.4
64.6
55.0
55.1
55.1
61.8
5
Taiwan
37.5
74.0
50.3
75.0
69.9
71.9
56.8
6
Indonesia
65.0
48.2
59.1
35.0
62.0
51.2
56.8
7
Malaysia
50.0
64.3
55.0
55.0
62.9
59.8
56.4
8
Vietnam
55.0
60.4
56.9
40.0
54.6
48.8
54.5
9
Thailand
40.0
72.3
51.3
50.0
61.1
56.7
52.9
10
Philippines
42.5
55.1
46.9
35.0
56.8
48.1
47.3
11
Cambodia
32.5
25.9
30.2
25.0
42.3
35.4
31.7
12
Pakistan
10.0
43.6
21.8
35.0
45.1
41.0
27.6
13
Regional Average
46.5
62.7
52.2
53.1
62.7
58.9
54.2
Source: BMI. Scores out of 100, with 100 highest.
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Company Monitor
Cavico Corporation
Strengths
ƒ
ƒ
It is diversified across a number of interrelated sectors.
A portfolio of completed projects sets a precedent for the company in Vietnam’s construction
and infrastructure sectors.
Weaknesses
ƒ
According to the company, ‘Cavico’s business growth is correlated to Vietnam’s economic
and infrastructural development’ – this endangers the company’s operations and revenue
streams in the current downturn.
The small size of the company means that competition from domestic state-owned
companies and foreign majors could erode its market share.
The value of contracts is very small for a construction and infrastructure company, typically
below US$10mn.
ƒ
ƒ
Opportunities
ƒ
ƒ
ƒ
Vietnam is one of the best-placed Asian economies to weather the global financial crisis.
The government’s willingness to improving infrastructure seems undiminished.
The energy and utilities sector in Vietnam has picked up a lot of pace since FY2009, creating
plenty of opportunities.
Threats
ƒ
The procedures for project start-ups are bureaucratic in Vietnam (administrative burdens and
inefficiency).
Regional contraction in the Asian markets poses threats to Cavico’s planned expansion in the
region.
ƒ
Company Overview
Cavico Corp. is the largest private infrastructure and mining company based in Vietnam*. Through
its various subsidiaries, Cavico operates in the power, transport and urban development sectors.
In the power generation sector, Cavico mainly focuses on hydropower and dam construction,
although lately it has also made its first venture in wind power generation. Transport is the largest,
or most active, segment of the company, with operations in tunnels, bridges and highways. The
company also has a presence in commercial and residential construction in Hanoi, and other
regional centres with large-scale mixed-use projects under way.
Financial Highlights
In Q210, revenues rose by 7.9% year-on-year (y-o-y) to reach US$14.7mn. Net profit for Q210
was a loss of US$1.8mn, compared to a net income of US$37,445 in the same period of 2009.
Order backlog as of June 30 2010 was US$304.6mn, an increase of 33.8% y-o-y.
For 2010, the company expected revenues of between US$65mn and US$70mn, while overall the
company expected to see a net loss in the range of US$4mn to US$5mn.
Strategy and
According to the company’s declared business strategy, the key points that will guide investment
Evaluation
decisions are: prioritising the key businesses of industrial engineering, infrastructure construction
and mining; investing in strategic industries for the economy of Vietnam (infrastructure, energy,
mining, tourism); diversifying further; widening the company’s portfolio abroad; and increasing
joint ventures and partnerships with international majors.
Hitherto, Cavico has kept to its strategic guidance and has managed to expand into new sectors
(such as wind power generation) and abroad, most recently in neighbouring Laos.
The company’s aim is to increase its current backlog of projects within Vietnam and to cement its
presence in the country’s infrastructure sector. BMI believes that Cavico is well-placed in its
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Vietnam Infrastructure Report Q1 2013
operations in Vietnam. Its presence in the country has set a precedent and it has a history of
partnerships with local state-owned contractors. Vietnam’s planned infrastructure investments in
the power and transport sectors present significant opportunities that could allow Cavico to
achieve its aim of increasing its order backlog. This rose by 33.8% y-o-y to reach US$304.6mn as
of June 30 2010.The firm also saw a loss of US$1.8mn in the second quarter of 2010. According
to the company, this was due to the fact many of the company’s hydropower construction projects
were in the early stages, and not generating sufficient revenue to offset their initial construction
costs. Once these projects progress further into completion, net income will increase as more
revenues are generated.
