Q4 2013
www.businessmonitor.com
VIETNAM
INFRASTRUCTURE REPORT
INCLUDES 5-YEAR FORECASTS TO 2017
ISSN 1750-5593
Published by:Business Monitor International
Vietnam Infrastructure Report Q4
2013
INCLUDES 5-YEAR FORECASTS TO 2017
Part of BMI’s Industry Report & Forecasts Series
Published by: Business Monitor International
Copy deadline: August 2013
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Vietnam Infrastructure Report Q4 2013
CONTENTS
BMI Industry View ............................................................................................................... 7
SWOT .................................................................................................................................... 8
Infrastructure SWOT .................................................................................................................................. 8
Industry Forecast .............................................................................................................. 10
Construction And Infrastructure Forecast Scenario ........................................................................................ 10
Table: Table: Vietnam Construction And Infrastructure Industry Data, 2011-2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Table: Table: Vietnam Construction And Infrastructure Long-Term Forecasts, 2017-2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Non-Residential Sector: Demand And Credit ...............................................................................................
Residential Sector: Oversupply .................................................................................................................
Infrastructure Sector: Financing ...............................................................................................................
Long-Term Still Positive ..........................................................................................................................
Transport Infrastructure - Outlook And Overview ..........................................................................................
17
18
19
21
22
Table: Table: Vietnam Transport Infrastructure Industry Data, 2011-2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Table: Table: Vietnam Transport Infrastructure Long-Term Forecasts, 2017-2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Table: Title: Competitiveness Of Vietnam's Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Roads .................................................................................................................................................. 29
Railways .............................................................................................................................................. 32
Table: Table: Vietnam Railway Corporation's Main Targets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Ports ................................................................................................................................................... 36
Airports ................................................................................................................................................ 39
Table: Table: Major Projects - Transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Energy And Utilities Infrastructure - Outlook And Overview ............................................................................ 56
Table: Vietnam Energy & Utilities Infrastructure Industry Data, 2011-2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Table: Vietnam Energy & Utilities Infrastructure Industry Long-Term Forecasts, 2017-2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Coal: Growing Foreign Participation ........................................................................................................
Hydropower: Indispensible, But Problematic ..............................................................................................
Nuclear: Still In The Works ......................................................................................................................
Geothermal: Making A Presence ...............................................................................................................
Water Treatment: Droughts Driving Demand For Services ............................................................................
61
64
66
68
70
Table: Table: Major Projects - Energy & Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Residential/Non-Residential Building - Outlook And Overview ......................................................................... 84
Table: Table: Vietnam Residential And Non-residential Building Industry Forecasts, 2011-2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Table: Table: Vietnam Residential And Non-residential Building Long-Term Forecasts, 2017-2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Non-Civil Building To Outperform ............................................................................................................ 88
Major Projects Table - Residential/Non-Residential Construction And Social Infrastructure ............................... 91
Table: Table: Major Projects - Residential/Non-Residential Construction And Social Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Industry Risk Reward Ratings .......................................................................................... 94
Vietnam - Infrastructure Risk/Reward Ratings ............................................................................................... 94
Rewards .............................................................................................................................................. 94
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Vietnam Infrastructure Report Q4 2013
Risks .................................................................................................................................................. 95
Asia - Infrastructure Risk/Reward Ratings .................................................................................................... 96
Nearly Developed Markets: Affected By Export Environment .......................................................................... 97
Giants Of Asia: Sizeable Rewards, Sizeable Risks ....................................................................................... 100
South East Asia: Better Rewards ............................................................................................................. 101
Table: Asia Infrastructure Risk Reward Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Market Overview ............................................................................................................. 104
Competitive Landscape ........................................................................................................................... 104
Table: Table: Vietnam EQS Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Company Profile .............................................................................................................. 105
Cavico Corporation ............................................................................................................................... 105
Electricity Vietnam Group (EVN) ............................................................................................................. 108
Global Industry Overview ................................................................................................ 112
Industry Trend Analysis .......................................................................................................................... 112
Industry Trend Analysis .......................................................................................................................... 114
Methodology .................................................................................................................... 118
Data Methodology ................................................................................................................................
Definitions ..........................................................................................................................................
Capital Investment ...............................................................................................................................
Infrastructure Risk/Reward Ratings .........................................................................................................
118
120
120
122
Table: Infrastructure Business Environment Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
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Vietnam Infrastructure Report Q4 2013
BMI Industry View
BMI View: Vietnam's construction sector is still in an upward cyclical phase, as evidenced by a real
growth rate of 5.1% y-o-y in H113. Therefore, we are maintaining our view that the recovery in Vietnam's
construction sector could last well into 2013 - our real growth forecasts for the sector remain at 5.3% for
2013 - as monetary conditions are becoming increasingly conducive to construction. We have, however,
revised down our construction growth forecasts for 2014 from 6.4% to 5.6%. This is due to an increasingly
poor external environment for trade, an oversupply of housing and difficulties in securing project financing
within the infrastructure sector.
The major developments in Vietnam's infrastructure sector are:
■
In April 2013, Vietnam started the construction of the Lach Huyen international port in the northern city
of Haiphong. The port is scheduled to be built in two phases, with the first phase entailing the
construction of port infrastructure, while the second phase will include the construction of two 750m
wharves capable of handling 100,000-tonne container ships. The Vietnam Maritime Administration will
manage the first phase, involving an investment of more than VND18.6trn (US$885mn), while a joint
venture of Vietnamese and Japanese enterprises will manage the second phase worth more than
VND6.57trn (US$315mn). The port, due for completion in 2016, will have modern cargo handling
equipment. It will be capable of handling container ships of up to 8,000 twenty-foot equivalent units.
■
In April 2013, local authorities in the Kien Giang province announced that the Kien Luong Power Centre
project is likely to be halted if the Tan Tao Group is unable to arrange capital required for investment,
worth around US$6.7bn. The project was licensed five years ago. The first phase of the project, the
thermal power plant Kien Luong 1, was expected to become operational by end-2013. Land clearance for
the construction of the Kien Luong 1 was obtained more than 18 months ago, but no progress on it was
made owing to a lack of capital, according to ITACO, a subsidiary of Tan Tao Group.
■
In June 2013, India-based electric utility Tata Power secured a contract worth US$1.8bn from the
Vietnamese government. The contract is to develop two 660-megawatt (MW) coal-fired thermal power
plants in South Vietnam. The construction of the power project, called Long Phu 2, is likely to start in
2019. This is believed to be the largest Indian investment in Vietnam and will support Tata Power's own
aspirations in South East Asia and India's Look East policy.
■
In July 2013, the Vietnamese Ministry of Transport issued a request inviting applications for qualification
for a second investor for the US$757mn Dau Giay-Phan Thiet Expressway Project. Under the project, the
successful bidders would design, finance, construct, operate and maintain a four-lane expressway and
allied structures from Dau Giay in the Dong Nai province to Phan Thiet in the Binh Thuan province
through a special purpose vehicle (SPV). The SPV would be formed between Bitexco, which has been
appointed as the first investor for the project, and the second investor. The first investor will have a share
of 60% in the project and the other investor 40%. However, the first investor may dilute its share in
favour of the second investor during the construction.
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Vietnam Infrastructure Report Q4 2013
SWOT
Infrastructure SWOT
Vietnam Infrastructure SWOT Analysis
Strengths
■
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.
Weaknesses
■
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.
Opportunities
■
Demand for urban infrastructure projects in transport and sanitation over our 10-year
forecast period to 2022 will rise, in tandem with urbanisation.
■
Severe drought is driving demand in electricity generation sources besides
hydropower, such as 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.
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Vietnam Infrastructure Report Q4 2013
Vietnam Infrastructure SWOT Analysis - Continued
Threats
■
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 and tighter credit conditions 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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Vietnam Infrastructure Report Q4 2013
Industry Forecast
Construction And Infrastructure Forecast Scenario
Table: Table: Vietnam Construction And Infrastructure Industry Data, 2011-2016
2011
2012e
2013f
2014f
2015f
2016f
162,620.0
179,301.0
200,466.4
223,396.2
248,741.5
276,128.2
7.9
8.6
9.6
10.9
12.2
13.7
-1.0
2.1
5.3
5.6
6.1
6.0
6.4
6.1
6.0
6.0
5.9
5.9
Total capital
investment, VNDbn
745,494.0
849,629.1
944,668.6
1,047,433.5
1,172,978.8
1,319,073.3
Total capital
investment, US$bn
36.1
40.7
45.2
50.9
57.7
65.6
Total capital
investment, % of
GDP
29.4
28.8
28.5
28.1
28.0
28.0
Capital investment
per capita, US$
406.5
453.9
498.6
556.3
624.1
703.4
Real capital
investment growth,
% y-o-y
-10.4
4.3
4.4
4.8
6.4
7.1
Construction
industry
employment, '000
2,687.2
2,731.3
2,845.3
2,972.9
3,118.6
3,271.1
Construction
industry
employment, % yo-y
-0.8
1.6
4.2
4.5
4.9
4.9
62,824.3
63,694.6
64,449.1
65,116.8
65,719.2
66,294.0
Construction
industry
employees as % of
total labour force
4.3
4.3
4.4
4.6
4.7
4.9
Infrastructure
Industry Value As
32.7
32.7
32.3
32.0
31.7
31.3
Construction
industry value,
VNDbn
Construction
industry value, US
$bn
Construction
industry, real
growth, % y-o-y
Construction
industry, % of
GDP
Total workforce,
'000
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Vietnam Infrastructure Report Q4 2013
Table: Vietnam Construction And Infrastructure Industry Data, 2011-2016 - Continued
2011
2012e
2013f
2014f
2015f
2016f
53,227.4
58,653.2
64,758.5
71,519.5
78,729.6
86,497.8
Infrastructure
Industry Value, US
$bn
2.6
2.8
3.1
3.5
3.9
4.3
Infrastructure
Industry Value Real
Growth (%)
-1.7
0.9
3.9
4.6
4.8
4.9
Infrastructure
Industry Value as
% of GDP
2.1
2.0
2.0
1.9
1.9
1.8
Residential and
Non-residential
Building Industry
Value As % of
Total
Construction
67.3
67.3
67.7
68.0
68.3
68.7
Residential and
Non-residential
Building Industry
Value, VNDbn
109,392.6
120,647.8
135,707.8
151,876.7
170,011.8
189,630.4
Residential and
Non-residential
Building Industry
Value, US$bn
5.3
5.8
6.5
7.4
8.4
9.4
Residential and
Non-residential
Building Industry
Value Real Growth
(%)
-1.9
1.0
6.0
6.1
6.7
6.5
Residential and
Non-residential
Building Industry
Value as % of GDP
4.3
4.1
4.1
4.1
4.1
4.0
Cement
production
(including
imported clinker),
tonnes
45,837,499.7
47,694,500.4
49,674,863.4
51,930,004.4
55,080,157.6
58,798,585.4
Cement
production
(including imported
clinker), tonnes, %
y-o-y
-9.8
4.1
4.2
4.5
6.1
6.8
45,223,300.9
47,012,275.1
48,914,913.9
51,082,000.8
54,131,051.8
57,737,007.6
% of Total
Construction
Infrastructure
Industry Value,
VNDbn
Cement
consumption,
tonnes
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Vietnam Infrastructure Report Q4 2013
Table: Vietnam Construction And Infrastructure Industry Data, 2011-2016 - Continued
2011
2012e
2013f
2014f
2015f
2016f
Cement
consumption,
tonnes, % y-o-y
-8.9
4.0
4.0
4.4
6.0
6.7
Cement net
exports, tonnes
614,198.9
682,225.3
759,949.5
848,003.6
949,105.9
1,061,577.8
-48.1
11.1
11.4
11.6
11.9
11.9
Cement net
exports, tonnes, %
y-o-y
e/f = BMI estimate/forecast. Source: Vietnam General Statistics Office, BMI
Table: Table: Vietnam Construction And Infrastructure Long-Term Forecasts, 2017-2022
2017f
2018f
2019f
2020f
2021f
2022f
Construction
industry value,
VNDbn
306,297.1
339,497.7
375,120.3
413,679.0
456,190.0
503,058.3
Construction
industry value,
US$bn
15.3
17.0
18.8
20.7
22.8
25.2
Construction
industry, real
growth, % y-o-y
5.9
5.8
5.5
5.3
5.3
5.3
Construction
industry, % of
GDP
5.8
5.7
5.6
5.5
5.5
5.4
1,488,904.0
1,657,150.2
1,830,488.1
2,018,113.1
2,224,969.7
2,453,029.1
Total capital
investment, US
$bn
74.4
82.9
91.5
100.9
111.2
122.7
Total capital
investment, %
of GDP
28.1
27.9
27.5
27.0
26.6
26.2
Capital
investment per
capita, US$
791.0
873.1
956.9
1,047.2
1,146.6
1,255.9
7.5
6.0
5.2
5.0
5.0
5.0
3,430.5
3,596.8
3,762.4
3,930.3
4,107.0
4,292.9
Total capital
investment,
VNDbn
Real capital
investment
growth, % y-o-y
Construction
industry
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Vietnam Infrastructure Report Q4 2013
Table: Vietnam Construction And Infrastructure Long-Term Forecasts, 2017-2022 - Continued
2017f
2018f
2019f
2020f
2021f
2022f
Construction
industry
employment, %
y-o-y
4.9
4.8
4.6
4.5
4.5
4.5
Total workforce,
'000
66,773.8
67,197.2
67,607.8
68,026.5
68,431.5
68,849.3
5.1
5.4
5.6
5.8
6.0
6.2
Infrastructure
Industry Value
As % of Total
Construction
31.0
30.6
30.3
30.0
29.7
29.4
Infrastructure
Industry Value,
VNDbn
94,854.6
103,917.5
113,608.0
124,072.5
135,496.0
147,949.9
Infrastructure
Industry Value,
US$bn
4.7
5.2
5.7
6.2
6.8
7.4
Infrastructure
Industry Value
Real Growth (%)
4.7
4.6
4.3
4.2
4.2
4.2
Infrastructure
Industry Value
as % of GDP
1.8
1.7
1.7
1.7
1.6
1.6
69.0
69.4
69.7
70.0
70.3
70.6
Residential and
Non-residential
Building
Industry Value,
VNDbn
211,442.4
235,580.2
261,512.2
289,606.5
320,694.0
355,108.5
Residential and
Non-residential
Building
Industry Value,
US$bn
10.6
11.8
13.1
14.5
16.0
17.8
Residential and
Non-residential
Building
Industry Value
Real Growth (%)
6.5
6.4
6.0
5.7
5.7
5.7
employment,
'000
Construction
industry
employees as
% of total
labour force
Residential and
Non-residential
Building
Industry Value
As % of Total
Construction
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Vietnam Infrastructure Report Q4 2013
Table: Vietnam Construction And Infrastructure Long-Term Forecasts, 2017-2022 - Continued
2017f
2018f
2019f
2020f
2021f
2022f
4.0
4.0
3.9
3.9
3.8
3.8
Cement
production
(including
imported
clinker), tonnes
63,005,497.9
66,623,381.2
69,946,160.7
73,307,146.5
76,835,758.5
80,540,503.2
Cement
production
(including
imported
clinker), tonnes,
% y-o-y
7.2
5.7
5.0
4.8
4.8
4.8
61,820,438.3
65,303,823.2
68,492,531.8
71,710,598.4
75,193,311.6
78,803,973.1
Cement
consumption,
tonnes, % y-o-y
7.1
5.6
4.9
4.7
4.9
4.8
Cement net
exports, tonnes
1,185,059.6
1,319,557.9
1,453,628.8
1,596,548.0
1,642,446.8
1,736,530.1
Cement net
exports, tonnes,
% y-o-y
11.6
11.3
10.2
9.8
2.9
5.7
Residential and
Non-residential
Building
Industry Value
as % of GDP
Cement
consumption,
tonnes
f = BMI forecast. Source: Vietnam General Statistics Office, BMI
BMI View: Vietnam's construction sector is still in an upward cyclical phase, as evidenced by a real
growth rate of 5.1% year-on-year in H113. Therefore, we are maintaining our view that the recovery in
Vietnam's construction sector could last well into 2013 - our real growth forecasts for the sector remain at
5.3% for 2013 - as monetary conditions are becoming increasingly conducive to construction. We have,
however, revised down our construction growth forecasts for 2014 from 6.4% to 5.6%. This is due to an
increasingly poor external environment for trade, an oversupply of housing and difficulties in securing
project financing within the infrastructure sector.