Activity and Projects
ƒ
In April 2011, Cavico Corporation announced that its subsidiary, Cavico Mining, had
received an investment licence for the Tan My Hydropower Plant. The licence grants Cavico
the right to build own and operate (BOO) a hydropower plant downstream from the Tan My
Irrigation Reservoir. The plant will be built in the Phuoc Tan Village, Ninh Thuan Province.
The plant has a designed capacity of 6MW and is estimated to cost US$6.7mn.
ƒ
In March 2011, Cavico Corporation announced that its subsidiary, Cavico Construction
Manpower & Services, has signed a contract to construct the tunnel roof and grout the arch
consolidation of a 1.4-mile-long rock transport tunnel at the Nghi Son cement plant, Thanh
Hoa Province. The contract is valued at approximately US$1.3mn. Cavico expects to
complete the project within seven months from the start of construction.
ƒ
In January 2011, Cavico Corporation announced that its subsidiary, Cavico Hydropower
Construction, had signed a US$7.75mn tunnel construction contract with Song Giang
Hydropower Joint Stock Company for the Song Giang 1 hydropower plant in Khanh Vinh
District, in central Vietnam's Khanh Hoa Province. The twin-unit plant, which is located 31
miles from Nha Trang city, will have a 24MW annual capacity once it becomes operational.
Song Giang Hydropower Joint Stock Company expects to invest a total of US$23.2mn in the
plant.
ƒ
In December 2010, Cavico Corporation announced that its subsidiary, Cavico Bridge and
Tunnel, had signed a US$6mn construction contract with Vietnam’s state-owned electricity
company, EVN, for the100MW Song Bung 2 hydropower plant project. Under the contract,
Cavico will be responsible for the construction of three tunnels, a surge tank, and a power
house. Cavico expects to complete construction by 2014.
ƒ
In October 2010, Cavico Corporation announced that its wholly-owned subsidiary, Cavico
Hydropower, had successfully completed all construction activities at the Dong Nai 3
Hydropower Plant. The company has started the handover process to the project owner,
EVN.
ƒ
In June 2010, Cavico Corporation announced that its majority-owned subsidiary, Cavico
Bridge, and Tunnel JSC had signed a transport tunnel construction agreement with Koreabased Doosan Heavy Industries & Construction Co., Ltd. for the Noi Bai-Lao Cai Highway.
The expected revenue value for this new contract is US$5.8mn, excluding VAT. In March
2010, Cavico announced it has won a contract for a US$2.1mn road construction contract
related to this project. Cavico expects to complete its portion of the project in 20 months.
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Vietnam Infrastructure Report Q1 2013
ƒ
In June 2010, Cavico Corporation announced that its majority-owned subsidiary, Cavico
Mining, had signed a construction contract for construction of Portal No. 2 at Ngan Truoi
reservoir of the Ngan Truoi Irrigation Dam located in Ha Tinh province. The expected
revenue value of this contract is US$3.3mn; however, the contract also has cost escalation
clauses, which may increase the revenues associated with the project. In May 2009, Cavico
signed a contract for US$8.5mn to construct Portal No. 1 on the same site. Cavico will be
responsible for the construction of a diversion dam, water intake gates and a groin dam
distributor. Ngan Truoi reservoir’s Portal No. 2 will be 2.5m in diameter and 464m in length.
* While we appreciate that mining activities are at the heart of the company’s operations, for the
purpose of this report we will only focus on the company’s infrastructure operations.
Key Statistics
Financial Data
ƒ
Revenue Q210: US$14.7mn
ƒ
Net income Q210 (loss): US$1.8mn
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Electricity of Vietnam Group (EVN)
Strengths
ƒ
EVN’s power companies account for 55% of the Vietnam’s total electricity generation.
ƒ
EVN has outlined ambitious plans to build 74 new power stations by 2020, in line with the
country’s power sector development.
ƒ
Weaknesses
ƒ
EVN has a diversified portfolio and is involved in all types of power plant projects.
Tightening credit conditions in the domestic banking sector are a key source of funds for the
company. These, together with rising construction costs, have severely hindered EVN’s ability
to implement its investment mandate.
ƒ
Opportunities
ƒ
High debt levels are inhibiting plans for expansion.
Vietnamese government is committed to energy sector development visible in its ambitious
plans to increase Vietnam’s total installed generating capacity from20GW in 2011 to 75GW by
2020.
Threats
ƒ
Vietnam’s Electricity Law (2005) might make operating in the electricity sector more complex,
especially in relation to transitional procedures.
Company Overview Electricity Vietnam was founded in 1995 as a state-owned utility engaged in the generation,
transmission and distribution of electricity. It has played an important role in supplying power which
is necessary for socio-economic development in Vietnam. EVN has moved forward with plans to
privatise member enterprises since the early 2000s, in line with the Government’s Strategy for
Electricity Sector Development. By April 2006, EVN had completed the privatisation of 21
subsidiaries and successfully converted five others into one-member limited liability companies.
EVN then began the process of privatising a further 18 companies and restructuring five others. It
was renamed as Vietnam Electricity Group.
As of 2010, EVN’s power companies accounted for 60% of total electricity generation in the country
and had around 98,000 employees. EVN is managing almost all plant groups, except for some
independent power plants (IPP) and some other BOT power plants. Despite further privatisation
plans, power transmission companies, hydropower plants – including Hoa Binh, Tri An and Yaly –
as well as the nuclear power programme, are expected to remain under the management of EVN.
EVN has also played a role in Vietnam’s successful rural electrification programme by implementing
four big power projects financed by the World Bank, worth US$370mn.
Strategy And
EVN is expected to face many major changes over the coming years due to the launch of the
Evaluation
Electricity Law in 2005. The law sets out a phased introduction of a competitive generation market,
followed by a competitive wholesale market and finally a competitive retail market. While there are
target dates for the realisation of each phase, important detail is lacking, especially in relation to
transitional procedures. EVN, which is currently the monopoly off-taker and controller of the
electricity transmission and distribution network, is expected to face increasing competition in the
future. As the largest utility and electricity wholesaler in Vietnam, EVN is the main force driving the
development of Vietnam’s power sector. It has taken up this mantle by launching and financing
numerous power projects throughout Vietnam, and has plans to continue to do so. In July 2011,
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EVN announced that it will invest US$39bn in building an additional 95 power plants with a total
capacity of around 49,000MW over the next ten years, 38 of which will be built between 2011 and
2015. To meet this target by 2015, EVN would need to invest US$3bn a year in new power plants
and transmission infrastructure between 2011 and 2015.
However, EVN is currently suffering from crippling debts due to a tightening in credit growth. Earlier
in 2011, Deputy General Director of EVN, Dinh Quang Tri, revealed that the company was
burdened with huge debts from the purchases of oil, gas, coal and electricity. EVN is also struggling
to clear these debts on its own, as the utility suffered a financial loss of VND8trn (US$388mn) in
2010. EVN is currently in negotiations with PetroVietnam and Vinacomin to refinance and extend
the tenure of its debt payments, while also requesting loans and additional capital from the
government to repay EVN's debts.
One reason for EVN's high debt levels is due to artificially low electricity prices and lack of
sophistication in setting electricity prices. Electricity prices in Vietnam are still at levels below the
cost of electricity production, making it unprofitable for power utilities to sell electricity. Meanwhile,
these electricity prices are not allowed to fluctuate, thus a rise in the cost of basic inputs such as
energy commodities cannot be passed on to the consumer. Consequently, EVN is forced to incur
additional losses to absorb these costs.