In line with our view, construction activity in Vietnam continues to recover in 2013. Latest data from the
Vietnam General Statistics Office reveals that real growth for the construction sector grew by 5.1% year-onyear (y-o-y) in H113, faster than the 4.8% in Q113 and much higher than the -5.4% in H112. We do,
© Business Monitor International
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Vietnam Infrastructure Report Q4 2013
however, note that growth in Q113 is still significantly slower than the 12.2% growth in Q412, which could
suggest that recovery in construction might not be as forthcoming as previously expected.
On The Path To Recovery
Vietnam - Quarterly Construction Industry Value, VNDbn
Source: General Statistics Office, State Bank of Vietnam
Given this H113 performance and our belief that this recovery in Vietnam's construction sector will last
well into 2013, we are content to maintain our real growth forecasts for Vietnam's construction sector at
5.3% in 2013.
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Vietnam Infrastructure Report Q4 2013
Not Like Before
Vietnam Construction (And Sum-Components) Industry Value Real Growth Forecasts
f= BMI forecast. Source: General Statistics Office, State Bank of Vietnam, BMI
This relatively optimistic outlook for Vietnam's construction sector is primarily driven by the country's
conducive monetary conditions. The government is seeking to boost economic growth and brought the
policy rate down to 7.00% in May 2013; the lowest policy rate since December 2009. Given the lagged
impact of monetary easing, this means that the positive implications of this easing will only start to translate
in H213. Furthermore, inflation continues to remain relatively benign, leading us to expect the Vietnamese
central bank to keep monetary conditions conducive throughout 2013 and into 2014 - we are forecasting the
benchmark interest rate to remain at 7.00% at the end of 2013 and 2014. This should be favourable for
construction activity as Vietnamese companies would benefit from a lower cost of capital - making them
more inclined to take up new projects or carry out capital-intensive construction works - while municipal
and provincial governments could also find the necessary financing for their infrastructure plans.
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Vietnam Infrastructure Report Q4 2013
Monetary Conditions Conducive
Vietnam - Policy Rate, % & Headline CPI - Housing & Construction Materials, % y-o-y
Source: General Statistics Office, State Bank of Vietnam
We have, however, revised down our construction growth forecasts in 2014 from 6.4% to 5.6%. This is
because several issues continue to dampen the demand for residential/non-residential buildings and
infrastructure.
Non-Residential Sector: Demand And Credit
We have revised down our real growth forecasts for Vietnam's buildings sector to 6.1% in 2014 (previously
7.3%). This decline will take place in both the residential and non-residential building sectors. We expect
non-residential building activity in H213 and 2014 to be dampened by the lack of trade activity. The latest
reading on the HSBC Purchasing Managers' Index showed that the recovery experienced by Vietnam's
manufacturing sector in March and April has stalled, with manufacturing sector growth reaching contraction
territory in May and June. We believe that the manufacturing sector could continue to perform poorly in
H213 as the cyclical upturn in China's economy is already starting to show signs of losing steam, with latest
economic data on China providing evidence that the mainland economy is on course for a growth relapse in
H213 (see 'Core Views Reiterated Following Q213 Growth Print', July 15). Given this poor business
climate, companies are likely to maintain a cautious outlook and scale back on fixed investment.
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Vietnam Infrastructure Report Q4 2013
Stalled Lending And Poor External Demand
Vietnam - Purchasing Managers' Index
Source: BMI, Markit, HSBC
In addition, Vietnamese banks remain saddled with bad debts, prompting them to be cautious towards
extending credit to businesses. According to the State Bank of Vietnam, total bad debts by the entire
banking sector accounted for 4.7% of total outstanding debts, which is estimated to be VN400trn in May
2013. This lack of credit from local banks has lead to failures by several investors in implementing their
non-residential building projects. For example, in June, Vietnamese media reported that local authorities
had cancelled 93 projects on Phu Quoc Island - including a EUR2.6bn luxury resort project proposed by
Swiss Trustee Group - because the investors of these projects were unable to find sufficient financing.
Although the State Bank of Vietnam has established a debt management agency in early-July to clean up the
build-up of bad debt across the banking sector (see 'All Eyes On New Debt Management Company', June
28), it remains to be seen if the clean-up and other reforms to restructure the banking sector will be
implemented in a timely manner. Therefore, even though interest rates in Vietnam are at a record-low,
businesses may still be unable to secure financing for their fixed investment plans.
Residential Sector: Oversupply
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Vietnam Infrastructure Report Q4 2013
We also expect residential building activity to be poor over the near term. This is because the residential
sector in Vietnam is still suffering from significant oversupply. According to a report from the Vietnam
Ministry of Construction, 34,000 apartments and 15,300 houses across 55 provinces and cities were unsold
at the end of March 2013, and they had an estimated combined value of around VND125trn. Although there
is still significant demand for low-cost housing, supply in other housing segments is still outstripping
demand. This has created a challenging market for developers to sell their completed properties, making it
unlikely for them to take on new residential projects.
Furthermore, several of these local developers are in the red, deterring foreign investors and Vietnamese
banks from releasing credit to them. At present, some of the developers are reducing their inventory by
converting their housing projects into low-cost housing. The Vietnamese government has also approved a
VND30trn stimulus package in June 2013 to provide loans for purchasing and completing low-cost housing,
though the impact of the stimulus package is expected to be limited given its relatively small scale.
Infrastructure Sector: Financing
We have maintained our real growth forecasts for Vietnam's infrastructure sector at 4.6% in 2014. We
continue to expect the sector to face difficulties in securing project financing and this is due to three factors:
Debt Burdens: 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.
We have also earlier highlighted the issues with bad debt among the Vietnamese banking sector, which
should also affect access to domestic financing for infrastructure projects.
Project Viability: We believe that the uncertainties surrounding the outlook for the global economy and the
lack of financial viability seen in much existing infrastructure in Vietnam will dampen the demand for
riskier assets such as infrastructure projects in the country.
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Vietnam Infrastructure Report Q4 2013
Limited By Debt
Vietnam - Capital Investment By State Budget, VNDbn And % chg y-o-y
Source: Bloomberg, BMI, General Statistics Office of Vietnam
Europe Difficulties: With European banks - a major source of finance for Vietnamese infrastructure - set to
face difficult economic conditions and stricter capital controls over the coming years, funds from these
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.
Evidence of these finance shortages continues to emerge among large-scale infrastructure projects. In April
2013, local authorities in the Kien Giang province announce that the US$6.7bn Kien Luong Power Centre
project will likely be halted if ITACO, a subsidiary of Tan Tao Group, is unable to arrange the capital
required for the project. Land clearance for the first phase of the project, thermal power plant Kien Luong 1,
was obtained more than 18 months ago, but no progress on it was made owing to a lack of capital,
according to ITACO.
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Vietnam Infrastructure Report Q4 2013
In Decline
Vietnam - Foreign Claims From European Banks, US$mn And % chg y-o-y
Source: Bank For International Settlements (July 2013), BMI
However, we highlight that financing from foreign sources has become increasingly forthcoming and this
represents an upside to our forecasts. According to figures published by the Ministry of Planning and
Investment (MPI), foreign direct investment (FDI) inflows into Vietnam grew by 16.0% y-o-y to US
$10.5bn in H113, while FDI in new projects was worth US$5.8bn, an increase of 3.7% over the same period
in 2012. We believe these FDI inflows are from Japanese sources. In March 2013, Japan and Vietnam
exchanged a diplomatic note which stated that Japan will finance 12 projects worth a combined US$2.2bn,
mostly in transport infrastructure. Meanwhile, the US$1.2bn Lach Huyen port project, a project financed by
the Japanese government and Japanese companies, started construction works in April 2013.
Long-Term Still Positive
Looking beyond 2014, we continue to believe that the construction and infrastructure sectors in Vietnam
should register decent growth rates, though not at the levels seen in previous years. We are forecasting real
growth for the construction and infrastructure sectors to average 6.0% and 4.8% per annum between 2015
and 2017 respectively.
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Vietnam Infrastructure Report Q4 2013
The Vietnamese government is currently carrying out reforms to address some of the fault-lines in the
country's business environment for infrastructure, such as the privatisation of several SOEs (a leading factor
for investment wastages), improving access to credit from domestic banks (a leading factor for excessive
allocation of resources in certain sectors) and high electricity subsidies (a leading factor for insufficient
public fixed investment). These measures could alleviate some of the government's debt issues and provide
financing for construction and infrastructure projects. Between 2012 and March 2013, 16 SOEs were
equitised, five were merged, three were sold and three were transformed into one-member limited liability
companies.
Meanwhile, we expect Vietnam's economy to grow relatively robustly over the long term - we are
forecasting real growth for Vietnam's economy to average 6.9% per annum between 2013 and 2017 - and
this should also drive construction activity in the country. Growing industrialisation will put demand-side
pressure on the electricity supply and transportation systems, while rising incomes among Vietnamese
consumers will drive demand for housing and commercial construction projects such as malls and hotel
development. The robust economic activity should also boost the financial viability of existing
infrastructure, making it more attractive for investors to finance new projects.
The Vietnamese government is also trying to secure funding for infrastructure projects by promoting the use
of public-private partnerships (PPPs). In July 2013, the Vietnamese Ministry of Transport issued a request
inviting investors to develop the US$757mn Dau Giay-Phan Thiet expressway with Vietnam's Bitexco
under a PPP framework. The country is also reviewing its PPP regulations, though progress has been slow.
Nevertheless, if properly developed, this could be help to offset the decline in credit from European banks.
Lastly, Vietnam continues to exhibit significant potential for growth in construction and infrastructure - a
youthful population, large consumption base, large unexploited deposits of bauxite and high infrastructure
deficit are just some supportive factors that spring to mind.