In addition to electricity prices, diversification into the Vietnamese telecoms sector is also another
contributing factor which has damaged EVN's profit-generating ability. EVN had invested significant
capital in setting up a Vietnamese telecoms subsidiary, EVN Telecom , despite the presence of
several established players – ie VinaPhone , MobiFone and Viettel Telecom. EVN has found it
difficult to compete in such a challenging market and was reported to have generated revenues of
just VND2.8trn (US$135.9mn) in 2010, equivalent to 61% of its target. We believe that this is
because EVN Telecom lacks the financial capacity to invest in networks; it also incurs substantial
rental costs due to infrastructure leasing. At present, EVN is looking to divest EVN Telecom, but
plans to sell the subsidiary to the Corporation for Financing and Promoting Technologies fell
through in April 2011, with Vietnam Multimedia Corporation now the most likely candidate to
acquire the telecoms subsidiary, according to local media reports.
In a bid to ease EVN’s current financial difficulties, in July 2011, the Vietnamese prime minister
directed commercial banks to extend credit to carry out projects under the six power planning
scheme. EVN will also be granted guarantees by the Ministry of Finance (MoF) for domestic credit
loans to pay for electricity purchases from thermo power plants under the direction of the prime
minister.
Activity And Projects In June 2012, Vietnam had granted approval to establish three power generation companies:
Genco 1, Genco 2 and Genco 3. These companies are to take over power generating plants
directly under EVN. Genco 1 will manage hydropower plants, such as Dai Ninh, Ban Ve and Song
Tranh. Genco 2, which is the upgrade of Can Tho Thermal Power, will manage the Quang Tri and
An Khe KaNak hydropower plants and the Thu Duc, Hai Phong and Pha Lai thermal power plants.
The establishment of Genco 3 is based on Phu My Thermal Power and 11 affiliates, including the
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Vinh Tan thermal power plant and the Buon Kuop hydropower plant. These three companies will
remain under EVN, which will also appoint their personnel.
In June 2012, EVN Southern Power Corporation (EVNSPC) and Prysmian Powerlink SRL Group
signed a US$112mn EPC contract for an undersea cable system in Vietnam. The cable system,
which will be the longest of its type in Southeast Asia, will connect Ha Tien Township and Phu
Quoc Island in the southern province of Kien Giang. The cable system is scheduled to be
completed by late-2013 and will be funded by the World Bank and EVNSPC.
In January 2012, VnExpress reported that the acquisition of EVN Telecom, a unit of Vietnam's
state utility Electricity of Vietnam (EVN), by mobile operator Viettel will be completed by end-Q112.
In December 2011, the government granted approval for the transfer of EVN Telecom to Viettel
from January 1, according to earlier reports. In October 2011, Viettel expressed interest in acquiring
EVN Telecom, which posted around VND2.43trn (US$114mn) in turnover in 2011.
In July 2011, Southern Power received approval from the Vietnamese Ministry of Industry and
Trade for developing an undersea power cable project, according to Thanhniennews.com. The
54km project, valued at VND1.81trn (US$87.5mn), will link the southern province of Ha Tien with
Phu Quoc Island. The company is seeking approval from the government and its parent company
EVN so it can launch a tender in Q311 . The bids will cover the engineering, procurement and
construction (EPC) of the project, which is due to start commercial operations in 2013.
In December 2010, construction began on the Lai Chau hydropower plant in Nam Hang, Vietnam,
reported Intellasia. The 1,200MW plant will require total investment of VND35.7trn (US$41.8bn).
One of the largest hydropower plants in South East Asia, Lai Chau is scheduled for completion in
2017.
In November 2010, EVN reported a loss of VND6.5trn (U$333bn) between January and July 2010,
reported Intellasia. The loss was due to the firm being forced to use expensive diesel for power
generation, after a number of natural disasters damaged hydropower plants and caused a shortage
of hydroelectric power in the country. The government is currently attempting to balance electricity
prices to cover production costs.
Company Data
In January 2012, EVN announced a loss of VND3.5tn (US$168bn), which was a vast improvement
from a forecasted VND11tn (US$528bn). This smaller-than-expected loss comes from a greater
reliance on hydropower of 4.07TWh and a lower reliance on thermal by 10.9TWh as forecasted.
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Global Overview
Our proprietary Global Infrastructure Index points to an ameliorating picture for the industry as a whole
(also see our online service, July 20 2012, 'Infrastructure Equities Reflect Ameliorating Picture'), with
utilities and machinery underperforming the wider industry. However, the overall index is in an uptrend,
suggesting there is positivity on the horizon.
Infrastructure Equities In An Uptrend
BMI Infrastructure Index, BMI Infrastructure Index 1-year Performance (%), By Sector
Source: BMI, Bloomberg.
We maintain our bearish view on French infrastructure. This is based on our macro outlook, which points
to a precarious picture, especially for public finances, which have been the linchpin behind infrastructure
financing in France over the past few years. The country’s banking sector and its ability for large-scale
project finance amidst the sovereign debt crisis in Europe, as well as Basel III, are two of the main drivers
behind out outlook for the French infrastructure sector. Combined, the two issues suggest that the sector's
growth will moderate in the coming quarters and adjust to the new macro and financial reality. We
believe that Bouygues and Eiffage are most at risk to be dragged down if the sector underperforms, with
Vinci's diversification acting as a safety net for the stock.
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Bearish France
France Major Construction Companies, EUR
Source: Bloomberg.
Our bullish view for the construction sector throughout the Gulf Cooperation Council (GCC) has been
substantiated by the astonishing rally of some of the largest listed construction companies over the past 12
months. UAE-based Arabtec has been the second best performing stock in BMI's Infrastructure Index
over the past 12 months, rising by 111%. We hold a bullish view on companies with a well-diversified
portfolio across the GCC infrastructure and construction sector that allows taking advantage of
opportunities and spreading the risks.
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Bullish Middle East Construction
Arabtec, Drake and Scull, AED / Orascom Construction, EGP
Source: Bloomberg.
One of the best performing sectors across the industry has been the US homebuilders. We formulated our
bullish view on the US homebuilders segment during Q311, and since then it has taken shape nicely, with
the main homebuilders in the United States posting strong gains on the back of rising confidence in the
sector (see our online service, January 13 2012, 'Lennar Results Support Housing Recovery View').
According to the latest National Association of Home Builders/Wells Fargo Housing Market Index,
confidence is returning rapidly, though overall the index is below 50 - an indication that the majority of
the market participants surveyed view the home sales conditions as poor. However, if the index continues
to rise at the current levels (it has gained nearly 28 points since January 2012), it will surpass the 50-point
mark in the next few months. US homebuilder equities track the HMI closely, and therefore expect the
uptrend in their share prices to continue.
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Rally Has Further To Run
US Homebuilders - Lennar, PulteGroup, KB Homes
Source: Bloomberg.
Another top performer over the year has been Mexican infrastructure and construction player Empresas
ICA. The company is one of the strongest Latin American-listed infrastructure players, and in our view it
is on its way to becoming a strong barometer for the entire Latin America infrastructure sector. We
believe that ICA's development from a Mexican-focused construction company to a regional heavyweight came at the right time and its stock performance supported our bullish view of ICA over its bigger
rival IDEAL, which is exclusively focused on the Mexican infrastructure sector. Since we looked at the
factors why ICA would perform better than its Mexican rival IDEAL, the stock has gained 101% (see our
online service, October 14 2011, 'Strong Fundamentals Support Our Optimism For ICA Over IDEAL').
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ICA Diversification Bolsters Stock Performance
Mexican Construction - ICA, IDEAL, MXN
Source: Bloomberg.
We have been bullish on the US midstream operators for more than 15 months based on the capacity
constraints on the US energy transport network, which makes available capacity all the more valuable
(see our online service, February 2 2012, 'Bullish Outlook on Midstream Sector Plays Out'). Oil and
liquids transportation companies have been reaping windfalls from the astonishing growth taking place in
the US oil & gas upstream segment. While in the upstream segment returns have been volatile, especially
for the natural gas-heavy producers, the necessity for transportation of higher volumes has meant that
energy transportation companies (from specialist rail freight to trucking to barges and of course pipelines)
have been reaping significant benefits. Midstream energy is a sector we expect to see a lot of investment
in over the coming years; therefore we also see rewards for engineering companies in the sector. The US
Pipelines Index from Bloomberg outperformed the S&P 500 Energy Index for most of 2012.
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Transportation Benefits
North American Energy And Wider Market Indices, 100 = October 2011
Source: Bloomberg.