Transport Infrastructure - Outlook And Overview
Table: Table: Vietnam Transport Infrastructure Industry Data, 2011-2016
2011
2012
2013f
2014f
2015f
2016f
Transport
Infrastructure Industry
Value As % Of Total
Infrastructure
68.6
65.5
64.9
64.7
64.6
64.4
Transport Infrastructure
Industry Value, VNDbn
36,496.3
38,444.5
42,051.2
46,241.7
50,828.7
55,666.1
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Table: Vietnam Transport Infrastructure Industry Data, 2011-2016 - Continued
2011
2012
2013f
2014f
2015f
2016f
Transport Infrastructure
Industry Value, US$bn
1.8
1.8
2.0
2.2
2.5
2.8
Transport Infrastructure
Industry Value Real
Growth (%)
-6.0
-3.9
2.9
4.2
4.7
4.5
Transport Infrastructure
Industry Value As % Of
Total Construction (%)
22.4
21.4
21.0
20.7
20.4
20.2
Roads and Bridges
Infrastructure Industry
Value As % of
Transport Infrastructure
51.5
50.1
50.7
51.3
51.8
52.4
Roads and Bridges
Infrastructure Industry
Value, VNDbn
18,779.8
19,274.3
21,307.5
23,699.5
26,337.3
29,148.4
Roads and Bridges
Infrastructure Industry
Value, US$bn
0.9
0.9
1.0
1.2
1.3
1.5
Roads and Bridges
Infrastructure Industry
Value Real Growth (%)
12.5
-6.6
4.0
5.4
5.9
5.7
Roads and Bridges
Infrastructure Industry
As % of Total
Infrastructure
35.3
32.9
32.9
33.1
33.5
33.7
Roads and Bridges
Infrastructure Industry
As % of Total
Construction
11.5
10.7
10.6
10.6
10.6
10.6
Railways Infrastructure
Industry Value As % of
Transport Infrastructure
20.7
24.3
24.1
23.7
23.4
23.1
Railways Infrastructure
Industry Value, VNDbn
7,551.3
9,343.3
10,136.0
10,976.5
11,882.6
12,839.7
Railways Infrastructure
Industry Value, US$bn
0.4
0.4
0.5
0.5
0.6
0.6
Railways Infrastructure
Industry Value Real
Growth (%)
-8.2
14.5
2.0
2.5
3.0
3.1
Railways Infrastructure
Industry As % of Total
Infrastructure
14.2
15.9
15.7
15.3
15.1
14.8
Railways Infrastructure
Industry As % of Total
Construction
4.6
5.2
5.1
4.9
4.8
4.6
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Vietnam Infrastructure Report Q4 2013
Table: Vietnam Transport Infrastructure Industry Data, 2011-2016 - Continued
2011
2012
2013f
2014f
2015f
2016f
11.7
9.5
9.1
8.9
8.7
8.5
Airports Infrastructure
Industry Value, VNDbn
4,257.5
3,643.8
3,832.1
4,125.3
4,405.0
4,707.7
Airports Infrastructure
Industry Value, US$bn
0.2
0.2
0.2
0.2
0.2
0.2
Airports Infrastructure
Industry Value Real
Growth (%)
-45.3
-23.7
-1.3
1.9
1.5
1.9
Airports Infrastructure
Industry As % of Total
Infrastructure
8.0
6.2
5.9
5.8
5.6
5.4
Airports Infrastructure
Industry As % of Total
Construction
2.6
2.0
1.9
1.8
1.8
1.7
Ports Harbours and
Waterways
Infrastructure Industry
Value As % of
Transport Infrastructure
16.2
16.1
16.1
16.1
16.1
16.1
Ports Harbours and
Waterways
Infrastructure Industry
Value, VNDbn
5,907.6
6,183.1
6,775.6
7,440.4
8,203.8
8,970.4
Ports Harbours and
Waterways
Infrastructure Industry
Value, US$bn
0.3
0.3
0.3
0.4
0.4
0.4
Ports Harbours and
Waterways
Infrastructure Industry
Value Real Growth (%)
-10.1
-4.6
3.1
4.0
5.0
4.3
Ports Harbours and
Waterways
Infrastructure Industry
As % of Total
Infrastructure
11.1
10.5
10.5
10.4
10.4
10.4
Ports Harbours and
Waterways
Infrastructure Industry
As % of Total
Construction
3.6
3.4
3.4
3.3
3.3
3.2
Airports Infrastructure
Industry Value As % of
Transport Infrastructure
e/f = BMI estimate/forecast. Source: Vietnam General Statistics Office, BMI
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Vietnam Infrastructure Report Q4 2013
Table: Table: Vietnam Transport Infrastructure Long-Term Forecasts, 2017-2022
2017f
2018f
2019f
2020f
2021f
2022f
Transport
Infrastructure Industry
Value As % Of Total
Infrastructure
64.1
63.8
63.5
63.2
62.8
62.5
Transport Infrastructure
Industry Value, VNDbn
60,923.9
66,425.5
72,358.9
78,679.5
85,399.1
92,616.1
Transport Infrastructure
Industry Value, US$bn
3.0
3.3
3.6
3.9
4.3
4.6
Transport Infrastructure
Industry Value Real
Growth (%)
4.1
4.0
3.9
3.7
3.5
3.5
Transport Infrastructure
Industry Value As % Of
Total Construction (%)
19.8
19.4
19.1
18.8
18.5
18.2
Roads and Bridges
Infrastructure Industry
Value As % of
Transport Infrastructure
52.6
52.9
53.0
53.2
53.3
53.5
Roads and Bridges
Infrastructure Industry
Value, VNDbn
31,966.1
35,011.3
38,214.1
41,621.4
45,326.0
49,353.9
Roads and Bridges
Infrastructure Industry
Value, US$bn
1.6
1.8
1.9
2.1
2.3
2.5
Roads and Bridges
Infrastructure Industry
Value Real Growth (%)
4.7
4.5
4.1
3.9
3.9
3.9
Roads and Bridges
Infrastructure Industry
As % of Total
Infrastructure
33.7
33.7
33.6
33.5
33.5
33.4
Roads and Bridges
Infrastructure Industry
As % of Total
Construction
10.4
10.3
10.2
10.1
9.9
9.8
Railways Infrastructure
Industry Value As % of
Transport Infrastructure
22.9
22.8
22.7
22.6
22.6
22.6
Railways Infrastructure
Industry Value, VNDbn
13,908.5
15,081.4
16,345.4
17,723.2
19,219.8
20,824.9
Railways Infrastructure
Industry Value, US$bn
0.7
0.8
0.8
0.9
1.0
1.0
Railways Infrastructure
Industry Value Real
Growth (%)
3.3
3.4
3.4
3.4
3.4
3.4
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Vietnam Infrastructure Report Q4 2013
Table: Vietnam Transport Infrastructure Long-Term Forecasts, 2017-2022 - Continued
2017f
2018f
2019f
2020f
2021f
2022f
Railways Infrastructure
Industry As % of Total
Infrastructure
14.7
14.5
14.4
14.3
14.2
14.1
Railways Infrastructure
Industry As % of Total
Construction
4.5
4.4
4.4
4.3
4.2
4.1
Airports Infrastructure
Industry Value As % of
Transport Infrastructure
8.4
8.3
8.3
8.3
8.3
8.4
Airports Infrastructure
Industry Value, VNDbn
5,092.0
5,518.7
5,992.1
6,512.5
7,083.7
7,714.7
Airports Infrastructure
Industry Value, US$bn
0.3
0.3
0.3
0.3
0.4
0.4
Airports Infrastructure
Industry Value Real
Growth (%)
3.2
3.4
3.6
3.7
3.8
3.9
Airports Infrastructure
Industry As % of Total
Infrastructure
5.4
5.3
5.3
5.2
5.2
5.2
Airports Infrastructure
Industry As % of Total
Construction
1.7
1.6
1.6
1.6
1.6
1.5
Ports Harbours and
Waterways
Infrastructure Industry
Value As % of
Transport Infrastructure
16.1
16.0
16.0
15.9
15.7
15.6
Ports Harbours and
Waterways
Infrastructure Industry
Value, VNDbn
9,786.6
10,627.2
11,512.1
12,419.0
13,375.9
14,386.1
Ports Harbours and
Waterways
Infrastructure Industry
Value, US$bn
0.5
0.5
0.6
0.6
0.7
0.7
Ports Harbours and
Waterways
Infrastructure Industry
Value Real Growth (%)
4.1
3.6
3.3
2.9
2.7
2.6
Ports Harbours and
Waterways
Infrastructure Industry
As % of Total
Infrastructure
10.3
10.2
10.1
10.0
9.9
9.7
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Vietnam Infrastructure Report Q4 2013
Table: Vietnam Transport Infrastructure Long-Term Forecasts, 2017-2022 - Continued
Ports Harbours and
Waterways
Infrastructure Industry
As % of Total
Construction
2017f
2018f
2019f
2020f
2021f
2022f
3.2
3.1
3.1
3.0
2.9
2.9
f = BMI forecast. Source: Vietnam General Statistics Office, BMI
The transport sector forms the majority of infrastructure investment in Vietnam throughout our 10-year
forecast period, forecast to account for 60-65% in 2022. 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 4.1% year-on-year (y-o-y) between 2013 and 2017.
Table: 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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Vietnam Infrastructure Report Q4 2013
Roads Dominant
Transport Infrastructure Value By Industry, VNDbn
e/f = BMI estimate/forecast, Source: Vietnam General Statistics Office, Local news sources, industry sources,
BMI (Major Projects Database)
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Vietnam Infrastructure Report Q4 2013
Roads
Within the transport infrastructure sector, the roads and bridges sub-sector leads in terms of contributions to
total transport infrastructure industry value, accounting for 50% of total value in 2013. Although most of
Vietnam's national road network is paved (only 26%, or 46,650km out of 180,549km, 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 longterm economic wellbeing, 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 being planned such as the Phap Van-Cau Gie highway build-operate-transfer (BOT) project - or being developed in
Vietnam - such as the expansion of the NH-1A Cam Ranh City-Cam Lam District (Khanh Hoa province)
BOT project, the Danang-Quang Ngai expressway and the Ho Chi Minh City (HCMC)-Long Thanh-Dau
Giay Expressway.
However, there are still ongoing concerns about the viability of toll roads in Vietnam. In July 2012, the
Vietnamese government accepted a proposal from the Ministry of Finance to reduce toll fees for trucks
using the 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
$22-23) per trip for using the 61.9km expressway, compared with the current fee of VND640,000 (US$31).
The decision to cut toll fees is because traffic volumes fall sharply in the HCMC-Trung Luong expressway
once it required commuters to pay a toll fee in February 2012.
We believe that this toll cut in one of the highways linking Vietnam's most economically developed cities
reflects our concerns about the viability of building toll roads in Vietnam. The approval of the toll cut not
only suggests that the sector could be oversaturated, but that economic development within Vietnam has not
reached levels that are financially viable for such toll roads.
This lack of financial viability for toll roads in Vietnam is collaborated with anecdotal evidence regarding
the HCMC-Trung Luong Expressway. According to the association, heavy trucks - the main vehicle used by
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transport companies - have to pay a toll fee of VND320,000-640,000 for a round trip on the expressway.
However, these companies only earn a profit of VND300,000-400,000 for each transport trip within 100km.
Costly To Build
Investment Cost of Expressways In Vietnam, US$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 an official report from the Ministry of
Construction in September 2012, the cost of constructing an expressway in Vietnam is about 1.5-2.0 times
higher than comparable roads in China, Europe and Africa. 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).
We believe there are several factors contributing to this high construction cost for toll roads:
■
The lack of project management and technical expertise to complete road projects within budget,
resulting in site clearance delays and cost overruns. To resolve this problem, the transport ministry is
planning to classify investors and contractors into three grades, A, B and C, with companies at each grade
developing projects of the same grade.
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Vietnam Infrastructure Report Q4 2013
■
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.
■
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.
■
Difficult geological conditions, as most of Vietnam's terrain is uneven.
■
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 makes it difficult for Vietnam to raise financing for several road projects, which are
capital-intensive. According to a master transport plan for HCM City (approved by the government in April
2013), the city will upgrade or expand five expressways - the HCM City-Long Thanh-Dau Giay
expressway, the HCM City-Thu Dau Mot-Chon Thanh expressway; the HCM City-Moc Bai expressway,
the Ben Luc-Long Thanh expressway and the Bien Hoa-Vung Tau expressway - and build five four-lane
flyovers with a total length of 70.7km. To finance these projects, the city will need VND45trn between
2013 and 2015.
To compound the problem, 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. For example, Vietnam Expressway Corporation is facing the risk of falling into
insolvency as it could be unable to pay its bond holders.
One of the major road projects being delayed due to financing is the 101km Dau Giay-Phan Thiet highway
project. The US$1.12bn highway project is planned to be Vietnam's first public-private partnership (PPP)
highway project, but has so far failed to attract foreign liquidity. A fresh capital structure proposal was put
forward in February 2013 to boost the implementation of the Dau Giay-Phan Thiet expressway project, but
it remains to be seen if this would work. The proposal has hiked the portion of the state capital contribution
to the 101km Dau Giay-Phan Thiet expressway project to 40% of the project's total investment capital from
29.4% with a loan from the World Bank. The state's share in the project would come to around US$429mn.
The figure may vary depending upon the land acquisition costs, according to the Ministry of Transport. The
project was originally scheduled to be only developed by Binh Minh Import Export Production and
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Vietnam Infrastructure Report Q4 2013
Trade (Bitexco), but would now form a joint venture with the second developer, which would be selected
through an international tender.
In July 2013, the Vietnamese Ministry of Transport issued a request inviting applications for qualification
for a second investor for the US$757mn Dau Giay-Phan Thiet Expressway Project. Under the project, the
successful bidders would design, finance, construct, operate and maintain a four-lane expressway and allied
structures from Dau Giay in the Dong Nai province to Phan Thiet in the Binh Thuan province through a
special purpose vehicle (SPV). The SPV would be formed between Bitexco, which has been appointed as
the first investor for the project, and the second investor. The first investor will have a share of 60% in the
project and the other investor 40%. However, the first investor may dilute its share in favour of the second
investor during the construction.
To secure additional financing for road development, Ministry of Transport started collecting a fee for road
maintenance from the start of 2013. This is because a number of key roads, including the National Highway
1A, are deteriorating rapidly and the government does not have sufficient funds to boost its budget for road
maintenance - the ministry estimates that it only meets 40% of the funds needed for road maintenance. The
government is also hiking toll fees for existing roads and implementing new toll stations on certain
expressways - Intellasia reported that transport costs in Vietnam would treble by 2015 when 21 new BOT
toll stations on NH-1A are operational, plus a rise of 3.5 times in road fees.
These toll and fee increases came about after the Vietnam Ministry of Transport revealed at the end of
November 2012 that its original targets for highway construction between now and 2020 - 2,000km of
expressways completed and 3,000km under construction by 2020 - are not possible due to the government's
limited budget for roads and the lack of financing from the private sector.
We do highlight that financing from foreign sources for road projects has become increasingly
forthcoming. In March 2013, Japan and Vietnam exchanged a diplomatic note which stated that Japan will
finance 12 projects worth a combined US$2.2bn, mostly in transport infrastructure (such as the third phase
of the Nhat Tan Bridge and the second phase of a road project linking Noi Bai Airport with Nhat Tan
Bridge). In May 2013, Goldman Sachs was close to reaching an agreement with the BT 20 Joint Stock
Company consortium to provide US$250mn for the rehabilitation (first phase) of the 110km NH-20 under a
BT format. Besides NH-20, the World Bank was also reported to be thinking of providing around US
$600mn risk guarantee package for the Hanoi-Hai Phong expressway project.