We expected the infrastructure sector equities in India to outperform the wider market, from both a
technical and fundamental perspective (see our online service, January 12 2012, 'Macro/Industry
Strategy: Indian Infra, US Autos, Morocco'). Having said that, the Indian business environment remains
fraught with risks and difficulties, even for the majors that dominate the industry, and thus creating a
discount to the stocks. Larsen and Tourbo had an impressive 2012, rising by 16.5% and outperforming
its peers. However, major structural risks remain and with the ailing macro picture, we expect problems to
remain. It is because of this view that we are cautiously optimistic.
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Infrastructure Sector In India Holding Up
Indian Infrastructure Companies, INR
Source: Bloomberg
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Methodology
Industry Forecasts
BMI’s industry forecasts are generated using the best-practice techniques of time-series modelling and
causal/econometric modelling. The precise form of model we use varies from industry to industry, in each
case being determined, as per standard practice, by the prevailing features of the industry data being
examined. BMI mainly uses ordinary least squares (OLS) estimators and in order to avoid relying on
subjective views and encourage the use of objective views, uses a ‘general-to-specific’ method. BMI
mainly uses a linear model, but simple non-linear models, such as the log-linear model, are used when
necessary. During periods of ‘industry shock’, for example a deep industry recession, dummy variables
are used to determine the level of impact. Effective forecasting depends on appropriately selected
regression models. BMI selects the best model according to various different criteria and tests, including,
but not exclusive to:
ƒ
R2 tests explanatory power; Adjusted R2 takes degree of freedom into account;
ƒ
Testing the directional movement and magnitude of coefficients;
ƒ
Hypothesis testing to ensure coefficients are significant (normally t-test and/or P-value);
ƒ
All results are assessed to alleviate issues related to auto-correlation and multi-co linearity.
BMI uses the selected best model to perform forecasting.
It must be remembered that human intervention plays a necessary and desirable role in all of BMI’s
industry forecasting. Experience, expertise and knowledge of industry data and trends ensures that
analysts spot structural breaks, anomalous data, turning points and seasonal features where a purely
mechanical forecasting process would not. Within the infrastructure industry, this intervention might
include, but is not exclusive to, new investments across sectors or cancelled projects; general investment
climate and business environment changes; changing domestic or regional trends; macroeconomic
indicators; and regulatory changes.
Example Of Construction Value Model
(Construction value)t = β0 + β1*(Gross Fixed Capital Formation)t + β2*(inflation)t + β3*(lending rate)t +
β4* (population)t + β5*(government expenditure)t + β6*(construction value)t-1 + εt
Note: Infrastructure sub-sector values are forecast using a similar regression model.
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Construction Industry
A number of principal criteria drive our forecasts for each construction and engineering variable:
Construction GDP And Infrastructure Spending
Figures for construction GDP and infrastructure spending are based, where possible, on national accounts
as published by relevant central banks, as well as primary government/ministry sources and official data.
Where these are unavailable, construction GDP forecasts are based on a range of variables including:
ƒ
Stated infrastructure and development programmes;
ƒ
Likely increases owing to related urban or industrial sector developments;
ƒ
Political factors (such as an electorally motivated public works programmes).
Construction as a percentage of GDP is calculated using BMI’s own macroeconomic and demographic
forecasts.
Employment Within The Construction Industry
These figures are forecast based on:
ƒ
The growth or otherwise of the construction industry;
ƒ
Company results and expansion plans.
Data Methodology
New Infrastructure Data Sub-sectors
BMI’s new Infrastructure Data examines the industry both from the top down and the bottom up in order
to calculate the industry value of infrastructure and its sub-sectors.
For the bottom up – a country-specific – approach, we have made full use of BMI’s Infrastructure Major
Projects Databases for each country, in most cases dating back to 2005. This has allowed us to calculate
historical ratios between general infrastructure industry value and its sub-sectors, which we then use for
forecasting. Our Major Projects Tables are not exhaustive, but they are sufficiently comprehensive to
provide a solid starting point for our calculations.