Railways
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Railways will account for around 24% of Vietnam's total transport infrastructure industry value in 2013,
according to BMI's forecasts. Vietnam's rail network stretches for 2,632km, but only 527km is standard
gauge (1.435m gauge). The network has around 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).
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. The proposed project has since resurfaced,
with Japan announcing in September 2012 that it remains keen to assist Vietnam in building this northsouth high-speed railway line by 2030. As of April 2013, plans on the north-south high-speed railway line
are still in a state flux as state-owned Transport Engineering Design Inc (TEDI), as a consultant to the
Ministry of Transport for Vietnam railway transport development strategy for 2020, had submitted a
proposal to the government with major adjustments to the high-speed railway plan. In the proposal, TEDI
suggested that work on the north-south high-speed railway project in Vietnam should be delayed and the
focus should be shifted on upgrading the current north-south track Additionally, the speed of the northsouth high-speed train should be slowed down to 150-200km per hour from more than 200km per hour,
while the time frame for the development of the trans-Asia railway should be reconsidered along with the
rail lines connected to seaports, industrial zones and tourist sites.
There are still plans to build a high-speed railway line between Laos and Vietnam. The US$5bn high-speed
railway project, which is close to starting construction works, spans 220km from the Laos central province
of Savannakhet to the Lao Bao border gate of neighbouring Vietnam and is expected to be operational in the
next five years.
Table: Table: Vietnam Railway Corporation's Main Targets
Upgrading north-south railway routes and improving the running speed of passenger trains and freight trains to
100-120kph 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
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Instead of a high-speed railway line, the government is looking to increase the speed of the existing normalgauge north-south railway line. In April 2013, the Ministry of Transport said that it had assigned the
Vietnam Railway Corporation to make a detailed plan to increase the speed of the line from 90km/h to
200km/h. This could be done in two phases. The first phase would increase the speed of the line from 90km/
h to 110km/h, while the second phase would involve the construction of a new double-track standard gauge
line that increases the line's speed to 220km/h.
The government is also looking to improve its existing railway network. In March 2013, the Ministry of
Transport said that between 2013 and 2020, the Vietnam Railway Corporation needed to focus on
improving the existing railway system and building several new 1,435mm gauge dual track lines along the
existing 1,726km north-south (Ngoc Hoi-Phu Ly) railway line. Under the amended planning the railway
sector would require around VND365.242trn (US$17.4bn) to 2020 for upgrading six existing lines, putting
into place three new arterial routes, including some lines heading seaports, economic zones and tourist sites.
Amendments relating to Vietnam's railway development planning to 2020, with a vision toward 2030 (2009
planning), have been reported by the Vietnam Railway Administration (VRA) to the Ministry of Transport
in April 2013. According to a proposal from the consultancy unit that is tasked with amending the 2009
planning, Vietnam will weigh up the construction of a trial electrified 1,435mm Ngoc Hoi-Phu Ly gauge
dual-track line, with a velocity ranging from 160km to 200km per hour. Overhauling the existing 1,726km
north-south railway is estimated to require a total investment of VND39.87trn (US$1.9bn). Of the total, the
capital demand to 2020 is set at VND18.61trn (US$886mn).
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 VRA to be developed under the forms of BOT, build-transfer and buildtransfer-operate. This list of projects was submitted to the Ministry of Transport in early 2010, but a lack of
investors prevented them from starting. 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.
Urban Railways
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As most of the railway projects in Vietnam are at an early stage, we believe that it would be urban railway
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 Ho Chi Minh's City's Ben Thanh-Suoi
Tien Metro line 1, the underground section of the Metro line 2), but just like the roads sector, several have
also faced delays. This is because they are suffering from slow site clearances (such as the Cat Linh StreetHa Dong District railway line in Hanoi, which is two years behind schedule), cost overruns (such as the
Nhon-Hanoi Station urban railway line No. 3), the lack of a legal framework, a lack of proper planning for
underground space and integration with other transport modes, and the lack of skilled labour.
The sector is also heavily reliant on financing, mainly official development assistance loans, from several
foreign countries and multinational development banks. This has caused delays as to access these loans
Vietnam needs to conform to the regulations of all its donors, making it difficult to coordinate construction
work for the projects. In addition, European banks are set to face difficult economic conditions and stricter
capital controls over the coming years. This could lead to a decline in European financing for Vietnamese
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projects and has already transpired, with the Spanish government announcing in late-November 2012 that it
would only provide 40% of the financing it had initially promised for an urban railway project in Ho Chi
Minh City (the Metro Line No.5).
Having said that, some lenders remain keen to provide funds for Vietnam's urban railway sector. In March
2013, Japan and Vietnam exchanged a diplomatic note, under which Japan agreed to finance 12 local
projects such as the first phase of the Hanoi urban railway line 1 (Gia Lam-Giap Bat). Officials from the Ho
Chi Minh City administration also pointed out in March 2013 that the Asian Development Bank (ADB) and
the European Investment Bank (EIB) will provide a combined US$260mn and US$735mn for the Metro
Line No.5 and Metro Line No.2. The loan agreement for the Metro Line No.2 was signed in July 2013.
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 its port infrastructure is poor by international standards. The main ports currently in operations
are the Cam Pha Port, Da Nang, Haiphong, Ho Chi Minh, Phu My and Quy Nhon.
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 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. As of January 2013, Vietnam was home to 266
large and small-scale seaports, but only nine ports are able to handle 50,000-deadweight tonne (dwt) 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 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.
BMI anticipates increasing investment into Vietnam's port infrastructure over the long term, as it is a sector
crucial to the country's economic growth. There are two major factors central to our view:
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■
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 113th in the 2012/13
competitiveness report published by the World Economic Forum.
■
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 Asia-Europe services.
Vietnam is keen to address this deficit, but lacks the necessary fiscal strength to meet the required
investment. This keenness to meet this deficit has also been dampened recently due to feeble external
demand. The slowdown in global economic activity in 2012 has also dampened the demand for Vietnamese
goods and minerals, resulting in a glut in port capacity, particularly with deep-sea ports in South Vietnam.
This glut has become so serious that in December 2012, investors were calling for a halt in licences been
issued for container terminal building projects in HCM City and a delay to the launch of the US$660mn Cai
Mep-Thi Vai port complex. A report of the Vietnam Seaport Association showed that in 2012, the
international container ports in the Cai Mep-Thi Vai deep water port complex area ran at 15-20% of their
designed capacity.
Vinacomin also decided to suspend the construction of the Ke Ga deepwater port in the Binh Thuan
province, according to Vinacomin General Director Le Minh Chuan in February 2013. The company took
the decision due to a cut in bauxite production. The port was scheduled to receive bauxite from mines in
Tay Nguyen, with an annual capacity of up to 3.5mn tonnes by 2015, 17.5mn tonnes by 2020, 27mn tonnes
by 2025 and 37mn tonnes by 2030. However, the output of bauxite at Tan Rai and Nhan Co alumina
projects in Dak Nong Province is low and may reach only 1.3mn tonnes.
Besides Vinacomin, Vinalines is also selling stakes in four of its ports - namely Hai Phong, Da Nang,
Quang Ninh, Saigon and Quy Nhon - between 2013 and 2014 to pare down its high level of debts, which
were brought on by investment in under-performing ports.
As a result, Vietnam has adjusted its port development plans at the start of January 2013, with the Vietnam
Maritime Administration announcing that it would only focus on building large deep-sea ports in Hai
Phong's Lach Huyen and Ba Ria-Vung Tau's Cai Mep - Thi Vai port complexes. The administration will
also focus on converting the remaining ports in the central region and the Mekong Delta into special-use
ports to transport materials for thermo-power plants. Small ports that had been planned for development
will not be put into this time's zoning plan if they are not in urgent need. This plan appears to be taking
place with, the Lach Huyen port project starting construction works in April 2013. There are also plans to
develop a US$3.5bn deep-sea port on Hon Khoai Island, Ca Mau province. The project proposal was
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unveiled by Australia-based N&M Commodities in June 2013. The company was completing the necessary
administrative procedures for the project, which is expected to start construction works at the end of 2016.
Once completed, the Hon Khoai Seaport is expected to become the gateway to the Mekong Delta and HCM
City.
In April 2013, Vietnam started the construction of the Lach Huyen international port in the northern city of
Haiphong. The port is scheduled to be built in two phases, with the first phase entailing the construction of
port infrastructure, while the second phase will include the construction of two 750m wharves capable of
handling 100,000-tonne container ships. The Vietnam Maritime Administration will manage the first phase,
involving an investment of more than VND18.6trn (US$885mn), while a joint venture of Vietnamese and
Japanese enterprises will manage the second phase worth more than VND6.57trn (US$315mn). The port,
due for completion in 2016, will have modern cargo handling equipment. It will be capable of handling
container ships of up to 8,000 twenty-foot equivalent units (TEUs).
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 forced the government to suspend the
project in September 2012. In June 2013 the management of the Van Phong Economic Zone cancelled the
investment licence, held by Vinalines, to build Van Phong International Port project. Vinalines is required
to complete all procedures to liquidate the project within H114.
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. This could remain an issue
for other ports currently being developed. The VND2.73trn Saigon-Hiep Phuoc port was scheduled to be
completed by 2014, but as of March 2013, a harbour bridge and port routes to connect it with main
highways and roads have yet to materialise.
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.
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A lack of proper planning is also an issue. According to the Vietnam Seaports Association in January 2013,
seaport zoning plans of Vietnam are yet to be synchronic and have still failed to meet rising sea transport
demand due to a disproportional focus on the construction of small ports, which are inefficient in meet
Vietnam's transhipment needs.
The government has also been slow in implementing regulations that support the development of a PPP
framework for port projects. A PPP framework has been on the cards for several years but has yet to be
developed, with investors still seeking incentives from the government to attract PPP investment in August
2012.
Lastly, access to financing remains an issue, despite a sharp decline in Vietnam's interest rates. This is
partially due to Vietnam's financial regulations and the decline in government investment.
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.
In December 2012, Saigon Port Company Deputy Director Huynh Van Cuong said that the Saigon Port
relocation project has not made any considerable progress due to capital shortages. The relocation work is
moving at a slow pace despite financial assistance from the Vietnamese government. The Hiep Phuoc Port
construction project is required to be finished first in order to relocate the Saigon Port from Ho Chi Minh
City; however, construction work is only 38% completed.
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. The government initial plans were to develop 10 international airports by 2020 - Noi
Bai, Cat Bi, Phu Bai, Danang, Chu Lai, Cam Ranh, Tan Son Nhat, Long Thanh, Can Tho and Phu Quoc and 16 domestic airports in the same timeframe - which includes Dien Bien Phu, Na San, Lao Cai, Quang
Ninh, Gia Lam, Vinh, Dong Hoi, Phu Cat, Tuy Hoa, Pleiku, Buon Ma Thuot, Lien Khuong, Rach Gia, Ca
Mau, Con Son and Vung Tau.
This willingness by the government to get projects under way for the private sector (which is partially due
to a lack of public funds) provides grounds for optimism and this has attracted foreign investors to the
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sector. In April 2011, US-based ADC-HAS Airports 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. This plan is still in the works. In
August 2012, ADC-HAS Airports suggested a plan to develop the Chu Lai airport into an industrial airport,
while the Khanh Hoa provincial government was seeking permission for a plan to develop the Cam Ranh
airport with ADC-HAS Airports and Vietnam Airlines (VAC). ADC-HAS Airports is also interested in
developing the Da Nang airport with VAC. In April 2013, the Airports Corporation of Vietnam (ACV)
tasked Parsons Brinckerhoff with investigating the potential to develop the Chu Lai airport into a regional
cargo hub. The study was funded by a grant from the US Trade and Development Agency. In June 2013,
ADC-HAS Airports reiterated its interest in expanding the Cam Ranh Airport and Danang airport.
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.
Since early 2012, Vietnam has 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 ACV, foreign investors have already
expressed interest in the Van Don airport, with South Korean investors being highlighted as one of the
interested parties in late-2012. Interested investors were due to complete project documents and submit
them to provincial and central agencies in November 2012.
The Long Thanh airport, approved in 2011, also appears to be make some progress, albeit slowly. In March
2013, the provincial government of Dong Nai disclosed a development plan for the area surrounding Long
Thanh International Airport. The government plans to develop a tourism complex, several industrial clusters
and world-class sporting, education and healthcare venues in the 21,000-hectare (ha) area. The plan entails
the development of 12 communes in Long Thanh and Cam My districts in the area, excluding the 5,000ha
zoned for the terminal, by 2025. The northern part of the airport covering 5,720ha will boast condominiums
for aviation employees and locals, while the southern area covering about 4,400ha will boast an
international transhipment centre, a supporting industrial park and an area zoned for fruit farms and
industrial plants. The plan is likely to be implemented in three phases during 2012-2025, with land
acquisition estimated to cost VND10trn as of March 2013.
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The terminal will also be developed in three phases, starting from 2015. The first phase (2015-2020)
requires US$5.6bn for the construction of two runways, taxiways, aircraft parking zones and two terminals
with an annual handling capacity of 25mn passengers and 1.2mn tonnes of cargo. The second phase
(2020-2030) involves the construction of a third runway and the increase in passenger handling capacity by
50%, while cargo handling capacity is increased to 1.5mn tonnes per annum. The third phase (2030-)
involves the construction of a fourth runway and the increase in passenger and cargo handling capacity to
100mn passengers and 5mn tonnes of cargo per annum.
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 annum, 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, were 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.
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 difficulty in securing financing for its airport projects and is still seeking
investment capital from different sources.
The government has since recognised this lack of financial viability for some of these proposed airports and
is shifting its focus on a few key airports such as Noi Bai, Danang and Long Thanh. The smaller airports
such as Lao Cai, Lai Chau and Quang Ninh could be developed after 2020, according to official from the
ministry of Transport in April 2013.
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Table: Table: Major Projects - Transport
Project Name
Value (US
$mn)
Capacity/
Length
Companies
Timeframe
Status
Airports
Quang Tri Airport Gio Linh District
Airport
27
na
na
2009-2015
Planning stage Approved in
February 2009
Passenger terminal,
Danang International
Airport
6mn
passengers /
74
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)
Cam Ranh
International Airport
expansion
5.5mn
passengers/
590
yr
na
Noi Bai International
Airport extension
(includes T2 terminal)
10mn
passengers /
960
year
Northern Airports Corporation
(NAC), Taisei, Hoa Binh
Construction and Real Estate
Corporation
Project approved,
US$9.5mn terminal
completed in
late-2009 (Nov
2009-2020
2011)
September
2012 November
2014
Contract awarded
(September 2012);
US$759mn ODA
loan from Japan
2009 December
2012
Under
Construction,
Construction on
terminal started in
end-Jan 2012
(October 2012)
Phu Quoc
International airport,
Duong To Commune
3mn
passengers/
780
yr
Chu Lai International
Airport
4mn
passengers /
1,000
year
Garuda Asea, Airis International
Memorandum of
understanding
(MoU) for feasibility
-2025
study approved
Long Thanh
international airport
(Passenger terminal,
runway, parking
place), Dong Nai
province
100mn
passengers / Japan Airport Consultants, Airports
6,740
year
Corporation of Vietnam
At planning stage,
Land clearing to
begin in 2013 (April
2015-2020
2013)
Southern Airports Corporation
At planning stage,
government to
arrange financing
2011-2020 for 2012 (Nov 2011)
Phu Bai International
Airport upgrade, Thu
Thien-Hue Province
5mn
passengers/
595
year
Middle Airports Corp.
Tien Lang
International Airport,
Hai Phong
80mn
passengers /
na
year
na
2010-
At planning stage
Pleiku Airport (twophase upgrade), Gia
Lai
500,000
passengers /
105
year
na
2011-2030
(first phase)
At planning stage
Da Nang International
Airport terminal
expansion
6mn
passengers /
64.5
year
na
Completed;
Opening in May
2011
Seven PPP airport
projects (Chu Lai, Phu
Bai, Da Nang, Tuy
Hoa, Quy Nhon,
Pleiku and Cam Ranh)
na
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na
Da Nang International Airport
na
Proposal for
projects send to
Vietnamese
Ministry of Planning
and Investment
(MoPI) by ADC2011HAS
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Vietnam Infrastructure Report Q4 2013
Table: Major Projects - Transport - Continued
Project Name
Cat Bi international
airport (first phase)
upgrading project,
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
2mn
passengers/
240
yr
Companies
Timeframe
Status
na
February
2013-2015
(first phase);
- 2025
At planning stage,
seeking financing
(November 2012)
2-5mn
passengers/
250
yr Joinus, Korea Airports Corporation
na
1,200
na
na
Preparation to be
finalised by 2012,
Project site moved
to Doan Ket
commune (Jan
2013-2015
2012)
na
At planning stage,
received approval
for new project site
2011 - (September 2011)
Airports Corporation of Vietnam
At planning stage,
South Korean
companies
expressed interest
(October 2012)
October
2012 -
At planning stage,
January 2012 project announced
na
- 2020
(January 2012)
62.6
na
Cai Cui port project
32
60,000
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
35mn
250 tonnes /year
Vinacomin
2009-2020
At planning stage
April 2009 -
Licence awarded
(April 2009);
Delayed due to
disputes (April
2010)
Ports
Ben Dam deep water
transhipment port,
Con Dao district,
Vung Tau city
Saigon-Hiep Phuoc
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)
Trai Thien Sea Transport
10mn Investment and Development Joint
300 tonnes /year
Stock Company
8.7mn
337 tonnes /year
3,600
12,000-15,00
0TEUs
700
100,000
tonnes
© Business Monitor International
na
Second phase
2009-2015 under construction
Under
Construction, 38%
completed
2009-2020
(December 2012)
October
Vinalines, Portcoast, Nippon Koei, 2009 - 2015;
Rotterdam Port , SK E&C
- 2020
Civil Engineering Construction Joint
Stock Co. No.6 and Truong Son
Corp, ODA [Sponsor]
Construction
suspended;
Seeking investors
(September 2012)
October
2008 - June Under construction
2013
(December 2012)
Page 43
Vietnam Infrastructure Report Q4 2013
Table: Major Projects - Transport - Continued
Project Name
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 twophase PPP project
(four container
wharves), Hai Phong
province, east of
Hanoi
Value (US
$mn)
Capacity/
Length
Companies
Timeframe
Status
1,100
50,000
tonnes
Marine Consultant Co. and Quang
Tri province
2010-2020
Approved in
October 2008
November
2008 end-2015
Under
construction,
facing financing
difficulties (June
2012)
1,200
300
1,200
30mn
tonnes/yr
1.2mn TEUs/
yr
60mn
tonnes /yr
Formosa Plastics Group, Formosa
Ha Tinh Steel, Samsung C&T
Gemalink, CMA-CGM, DealimSAMWHA
Under
construction,
2010-2013 construction tempo
(first phase) slowed (June 2012)
Vinalines, Molyto, Mitsui O.S.K.
Lines (MOL), Nippon Yussen
Kaisha (NYK), Itochu, Saigon
Newport Corporation, Japan ODA
Under construction
[Sponsor] Q213 - 2015
(May 2013)
Cai Lan Port Investment Joint
Stock Company, Carrix, Cordiant
Capital
Completed; US
$127mn funding
secured
Cai Lan International
Container Terminal
na 720,000 TEU
Dong Lam cement
port
International Transport
Development And Investment Joint
64 71mn tonnes
Stock
Licence granted;
first phase to be
2010-2017 completed by 2013
International Transportation
Development and Investment
2010-2030
Ongoing
development,
Phase II and III to
be completed in
2020 and 2030
MOL, Hanjin and Wan Hai - March 2011
Completed
Cua Lo port
expansion, Nghe An
490 18mn tonnes
Tan Cang-Cai Mep
deepwater container
trans-shipment
terminal, Ba Ria-Vung
Tau province
204
1.8mn TEU /
year
Port facility, Nghe An
province
365
na
Ke Ga deep-water
port (three-phase),
Tan Thanh Commune,
Ham Thuan Nam
District, Binh Thuan
Province
3.5mn
tonnes /year
1,000 (first phase)
Kobe Steel
2011-2013
At planning stage
Vietnam Coal and Mineral
Industries (TKV)
Construction halted
April 2012 due to reduced
2015 (first bauxite production
phase)
(April 2013)
First two bidding
package under
construction, US
$171.5bn loan from
December
World Bank
2011 (December 2011)
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]
Deepwater port,
Mekong Delta region
1,000
na
OGL Mineral and Coal Mining
Company
© Business Monitor International
2010-2011
May 2012 -
At planning stage
Page 44
Vietnam Infrastructure Report Q4 2013
Table: Major Projects - Transport - Continued
Project Name
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
Da Nang port
upgrading project
phase 2
SP-SSA international
terminal, Cai Mep
River, Ba Ria-Vung
Tau province
Value (US
$mn)
Capacity/
Length
Timeframe
Status
107.5
Binh Duong Construction,
2012-2014
Consulting and Investment JSC, (first stage);
Nam Tan Uyen Industrial Park JSC, 2018 (second
na
U&I Logistics JSC.
stage)
US$37.5mn first
stage under
construction (May
2012)
180
Oshima Shipbuilding company
June 2012 2016
Investment licence
granted (June
2012)
12mn China Communication Construction
tonnes/yr
[EPC], EVN
Q4 2012 Q3 2014
Construction to
start in Q4 2012
(October 2012)
na
Nikken Sekkei Civil Engineering
Ltd, Port and Waterway August 2012
na Engineering Consultants Company
-
At design phase,
design consultant
contract signed
(August 2012)
na
Japan Transport Cooperation
Association (JTCA), Japan Port
Consultants Ltd (JPC) and Japan
Overseas Coastal Area
Development Institute (ACDI), JICA
na
[Sponsor]
240
SSA Holdings International, Saigon
Port, Vietnam National Shipping
1.5mn TEU
Lines Corporation
2009 - 2013
Under construction
(February 2013)
445
na Vietnam Railway Corporation (VRC)
2010-2015
At design stage
October
2011 - June
2015
Under
construction,
delayed by land
clearance (July
2012)
181
na
Companies
At planning stage,
seeking ODA funds
September
from JICA
2012 - (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
419
1,070
13.08km
15km
na
na
Under
construction; ODA
loans of US
$386.5mn from
France, the
remaining financing
2010-2016 from EIB and Hanoi
19.7km
(2.6km
underground
2,250
)
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], Hitachi
Under construction
[Equipment] Q312 - Q417
(June 2013)
11.3km
(9.3km
underground
1,370
)
Asian Development Bank (ADB)
Design and site
[Sponsor], European Investment
clearance phases
Bank [Sponsor], Tedi South
underway,
[Design], Obermeyer Planen & August 2013 construction tender
Beraten [Design], ILF Beratende - December
to start in Q113
Ingenieure [Design], Poyry [Design]
2017
(December 2012)
© Business Monitor International
Page 45
Vietnam Infrastructure Report Q4 2013
Table: Major Projects - Transport - Continued
Capacity/
Length
Companies
Timeframe
Status
1,900
1,726km
Vietnam Railway Corporation,
Japan International Cooperation
Agency
2013-2020
At planning stage
(April 2013)
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)
Project Name
North-South (Ho Chi
Minh City - Hanoi)
railway rehabilitation
project
Value (US
$mn)
Metro line 4 (Nguyen
Van Linh - Ben Cat
Bridge [District 12]),
Ho Chi Minh City
24km (19km
underground
2,500
)
Urban railway line No.
3 project (Nhon [Liem
district] - Hanoi
railway station [Hoan
Kiem district]), Hanoi
12.5 km
(8.5km of
aerial track
and 4km of
underground
1,430
track)
Nam Thang LongTran 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
9,300
© Business Monitor International
11.5km
2.6km
na
9.3km
na
Italian Thai Development
Pre-feasibility study
for BOT project
under way (April
April 2012 2012)
Systra, Vietnam Bank for Industry
and Trade; ADB [Sponsor], EIB
[Sponsor], France [Sponsor]
September
2010 - Q3
2015
Under
construction,
delayed by
financing and
manpower issues
(December 2012)
October
2011 - 2020
Awaiting
government
approval in Q411
(Oct 2011)
Hanoi Urban Railway Management
Board
na
At tendering stage,
contract to be
awarded in
end-2013 - mid-2013 (February
end-2017
2013)
na
At planning stage,
initial design
rejected by HCMC
authorities (June
June 2012 2012)
ADB [Sponsor]
US$500mn loan
from ADB received
April 2013 for underground
2016 section (May 2012)
Vietnam Railway Corporation
Received
government
approval,
preparations being
June 2012 finalised (June
2015
2012)
Page 46
Vietnam Infrastructure Report Q4 2013
Table: Major Projects - Transport - Continued
Project Name
Value (US
$mn)
Capacity/
Length
Companies
Thu Thiem/Hoa Hung
stations [Ho Chi Minh
City] - Cai Rang
station [Can Tho
province] railway line
9,630
191km
Southern Transport Design and
Consulting JSC
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
na
23km
na
Timeframe
Status
At planning stage,
detailed plan to be
completed by
2013, financing
unresolved
2015 (December 2012)
August 2012
-
At planning stage
(July 2012)
2013 - 2016
Technical study
completed, US
$260mn financing
from ADB and EIB
(April 2013)
Metro line 5 (Saigon
Bridge [District 2] Bay Hien Intersection
[Tan Binh District] Can Giuoc Bus
Station [District 8]), Ho
Chi Minh City
1,850
17km
GEV, Ho Chi Minh City Urban
Railway Management Board,
Spanish government [Sponsor],
Idom Ingenieria Consultoria, ADB
[Sponsor]
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 LongTrn Hung Dao), Hanoi
na
na
JICA
July 2012 -
At planning stage
(July 2012)
Urban railway line No.