The top down approach uses deduction to form the main hypothesis. We have separated the 35 countries
into three Tiers. Each Tier comprises a group of countries that are on a similar economic development
trajectory and have similar patterns in terms of infrastructure spending, levels of infrastructure
development and sector maturity. This methodology enables us to confirm and overcome any deficiencies
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of infrastructure-specific data, by applying an average group ratio (calculated from the countries for
which official data exists) to the countries for which data is limited.
Tier I- Developed States; common characteristic: mature infrastructure markets, investments typically
target maintenance of existing assets or highly advanced projects at the top of the value chain.
Infrastructure as percent of total construction on average around 30%.
Countries in Tier I: Germany, Greece, UK, US, France, Hong Kong, Taiwan, Singapore, Israel, Japan,
Australia.
Tier II – Core Emerging Markets; common characteristic: the most rapidly growing of emerging markets,
where infrastructure investments are a strategic priority for the government. There is significant scope for
new infrastructure facilities from very basic levels (highways, heavy rail for instance) to more high value
projects (renewables, urban transport). Infrastructure as percent of total construction on average around
45% and above.
Countries in Tier II: Mexico, South Korea, Peru, Turkey, Vietnam, Poland, Hungary, South Africa,
Nigeria, Russia, China, India Brazil, Indonesia.
Tier III- Emerging Europe; common characteristic: regional socioeconomic trajectories, development has
been defined by the recent or pending accession to European structures such as the European Union.
Infrastructure development to a large degree dictated by EU development goals and financed through
vehicles such as the PHARE and ISPA programmes, and institutions such as the EBRD and EIB.
Infrastructure as percent of total construction on average between 30% and 40%.
Countries in Tier III: Czech Republic, Romania, Bulgaria, Slovakia, Slovenia, Estonia, Latvia, Lithuania,
Croatia, Ukraine.
This methodology has enabled us to calculate infrastructure industry values for states where this was not
previously possibly. Furthermore, it has enabled us to create comparable indicators.
The top down hypothesis-led approach has been used solely to calculate the Infrastructure Industry Value
as a Percentage of Total Construction. For all sub-sector calculations we have applied the bottom-up
approach, i.e. calculated the ratios from our Major Projects Tables where data was not otherwise
available.
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Construction
Construction Value
Our data is derived from GDP by output figures from each country’s national statistics office (or
equivalent). Specifically, it measures the output of the construction industry over the reported 12 month
period in nominal values (i.e. domestic currency terms). As it is derived from GDP data, it is a measure of
value added within the industry (i.e. the additional contribution of the construction industry over other
industries, such as cement production). Consequently, it does not measure the nominal value of all inputs
used in the construction industry, which, for most states would increase the overall figure by 50-60%.
Furthermore, it is important to note that the data does not provide an indication of the total value of a
country’s buildings, only the construction sector’s output in a given year.
This data is used because it is reported by virtually all countries and can therefore be used for
comparative purposes. However, it is important to note that, where we are able to locate them, data
released by national statistical offices or industry groups or associations for the overall value of the
construction sector also taken into account and published by us.
Growth
Our data and forecasts for real construction measures the real increase in output (rather than nominal
growth, which would also incorporate inflationary increases). In short, it is an inflation adjusted value of
the output of the construction industry year-on-year. Consequently, real growth will – in virtually all
instances – be lower than the nominal growth of our ‘construction value’ indicator.
Construction Industry, % Of GDP/Construction Value (US$)
These are derived indicators. We use BMI’s Country Risk team’s GDP and exchange rate forecasts to
calculate these indicators.
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Capital Investment
Total Capital Investment
Our data is derived from GDP by expenditure data from each country’s national statistics office (or
equivalent). It is a measure of total capital formation (excluding stock build) over the reported 12 month
period. Total capital formation is a measure of the net additions to a country’s capital stock, so takes into
account depreciation as well as new capital. In this context, capital refers to structures, equipment,
vehicles etc. As such, it is a broader definition than construction or infrastructure, but is used by BMI as a
proxy for a country’s commitment to development.