5 PPP project (West
Lake-Ba 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)
At planning stage,
seeking investors
(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
49km
114km
Lao Cai-Hanoi-Hai
Phong railway line
na
381km
na
September
2012 -
Metro line (connecting
Hanoi station with
Nhon station)
na
12.5km
na
2013-2016
At planning stage
(December 2012)
Metro line (connecting
Nam Thang Long to
Tran Hung Dao),
Hanoi City
na
11.5km
na
na
At planning stage
(December 2012)
© Business Monitor International
Page 47
Vietnam Infrastructure Report Q4 2013
Table: Major Projects - Transport - Continued
Value (US
$mn)
Capacity/
Length
Companies
Timeframe
Status
na
na
Transport Engineering Design Inc
(TEDI)
2013 -
At planning stage
(April 2013)
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
Project Name
North-South highspeed railway project
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
My Phuoc-Tan Van
Expressway
196
42km
Becamex IDC Corporation
Ring Road No. 3,
Hanoi, Phase II
256
8.5km
Cienco4, JICA
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 CityLong Thanh-Dau Giay
(National Highway 1)
expressway, part of
North South Highway
Six-lane Hanoi [Gia
Lam] - Hai Phong
[Dinh Vu dam]
expressway project
2009-2013 Under Construction
2011-2013
Under construction
(October 2012)
GS Engineering and Construction
Project stalled due
to delays in site
June 2008 clearances (June
late-2013
2012)
na
Construction of the
first phase due to
2009-2015 commence in Q409
423
IHI, Sumitomo Mitsui Construction,
Import-Export Construction
3,900km
Corporation (Vinaconex),
Under construction
(Third and Final
2009-2012
stage)
952
Vietnam Expressway, POSCO E&C
[package A1, A2, A3], Keangnam
[A4, A5], Doosan [A6], Guangxi
RBEC, Vinaconex, Asian
Development Bank [Partial
245km
sponsor]
Under
construction,
significantly behind
schedule due to
2010 land clearances
late-2013
(January 2013)
1,180
Vietnam Expressway Corporation
(VEC), Japan Bank for International
Cooperation [Sponsor], Asian
Development Bank [Sponsor],
55km
Hashin Construction
Under
construction,
significantly behind
schedule, 60%
completed at
HCMC-Long Thanh
June 2010 section (January
2014
2013)
1,500
Vietnam Infrastructure
Development and Finance
Investment Joint Stock Company
(VIDIFI) [BOT], PSJ Holdings,
Cienco 1 Company and
Infrastructure Development and
Finance Investment Company, GS
Under
construction, 33%
completed,
significantly behind
schedule (February
2009-2015
2013)
383
350
© Business Monitor International
13.7km
21.3km
105.5km
Page 48
Vietnam Infrastructure Report Q4 2013
Table: Major Projects - Transport - Continued
Project Name
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
Value (US
$mn)
750
1,600
Road linking EastWest Avenue with the
Trung Luong
Expressway, part of
217km south coastal
corridor project
Capacity/
Length
Companies
E&C, Citibank Japan [Sponsor],
Sumitomo Mitsui Bank [Sponsor]
Timeframe
Status
Hanoi Construction Corp, Mai Linh
Group JSC, Hai Thach Investment
JSC. A Chau (Asia) JSC, Deo Ca
Investment; Credit Agricole
Corporate & Investment Bank
[Sponsor], Societe general
13.4km
[Sponsor], Vietinbank [Sponsor]
Under
construction,
financial closure
late-2012 - reached (November
Q2 2016
2012)
Vietnam Expressway Development
Company, JICA [Sponsor], ADB
57.8km
[Sponsor]
Q2 2013 2017
Construction
delayed to 2013
due to cost
escalations
(January 2013)
2010-2013
Project approved
(October 2010);
Seeking financing
(June 2012)
1
2.7km
na
Deo Ca tunnel
500
11.125km
Hanoi Construction, BOT Hai
Thach Investment, Mai Linh Group
2010-2014 Under construction
Thai Ha Bridge
102
na
Construction Corp No 1
2010-2012 Under construction
Received
government
approval
Road project between
uyen Van Cu and
Ngoc Thuy Roads in
Hanoi
12
3km
na
Fifth bidding package
for Ho Chi Minh City Long Thanh - Dau
Giay expressway, part
of North-South
Highway
43
13.9km
Pumyang-Sungjee Construction
Road linking Phuc Tho
and Son Tay district
8
4.3km
na
My Thuan-Can Tho
Expressway project,
south west Vietnam
Design and
consultancy contract
for Ben Luc-Long
Thanh expressway
Upgrading of the
provincial road No
39B, Thai Binh
province
Ring road No. 4,
Hanoi
National Road No 25
expansion (ie Phu Yen
section, 21.5km; Gia
Lai section)
2011-2013
2010-2013 Under construction
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)
na
Katahira, Nippon, Vietnam
Expressway Investment and
Development Company
2010-2012
Contract awarded
106
29km
Tasco Joint Stock, Agribank,
Maritime Bank, Southeast Asia
Bank
2010-2013
US$92.3mn loan
pledged by banks
1,970
98km
na
2010-2015
At planning stage
113
57.5km
na
2010-2014
Project approved
(December 2010)
441.6
10
© Business Monitor International
Page 49
Vietnam Infrastructure Report Q4 2013
Table: Major Projects - Transport - Continued
Project Name
Value (US
$mn)
Capacity/
Length
Companies
Timeframe
Status
2010-2012
Contract signed
2010-2013
Construction
under way
A 530.5m bridge
linking the east side of
Hanoi with the Van
Giang district across
the Bac Hung Hai river
26
Viet Hung Urban Development and
Investment, Utracon Overseas,
0.53km
Ultracon Vietnam Company
Hoa An Bridge over
Dong Nai River
56
1.30km
na
19m
Vietnam Road Corporation
[Sponsor]
December
2010 - May Under construction
2012
(January 2011)
30km
Central Japan Expressway,
Vietnam Expressway Investment
and Development Company (VEC)
Under negotiations
for a joint venture
2011(JV)
50
na
Duc Long Gia Lai Group, Vietnam
Commercial Joint Stock Bank for
Industry and Trade (VietinBankCTG)
2010-2022
Credit contract
signed; BOT
contract
announced in
September 2010
430
50.3km
Vietnam Expressway, JICA
[Sponsor]
2006 - June
2012
Completed (June
2012)
Kon Brai Bridge, Kon
Tum province (Part of
National Highway No
24)
Overhaul of Phap
Van-Cau 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
Ring roads 3 and 4,
connecting Ho Chi
Minh City with the
Ben Luc-Long Thanh
and Bien Hoa-Vung
Tau highways
Road upgrading
project, northern
provinces
Hoa Vang District (Da
Nang) - 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
164
71.4
500
8,000
170
1,470
2,800
© Business Monitor International
na
US$200mn loan for
project by Korea
Eximbank, the rest
from Australian and
2011ADB
na
(Ring road 3);
197.6km (Ring road
4) - Vietnamese
Ministry of
Transport to start a
2011procedure to call
300km
na
First phase to finish
in 2017 -US$80mn
2011-2017
loan from ADB
139km
Project Management Unit 85,
Nippon Koei, Nippon Engineering
Consultants, Chodai and Thai
Engineering Consultants, JICA
[Sponsor], World Bank [Sponsor]
Construction
delayed due to
costs escalations,
undergoing land
Q2 2013 - clearance (January
2016
2013)
na
Under tendering
process (July
2011); 30%
Financing from
government, 70%
from private
investors
na
100km
126.7km
2011 -
Page 50
Vietnam Infrastructure Report Q4 2013
Table: Major Projects - Transport - Continued
Project Name
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 GiayPhan Thiet
expressway PPP
project (parallel to
NH-1), Dong Nai
Province
Thu Bay - Kenh
section, part of 924km
Southern Coastal
Corridor Project
Two overpasses, part
of Ho Chi Minh CityLong Thanh-Dau Giay
(National Highway 1)
expressway
Duong Dong - Cua
Lap road, connecting
Phu Quoc Airport
Value (US
$mn)
82
50
na
757
Capacity/
Length
Companies
na
101km
na
Financing from ADB, Korea,
Australia, Vietnam
Under construction
(May 2011); (including two
bridges over Cai
Lon and Cai Be
rivers), part of
May 2011 217km
Bach Khoa Construction
Consultant Corporation
Initial report
submitted to
Transport Ministry
(July 2011); Design
2011 - completed by 2011
2013-2014
Binh Minh Import Export (first phase);
Production and Trading Group 2020 (second
(Bitexco)
phase)
US$320mn
financing from
World Bank; US
$430mn financing
from government;
in tender (July
2013)
Contract awarded
(September 2011);
Financing from
Korea Exim Bank
47.3
31km
Ssangyong Engineering and
Construction, Korea Exim Bank
[Sponsor]
33.8
800m &
680m
IDICO Investment Consultancy
Joint Stock Company
BOT contract
Q411 - signed (September
mid-2012
2011)
508 Company, Civil Engineering
Construction Company No 5
October
2008 -
50% completed
(September 2011);
Originally
completed by
November 2009
2012-2014
Received
government
approval
(September 2011)
2012-2015
Contract awarded
(September 2011)
2012-2015
EX5 awarded by
VIDIFI, EX4 & EX6
awarded by
September and
October
16
7km
Four-lane elevated
highway, Vinh Binh
bridge (Thuan An
commune) to My
Phuoc town (Ben Cat
district), southern Binh
Duong province
800
31.5km
Gia Loc-Tu Ky
section, Package EX5
of six-lane Hanoi-Hai
Phong expressway
project, Hai Duong
province
169
VIDIFI, Guangdong Provincial
15.3km Changda Highway Engineering
Package EX4, EX5 &
EX6, part of six-lane
Hanoi-Hai Phong
Status
Under construction
(May 2011);
Financing from
ADB, Korea,
May 2011 - Australia, Vietnam
na
21km
Timeframe
na
© Business Monitor International
40km
na
VIDIFI
September
2011 -
Page 51
Vietnam Infrastructure Report Q4 2013
Table: Major Projects - Transport - Continued
Project Name
expressway project,
Hai Duong province
Value (US
$mn)
Capacity/
Length
Companies
Timeframe
Status
respectively (Sep
2011)
At planning stage
(May 2012)
Noi Bai International
Airport to Nhat Tan
Bridge connecting
road construction
project
83
12.1km
JICA [Sponsor]
May 2012 September
2014
Southern Coastal
Corridor Project
(Vietnam - Thailand)
47.3
31km
Ssangyong Engineering and
Construction
2011 -
Contract awarded
(September 2011)
World Bank, Global Environmental March 2012 Facility
2015
Under
construction; US
$155mn loan from
World Bank
(Mar-12)
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)
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 ThienHue province] - Tuy
Loan [Danang city]
highway BT project,
part of North-South
Highway
National Highway No
1 expansion BOT
project, Thanh Hoa Vung Ang (Ha Tinh
304.7
751
749
71.5
6,000
690
(Second
phase)
1,000
4,300
© Business Monitor International
2km
29.3km
14.5km
987m
1,760km
3,183km
81.7km
1,057km
Australian Agency for International
Development (AusAID), the Asian
Development Bank (ADB)
Technical
consultancy
service agreement
signed; US$751mn
from AusAID, ADB
October
and Vietnamese
2011government
na
Project announced,
construction to
start in May 2012
May 2012 (Feb 2012)
HCM City Infrastructure Investment
Joint Stock Co (CII)
mid-April Under construction
2012 (April 2012);
October Seeking financing
2012
(June 2012)
Vietnam government [Sponsor]
At planning stage,
Awaiting
government
approval (June
2012)
June 2012 end-2016
First phase
2000-2007 completed; Second
(first phase);
phase under
2015 (second
construction
na
phase)
(Mar-12)
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, Vietnam
Expressway Corporation
At tendering
process, seeking
financing (June
2012); Construction
to start in 2013
2013-2015
(January 2013)
Vietnam government [Sponsor] March 2012 -
At planning stage,
seeking
government
approval,
Page 52
Vietnam Infrastructure Report Q4 2013
Table: Major Projects - Transport - Continued
Project Name
Value (US
$mn)
Capacity/
Length
province) - Can Tho
section
Status
government funds
fully disbursed, in
need of additional
funds (May 2012)
Bac Luan 2 bridge
connecting Mong Cai
(Quang Ninh) and
Dongxing (Guangxi)
Agreement signed
between Vietnam
and China (March
2012)
Vinh Thinh Bridge,
part of National
Highway No 2C,
Hanoi
Four-lane Buu Hoa Hiep Hoa bridge,
Dong Nai province
Provincial Road 10,
Long An Province
na
na
Companies
Timeframe
na March 2012 -
137
5.5km
Thang Long, South Korea
[Sponsor]
29
1.5km
VRC
January 2012 Under construction
- early-2013
(January 2012)
na
2010-2013
Land acquisition
delayed (April
2012)
na
na
December
2011 -
Under
construction, US
$130mn ODA loan
from South Korea
(December 2011)
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
165
47.5km
na
- May 2012
Completed (May
2012)
National Highway 61B
(Vi Thanh District [Hau
Giang Province] - Can
Tho City [Mekong
Delta])
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
2,100
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)
714
328
817
© Business Monitor International
8.4km
10.2km
na
na
na
na
Page 53
Vietnam Infrastructure Report Q4 2013
Table: Major Projects - Transport - Continued
Project Name
Fourth overhead road
project (Binh Phuoc
Junction - Cong Hoa
Intersection), Ho Chi
Minh City
Value (US
$mn)
547
Capacity/
Length
7.7km
Companies
na
Sa Huynh - Dung
Quat coastal road
project, Quang Ngai
central province
269
na
na
Tan Vu-Lach Huyen
expressway project,
part of Lach Huyen
port project
630
15.63km
Japan ODA [Sponsor]
54km
Trung Luong - My
Thuan - Can Tho
expressway project
Ring Road No. 5 (Son
Tay-Phu Ly, Phu LyBac Giang; Bac
Giang-Thai Nguyen
and Thai Nguyen-Son
Tay), Hanoi
84 bridge upgrading
project
National Highway 20
upgrade BT project
(Dau Giay [Dong Nai
province] - NH-27
[Lam Dong province])
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
4 road projects, Thu
Thiem new urban
area, District 2, Ho
Chi Minh City
Lao Bao [Quang Tri
Province] - Hai Phong
port [Hanoi], an
extension of the Khon
1,000
4,700
376
345
3,500
385km
na
Timeframe
Status
June 2012 -
At planning stage,
seeking financing
(June 2012)
Under
construction, cost
increased by 100%
2012 (June 2012)
December
2012 -
At planning stage
(May 2012)
Cuu Long Corporation for
Investment, Development and
Project Management of
Infrastructure
2013 -
At planning stage,
seeking financing
(August 2012)
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)
JICA [Sponsor]
Cuu Long Traffic Investment,
Development and Management
Joint Venture and Mekong East Co,
Petroleum and Construction Joint
Stock Company, Construction
268km
Materials No 1
At pre-construction
stage, seeking
financing, first
September
phase contract
2012 - late signed (September
2014
2012)
235km
September
2012 -
na
At feasibility-study
stage (August
2012)
22,800
1,811km
Cengiz Insaat
2010 - 2015
(136km); 2020
(793km); Certain sections
2020 under construction
(1018km)
(August 2012)
480
na
VIDFI
October Under construction
2012 - 2015
(October 2012)
na
At planning stage,
project under
negotiations
between Laos,
na
© Business Monitor International
900km
December
2012 -
Page 54
Vietnam Infrastructure Report Q4 2013
Table: Major Projects - Transport - Continued
Project Name
Value (US
$mn)
Capacity/
Length
Companies
4km
Vietnam Expressway Corporation
(VEC)
Kaen-Tien Sa Port
road
Road connector
project (East-West
Highway - HCM CityLong Thanh-Dau Giay
Expressway section),
Ho Chi Minh City
106
Timeframe
Status
Thailand and
Vietnam (December
2012)
December
2012 - Under construction