Capital Investment (US$), % Of GDP, Per Capita
These are derived indicators. We use our Country Risk team’s population, GDP and exchange rate
forecasts to calculate them. As a rule of thumb, we believe an appropriate level of capital expenditure is
20% of GDP, although in rapidly developing emerging markets it may, and arguably should, account for
up to 30%.
Government Capital Expenditure
This is obtained from government budgetary data and covers all non-current spending (i.e. spending on
transfers, salaries to government employees, etc.). Due to the absence of global standards for reporting
budgetary expenditure, this measure is not as comparable as construction/capital investment.
Government Capital Expenditure, US$bn, % Of Total Spending
These are derived indicators.
Construction Sector Employment
Total Construction Employment
This data is sourced from either the national statistics office or the International Labour Organization
(ILO). It includes all those employed within the sector.
Construction Employment, % y-o-y; % Of Total Labour Force
These are derived indicators.
Average Wage In Construction Sector
This data is sourced from either the national statistics office or the ILO.
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Infrastructure Risk/Reward Ratings
Risk/Reward Ratings Methodology
BMI’s approach in assessing the risk/reward balance for infrastructure industry investors globally is
fourfold. First, we identify factors (in terms of current industry/country trends and forecast
industry/country growth) that represent opportunities to would-be investors. Second, we identify country
and industry-specific traits that pose or could pose operational risks to would-be investors. Third, we
attempt, where possible, to identify objective indicators that may serve as proxies for issues/trends to
avoid subjectivity. Finally, we use BMI’s proprietary Country Risk Ratings (CRR) in a nuanced manner
to ensure that only the aspects most relevant to the infrastructure industry are incorporated. Overall, the
system offers an industry-leading, comparative insight into the opportunities/risks for companies across
the globe.
Ratings System
Conceptually, the ratings system divides into two distinct areas:
Rewards: Evaluation of sector’s size and growth potential in each state, and also broader industry/state
characteristics that may inhibit its development.
Risks: Evaluation of industry-specific dangers and those emanating from the state’s political/economic
profile that call into question the likelihood of anticipated returns being realised over the assessed time
period.
For each category and sub-category, each state is scored out of 100 (100 being the best), with the overall
risk/reward rating a weighted average of the total score. Importantly, as most of the countries and
territories evaluated are considered by BMI to be ‘emerging markets’, our rating is revised on a quarterly
basis. This ensures that the rating draws on the latest information and data across our broad range of
sources, and the expertise of our analysts.
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Table: Infrastructure Business Environment Indicators
Indicator
Rationale
Rewards
Industry rewards
Construction expenditure,
US$bn
Objective measure of size of sector. The larger the sector, the greater the opportunities
available.
Sector growth, % y-o-y
Objective measure of growth potential. Rapid growth results in increased opportunities.
Capital investment, % of
GDP
Proxy for the extent the economy is already oriented towards the sector.
Government spending, % of
GDP
Proxy for extent to which structure of economy is favourable to infrastructure/
construction sector.
Country rewards
Labour market infrastructure
From BMI’s Country Risk Ratings (CRR). Denotes availability/cost of labour. High
costs/low quality will hinder company operations.
Financial infrastructure
From CRR. Denotes ease of obtaining investment finance. Poor availability of finance
will hinder company operations across the economy.
Access to electricity
From CRR. Low electricity coverage is proxy for pre-existing limits to infrastructure
coverage.
Risks
Industry risks
No. of companies
Subjective evaluation against BMI-defined criteria. This indicator evaluates barriers to
entry.
Transparency of tendering
process
Subjective evaluation against BMI-defined criteria. This indicator evaluates predictability
of operating environment.
Country risks
Structure of economy
From CRR. Denotes health of underlying economic structure, including seven indicators
such as volatility of growth; reliance on commodity imports, reliance on single sector for
exports.
External risk
From CRR. Denotes vulnerability to external shock – principal cause of economic
crises.
Policy continuity
Subjective rating from CRR. Denote predictability of policy over successive
governments.
Legal framework
From CRR. Denotes strength of legal institutions in each state. Security of investment
can be a key risk in some emerging markets.
Corruption
From CRR. Denotes risk of additional illegal costs/possibility of opacity in tendering/
business operations affecting companies’ ability to compete.
Source: BMI
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