end-2014
(December 2012)
na = not available. Source: BMI Key Projects Database
© Business Monitor International
Page 55
Vietnam Infrastructure Report Q4 2013
Energy And Utilities Infrastructure - Outlook And Overview
Table: Vietnam Energy & Utilities Infrastructure Industry Data, 2011-2016
2011
2012e
2013f
2014f
2015f
2016f
31.4
34.5
35.1
35.3
35.4
32.9
Energy & Utilities Infrastructure Industry Value,
VNDbn
16,731.2
20,208.7
22,707.3
25,277.8
27,901.0
40,754.9
Energy & Utilities Infrastructure Industry Value,
US$bn
0.8
1.0
1.1
1.2
1.4
2.0
Energy & Utilities Infrastructure Industry Value
Real Growth (%)
9.0
11.5
5.9
5.5
5.1
5.5
Energy & Utilities Infrastructure Industry Value As
% Of Total Construction
10.3
11.3
11.3
11.3
11.2
14.5
Power Plants and Transmission Grids
Infrastructure Industry Value As % Of Total
Energy & Utilities
89.6
90.5
90.8
90.9
90.8
89.5
Power Plants and Transmission Grids
Infrastructure Industry Value, VNDbn
14,989.1
18,288.7
20,606.9
22,967.0
25,338.8
36,480.2
Power Plants and Transmission Grids
Infrastructure Industry Value, US$bn
0.7
0.9
1.0
1.1
1.2
1.8
Power Plants and Transmission Grids
Infrastructure Industry Value Real Growth (%)
8.7
12.7
6.2
5.7
5.1
5.4
Power Plants and Transmission Grids
Infrastructure Industry Value As % of Total
Infrastructure
28.2
31.2
31.8
32.1
32.2
29.5
Power Plants and Transmission Grids
Infrastructure Industry Value As % of Total
Construction
9.2
10.2
10.3
10.3
10.2
13.0
Oil and Gas Pipelines Infrastructure Industry
Value As % Of Total Energy & Utilities
2.3
1.7
1.6
1.5
1.4
1.9
Oil and Gas Pipelines Infrastructure Industry
Value, VNDbn
392.3
341.8
356.9
377.9
398.3
754.5
Oil and Gas Pipelines Infrastructure Industry
Value, US$bn
0.0
0.0
0.0
0.0
0.0
0.0
Oil and Gas Pipelines Infrastructure Industry
Value Real Growth (%)
-25.7
-22.1
-2.1
0.1
0.2
0.4
Oil and Gas Pipelines Infrastructure Industry As
% of Total Infrastructure
0.7
0.6
0.6
0.5
0.5
0.6
Oil and Gas Pipelines Infrastructure Industry As
% of Total Construction
0.2
0.2
0.2
0.2
0.2
0.3
Water Infrastructure Industry Value As % Of
Total Energy & Utilities
8.1
7.8
7.7
7.6
7.8
8.6
Energy & Utilities Infrastructure Industry
Value As % Of Total Infrastructure
© Business Monitor International
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Vietnam Infrastructure Report Q4 2013
Vietnam Energy & Utilities Infrastructure Industry Data, 2011-2016 - Continued
2011
2012e
2013f
2014f
2015f
2016f
Water Infrastructure Industry Value, VNDbn
1,349.7
1,578.2
1,743.6
1,932.9
2,163.9
3,520.2
Water Infrastructure Industry Value, US$bn
0.1
0.1
0.1
0.1
0.1
0.2
28.5
7.7
4.0
5.1
6.7
7.5
Water Infrastructure Industry As % of Total
Infrastructure
2.5
2.7
2.7
2.7
2.7
2.8
Water Infrastructure Industry As % of Total
Construction
0.8
0.9
0.9
0.9
0.9
1.3
Water Infrastructure Industry Value Real Growth
(%)
e/f = BMI estimate/forecast. Source: Vietnam General Statistics Office, BMI
Table: Vietnam Energy & Utilities Infrastructure Industry Long-Term Forecasts, 2017-2022
2017f
2018f
2019f
2020f
2021f
2022f
36.0
36.3
36.6
36.9
37.3
35.4
Energy & Utilities Infrastructure Industry Value,
VNDbn
34,101.4
37,678.7
41,544.3
45,796.4
50,490.7
74,073.3
Energy & Utilities Infrastructure Industry Value,
US$bn
1.7
1.9
2.1
2.3
2.5
3.7
Energy & Utilities Infrastructure Industry Value
Real Growth (%)
5.6
5.5
5.3
5.2
5.3
5.5
Energy & Utilities Infrastructure Industry Value As
% Of Total Construction
11.1
11.1
11.1
11.1
11.1
14.5
Power Plants and Transmission Grids
Infrastructure Industry Value As % Of Total
Energy & Utilities
90.8
90.8
90.8
90.8
90.8
89.5
Power Plants and Transmission Grids
Infrastructure Industry Value, VNDbn
30,956.0
34,214.1
37,725.4
41,594.6
45,868.1
66,304.4
Power Plants and Transmission Grids
Infrastructure Industry Value, US$bn
1.5
1.7
1.9
2.1
2.3
3.3
Power Plants and Transmission Grids
Infrastructure Industry Value Real Growth (%)
5.6
5.5
5.3
5.3
5.3
5.6
Power Plants and Transmission Grids
Infrastructure Industry Value As % of Total
Infrastructure
32.6
32.9
33.2
33.5
33.9
31.7
Power Plants and Transmission Grids
Infrastructure Industry Value As % of Total
Construction
10.1
10.1
10.1
10.1
10.1
13.0
Energy & Utilities Infrastructure Industry
Value As % Of Total Infrastructure
© Business Monitor International
Page 57
Vietnam Infrastructure Report Q4 2013
Vietnam Energy & Utilities Infrastructure Industry Long-Term Forecasts, 2017-2022 - Continued
2017f
2018f
2019f
2020f
2021f
2022f
Oil and Gas Pipelines Infrastructure Industry
Value As % Of Total Energy & Utilities
1.3
1.2
1.2
1.1
1.1
1.4
Oil and Gas Pipelines Infrastructure Industry
Value, VNDbn
442.5
466.4
491.6
518.1
546.1
1,034.4
Oil and Gas Pipelines Infrastructure Industry
Value, US$bn
0.0
0.0
0.0
0.0
0.0
0.1
Oil and Gas Pipelines Infrastructure Industry
Value Real Growth (%)
0.4
0.4
0.4
0.4
0.4
0.4
Oil and Gas Pipelines Infrastructure Industry As
% of Total Infrastructure
0.5
0.4
0.4
0.4
0.4
0.5
Oil and Gas Pipelines Infrastructure Industry As
% of Total Construction
0.1
0.1
0.1
0.1
0.1
0.2
Water Infrastructure Industry Value As % Of
Total Energy & Utilities
7.9
8.0
8.0
8.0
8.1
9.1
Water Infrastructure Industry Value, VNDbn
2,702.9
2,998.2
3,327.4
3,683.6
4,076.4
6,734.5
Water Infrastructure Industry Value, US$bn
0.1
0.1
0.2
0.2
0.2
0.3
Water Infrastructure Industry Value Real Growth
(%)
6.2
5.9
6.0
5.7
5.7
5.6
Water Infrastructure Industry As % of Total
Infrastructure
2.8
2.9
2.9
3.0
3.0
3.2
Water Infrastructure Industry As % of Total
Construction
0.9
0.9
0.9
0.9
0.9
1.3
f = BMI forecast. Source: Vietnam General Statistics Office, BMI
© Business Monitor International
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Vietnam Infrastructure Report Q4 2013
Slowly Overshadowed
Energy & Utilities Infrastructure Value And Share Of Infrastructure Value
e/f = BMI estimate/forecast, Source: Vietnam General Statistics Office, Local news sources, industry sources,
BMI (Major Projects Database)
Although the total investment in the transport sector will continue to overshadow spending on energy &
utilities, the value of the power plants and transmission grids sub-sector will increase, with real growth
averaging 5.5% 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 Seventh
Power Development Plan, the government has set a target of developing 75,000 megawatts (MW) 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
© Business Monitor International
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Vietnam Infrastructure Report Q4 2013
and rigidity of the internal market. Electricity Vietnam (EVN) enjoys a monopoly over distribution in
Vietnam's 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 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.
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Vietnam Infrastructure Report Q4 2013
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 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
Coal: Growing Foreign Participation
The first ever public-private partnership (PPP) in Vietnam's power generation sector gained momentum in
May 2009. Malaysia's JAKS Resources reportedly signed a memorandum of understanding (MoU) with
© Business Monitor International
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Vietnam Infrastructure Report Q4 2013
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
state-owned EVN are proliferating for 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 2000megawatt (MW) 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 build-operate-transfer (BOT) 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, four other coal-fired plants (Nghi Son 2, Phu My 3, Mhy My 2.2 and Hai Duong) are being
implemented by foreign independent power investors under BOT contracts.
Several BOT coal-fired power plant projects are in the pipeline.
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.
In February 2013, Japan's Sumitomo Corporation lodged an application to secure an investment licence for
the construction of a US$2bn, BOT coal-fired power plant in Khanh Hoa. The first turbine of the 1,320MW
plant is likely to start commercial operations in 2017. The plant will use coal imported from Australia and
other nations and will deliver power to state-owned EVN. As of May 2013 negotiations with the
government over the contract terms were under way, with the BOT contract expected to be signed in Q114.
In April 2013, the Vietnamese government approved Toyo Ink Group's request to be the project investor of
the US$3.5bn Song Hau 2 thermal power plant under a BOT basis. A MoU would be negotiated and signed
by the Ministry of Industry and Trade and several government agencies with Toyo Ink on the project. As of
July 2013, the company had yet to finalise negotiation with the authorities regarding detailed terms such as
the power tariff, concession period, and fuel supply.
In June 2013, India-based electric utility Tata Power secured a contract worth US$1.8bn from the
Vietnamese government. The contract is to develop two 660MW coal-fired thermal power plants in South
Vietnam. The construction of the power project, called Long Phu 2, is likely to start in 2019. This is
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Vietnam Infrastructure Report Q4 2013
believed to be the largest Indian investment in Vietnam and will support Tata Power's own aspirations in
South East Asia and India's Look East policy
Besides BOT contracts, the Vietnamese government is keen to award foreign players engineering,
procurement and construction (EPC) contracts for thermal (gas- and coal-fired) power plants. The
government had 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 plasma-converted 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. The 440MW Mao Khe coal-fired power plant
was also completed in April 2013 under an EPC contract, awarded to Wuhan Kaidi Electric Power and
Germany's WULFF.
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 was
awarded an 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(PVC), 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 was followed by 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 EVN to provide 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-
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Vietnam Infrastructure Report Q4 2013
invested Song Hau 1 in Southern Hau Giang province; and the PetroVietnam-invested Quang Trach 1 in
Central Quang Binh province.
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.
We highlight that coal-fired power plants that rely on domestically sourced coal are set to face rising fuel
costs, which could erode their profitability. This is because state coal miner and supplier Vinacomin has
been selling coal to power plants below the cost of production. Although the price of coal sold to the power
sector was raised on April 20 2013, this is still just equal to 85-87% of the projected production cost for
2013. Vinacomin was previously able to sustain losses from these sales as the power sector only accounted
for 10-15% of total output, while coal exports (which accounted for most of total output) were highly
profitable. However, a decline in global coal prices and an increase in demand from local power producers
(30% of total output in 2012) has led to the unwinding of the situation, and the Vietnamese trade ministry is
in the midst of determining a second rate hike.
Some coal-fired power plant projects are also facing difficulties with reaching financial closure. In April
2013, local authorities in the Kien Giang province announced that the Kien Luong Power Centre project
will likely be halted if the Tan Tao Group is unable to arrange capital required for investment, worth
around US$6.7bn. The project was licensed five years ago. The first phase of the project, thermal power
plant Kien Luong 1, was expected to become operational by end-2013. Land clearance for the construction
of the Kien Luong 1 was obtained more than 18 months ago, but no progress on it was made owing to a lack
of capital, according to ITACO, a subsidiary of Tan Tao Group.
Hydropower: Indispensible, But Problematic
Hydropower provides more than a quarter of Vietnam's electricity. In previous years, there has been a stable
stream of investment into increasing hydropower capacity as elevated coal prices in Asia render coal plants
costly to operate. This trend has changed in recent years, with a growing number of hydropower projects,
particularly small-scale hydropower plants, being cancelled. The country has 1,021 hydropower projects,
with a combined capacity of 24,246MW, located in over 36 provinces and cities.
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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.
In March 2013, the Vietnamese province of Kon Tum had implemented a ban on new hydroelectric power
(HEP) projects, reports Energy Business Review. The ban was imposed owing to environmental reasons,
namely the loss of forest cover and the erosion of downstream river basins, which has occurred as a result of
HEP development. 21 proposed HEP projects have been cancelled as a consequence of the ban. Several
other Vietnamese provinces have previously imposed similar prohibitive legislation.
In June 2013, a recent report published by the Vietnam National Assembly (NA) showed that nearly half of
the 1,108 small-scale hydro-power projects in the National Master Plan for Power Development until 2020
had been cancelled. In addition, NA Deputy Truong Van Vo had also proposed that the government
withdraw the planned hydropower projects 6 and 6A in Dong Nai Province from the national master plan.
The projects have a combined capacity of 240MW, and were undergoing environmental impact
assessments.
We believe this adverse sentiment towards hydropower plants is due to three factors:
Reliability: In recent years, hydropower has proven to be an unreliable source of electricity, due largely to
the severe droughts that have plagued Vietnam.
A lack of economic feasibility: The report published by the NA stated that there was a lack of investor
interest in hydropower projects due to low profits. We believe this is due to the low electricity prices - the
government controls prices, and the average rate for electricity in Vietnam is VND1,369 (US$0.066) per
kilowatt hour (kWh); one of the lowest in the world. This means that the country's sole electricity
distributor, EVN, is likely to purchase electricity at an even lower rate, thus making it hard for hydropower
projects (loaded with high upfront costs) to break even within an attractive period of time.
Environmental concerns: Environmental concerns - namely deforestation and the destruction of natural
landscapes - were key reasons cited by the Vietnamese Department of Industry and Trade in June 2012
regarding its decision to reject 52 sub-standard hydroelectricity projects for the first half of 2012. The NA
also stated that only 2.1% of the 51,000 hectares (ha) of forested land that had been used for construction of
hydro-power projects in Vietnam had been planted with new trees.
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Despite this negative investment climate, there are still hydropower projects being developed. In January
2013, Alstom was awarded a contract to supply electro-mechanical equipment for a hydroelectric power
plant in Vietnam, reports Energy Business Review. Alstom will install turbines and generators at the
154MW Dong Nai 5 facility, working in conjunction with its Chinese business partner, Hydrochina
Huadong.
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 Seventh Power
Master Plan, there are plans for 10 nuclear power plants with an installed capacity of 10,700MW by
2030. Eight sites in central Vietnam are being considered as location for potential nuclear power plants,
including locations in Ninh Thuan, Binh Dinh, Phu Yen, Ha Tinh and Quang Ngai provinces. According to
a statement by the Vietnamese prime minister in March 2013, the country now plans to build 8000MW of
nuclear capacity by 2025 and 15,000MW by 2030, representing 10% of total generation.
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 US$10bn, 2,000MW Ninh Thuan 1 nuclear project. The project is estimated to
cost a total of US$10bn, and Russia will provide up to US$9bn for the project, as well as a second loan of
US$500mn for the establishment of a nuclear science and technology centre. A Russian consortium is
expected to complete the feasibility study of the project by end-July, 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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Thermal Dependent
Vietnam Electricity Generation Capacity Mix, 2012e
e = BMI estimate. Source: UN Data, EIA, BMI
Similarly, in September 2011 a Japanese consortium, known as the International Nuclear Energy
Development of Japan (INEDJ), signed an agreement with Vietnamese state utility EVN to jointly develop
the Ninh Thuan 2 nuclear power project in Vietnam. As part of the agreement, nuclear plant operator Japan
Atomic Power conducted a US$26mn feasibility and environmental study on the project and was set to
report the results, which include an assessment on tsunamis, to EVN in July 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. Japan Atomic would also provide or
secure financing and insurance of up to 85% of the project's total coast, with Japan providing loans around
US$500mn for the project.
Vietnam's Song Da 5 also signed a contract in early February with Russian company NIAEP to send some
Vietnamese workers to build Russia's Rostov nuclear power plant. This is part of the training to build the
Ninh Thuan nuclear plant, with Vietnamese workers to be sent to Japan as well.
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,
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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. Vietnam was also planning to set up a new National Council for Atomic Energy
Development in May 2013. The council, headed by Vietnam's science and technology minister, will advise
the government on identify strategies and draw up key policies on nuclear energy development. It will also
coordinate with various agencies, governmental bodies and localities in developing nuclear
energy. 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 were scheduled to be
concluded in mid-2013. The US also appears keen to secure any future nuclear power plant contracts in
Vietnam, as the country sent a delegation in May 2013 to discuss the development of nuclear generation in
the US and Vietnam.
Geothermal: Making A Presence
In October 2012, a 25MW geothermal power plant was scheduled to be constructed in Dakrong District in
Central Quang Tri Province, Vietnam, according to the deputy chairman of Viet Nam Thermal Association,
Ta Huong. This will be the first power plant of its kind in Vietnam and has already secured licences by
provincial authorities. The geothermal plant will have the capability to operate 24 hours a day without being
affected by weather conditions such as sunlight, wind or waves. The plant will reportedly use hot dry rock
heat mining technology to generate power.
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. According to EVN, electricity losses in the first five months of
2012 were over 5.3bn kWh; 11% of the total electricity production and purchase. This is significantly
higher than its South East Asian peers who have an electricity loss ratio of about 4-5% according Tran Viet
Ngai, chair of the Vietnam Energy Association. According to Ngai (cited from Intellasia), the losses are due
to old transmission lines, overloading, locking connectors, distribution wires and old substations.
Significant investment is therefore required to address these transmission losses and meet future demand for
grids. According to the National Power Transmission Corp (NPT) in June 2012, total demand for
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Vietnam Infrastructure Report Q4 2013
investment capital to develop the electricity transmission network to 2020 reaches about US$10bn.
Transmission projects have so far borrowed only US$4bn-worth of official development assistance (ODA)
and commercial loans; the remaining US$6bn has not been arranged.
Vietnam is looking to change this. In November 2011, the 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 (ADB) 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 Ho Chi Minh City Power Corporation (HCMC
Power) 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 6.58% of electricity prices during the
2008-2012 period. This is much lower than the global average price and needs to be raised to 10-12% of
electricity prices.
In July 2012, NPT started implementing a US$215mn power transmission line project which involves: the
437km, 500kV Pleiku-My Phuoc-Cau Bong transmission line; the 15.94km, 220kV Cau Bong-Hoc MonBinh Tan line in HCM City; and the 13.4km 220kV Cau Bong-Duc Hoa line in HCM City. The project is
financed by ADB (US$115mn) and by the French Development Agency (US$100mn). The project aims to
transmit electricity from power plants in the central region, imported electricity from Laos and Cambodia,
coal-fired power plants in Northern Vietnam to the southern provinces.
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In January 2013, the Southern Electricity Corporation announced that it would invest nearly VND4.5trn
(US$225mn) for major power projects in 2012. These projects include a 56km sea cable system from Ha
Tien to Phu Quoc island - the EPC contract for the project was awarded to Italy's Prysmian Powerlink Sri
and power transmission networks in areas inhabited by Khmer people in Kien Giang, Soc Trang and Tra
Vinh provinces.
Water Treatment: Droughts Driving Demand For Services
Vietnam has significant potential for large-scale water treatment facilities and we are forecasting real
growth in the water infrastructure industry to average 6.0% per annum between 2013 and 2017. Despite 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
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Vietnam Infrastructure Report Q4 2013
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 surge to
1.0-1.5mn 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 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.
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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. This is
expected to be issued in the third quarter of 2013.
Several foreign investors have expressed an interest in Vietnam's water utilities sector, particularly Japanand Philippines-based 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.
There are, however, many investors still deterred from Vietnam's water utilities sector, and we believe some
of the reasons are:
■
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.
■
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.
■
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.
Table: Table: Major Projects - Energy & Utilities
Project Name
Value (US
$mn)
Capacity/
Length
Companies
Timeframe
Status
Vietsovpetro Joint Venture Co,
PetroVietnam Construction Joint
400km
Stock Corp and PetroVietnam
2009-2011
Construction started
(November 2009)
Oil & Gas Pipelines
B-O Mon natural gas
pipeline
800
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Vietnam Infrastructure Report Q4 2013
Table: Major Projects - Energy & Utilities - Continued
Project Name
Value (US
$mn)
2nd Nam Con Son gas
pipeline
Nam Con Son 2
pipeline project,
southern Vietnam
na
441
Capacity/
Length
Companies
Technical Services Joint Stock
Corp
Timeframe
Status
2010-2014
PetroVietnam to
prepare feasibility
study (March 2010)
400km
PetroVietnam
293km
PetroVietnam Construction and
PetroVietnam Equipment
Assembly, Metal Structure
2011-2013
Contract awarded by
PetroVietnam Gas
(July 2011)
170MW
Geruco Song Con Hydropower
2010-2013
Under construction
1,200MW
Tan Tao Energy Corporation,
China Harbour Engineering
Company [EPC]
Q1 2010 end-2013
Under construction
PetroVietnam
mid-2009 November
2011
Completed
(November 2011)
1,244MW
August 2010
- late-2013
(first turbine);
June 2014
EVN, Shanghai Electricity
(second
Corporation-China [EPC]
turbine)
Under construction,
financing secured
(January 2013)
Project approved in
principle (August
2010)
Under construction
Power Plants & transmission grids
Danang hydropower
plant
Kien Luong Coal-fired
Power Complex (Phase
1), Kien Luong
Province
Nhon Trach 2 gasbased 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
74
2,500
470
1,300
760MW
Two wind farms, Binh
Thuan Province
440
200MW
August 2010
Saigon Invest Group
-
Coal power plant BOT
project, Binh Thuan
province
1,750
1,200MW
China Southern Power Grid September
Corp 2010 - 2014
37
13.5MW
Hanoi Electrical Equipment
-2010
Completed - Started
commercial
operations
(September 2010)
500
200MW
Trung Nam Investment and
Construction
2010-2012
Construction
under way
41
29.7MW
Colben Energy JSC
2010-2013
Construction
under way
Muong Kim
hydropower plant
Wind farm in Thuan
Bac district, Ninh
Thuan Province
Coc San hydropower
plant
Dak R'Tih hydropower
plant, Gia Nghia town,
Dak R'Lap district, Dak
Nong province
192
144MW
Dakdrinh Hydropower Joint
Stock Company, Construction
Corp No 1
Dak Sepay hydropower
plant in Bai Tho spring
3
3MW
Duc Long Gia Lai Group (DLG)
Ninh Thuan 1 nuclear
power plant
10,600
© Business Monitor International
Russian Government [Sponsor],
EVN, Rosatom,
Atomstroyexport, E4 Group ,
2,400MW
Kiev Scientific Research and
2007 Completed without
December foreign guidance (Oct
2011
2011)
2010-
Currently under way
2014-2020
Feasibility study
completed by endJuly 2013, VTB
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Vietnam Infrastructure Report Q4 2013
Table: Major Projects - Energy & Utilities - Continued
Project Name
Song Hau 2 coal-fired
power plant (Song Hau
Thermo Power
Complex), Hau Giang
province
Ninh Thuan 2 nuclear
power plant
Value (US
$mn)
2,500
14,400
Capacity/
Length
Companies
Designing Institute (JSC KIEP),
EnergoProjectTechnology (LLC
EPT), VTB
Timeframe
Status
offered a US$1bn
loan (February 2013)
2,000MW
BOT project received
January government approval
PetroVietnam, Toyo Ink Group 2012 - 2018
(April 2013)
2,000MW
International Nuclear Energy
Development Corporation of
Japan, Japan Atomic Power
2014-2022
US$26mn feasibility
and environmental
study completed by
March 2013
(December 2012)
September
2011 December
2014 (first
turbine); June 2015
Under construction,
28% completed
(November 2012)
Mong Duong 2 coalfired BOT power plant
project, Quang Ninh
province
2,100
1,200MW
AES, Posco Power, China
Investment Company (CIC),
Doosan Heavy Industries &
Construction, Hoa Binh
Construction and Real Estate
Trading Joint Stock Co (HBC)
Wind power project in
Vinh Tan and Vinh
Phuoc, Soc Trang
Province
na
300MW
EAB Group, Trasesco
2011-
At the development
stage
Huoi Quang
hydropower plant
project
na
520MW
Electricity of Vietnam, French
Development Agency (AFD)
2010-2015
Received US$100mn
financing from AFD
6MW
PetroVietnam Power
Corporation, Electronics and
Informatics Corp (VEIC),
Viettronics Construction JSC
(VIETCT), Amec Technologies
Joint Stock Co
2010-
First phase under
construction;
Financing secured
with OceanBank and
HSBC
Phu Quy wind power
plant, Binh Thuan
Province
Dak Mi 2 Hydropower
plant
17
128
96MW
Song Da 9.01
Song Da 5 Investment,
Construction and Energy
Development Joint Stock Co
Song Chay 5
hydropower plant
project, Then Phang
Commune, Xin Man
Dist, Ha Giang province
21
16MW
Son La hydropower
power plant, Muong La
district, Son La
province
2,900
2,400MW
Long Phu 1 coal-fired
power plant, Soc Trang
Province
1,200
1,200MW
Lai Chau hydropower
plant, Lai Chau
province
1,831
© Business Monitor International
1,200MW
Contract signed First turbine expected
2010- 2013
2013
2010-2012
Construction
under way
Electricity of Vietnam (EVN)
2005 [Sponsor] August 2012
Completed
PetroVietnam, PetroVietnam
Technical Services Corp
EVN, Song Da Group
2011-2014
Construction
under way
Under construction;
Facing payment
delays (June 2011);
First phase completed
2011-2017
by March 2016
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Vietnam Infrastructure Report Q4 2013
Table: Major Projects - Energy & Utilities - Continued
Project Name
Thang Long coal-fired
circulating fluidised
bed power plant,
Guangninh province
Vung Ang 2 coal-fired
power plant, Ky Anh
District, Ha Tinh
Province
Value (US
$mn)
303
Hydropower plant
Nghi Son 2 coal fired
power plant 25-year
BOT project, Thanh
Hoa province
Companies
Timeframe
Status
600MW
Wuhan Kaidi Electric Power,
Thang Long Thermoelectric,
Vinacomin
2012-2015
EPC contract signed
(Dec 2011)
1,200MW
At tendering stage,
BOT contract signed
Vapco, Hung Nghiep Formosa early-2013 - by end-2012 (October
Ha Tinh Co.
2020
2012)
na
na
Tokyo Electric Power (TEPCO)
2011-
Feasibility study
completed in
February 2011
135
111MW
Hoang AnhAttapeu Electric
2011-2013
Licence granted
62.5
Sumitomo Mitsui Financial
Group [Sponsor], Nippon Export
and Investment Insurance of
Japan [Sponsor], Chugoku
na
Power Co
February
2011 -
Sumitomo Mitsui
Financial Group
agreed to US$51mn
loan (February 2011)
2,300
Marubeni Corp, Vietnam
National Coal-Mineral Industries
Group (Vinacomin), Korea
Electric Power Corp (KEPCO),
Korea EximBank, Japan Bank
for International Cooperation
1,200MW
(JBIC)
2011-2018
Contract awarded to
KEPCO (April 2013)
1,700
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
Capacity/
Length
Phu My 2.2 thermal
power station
na
715MW
Electricity of France (EDF)
2011-
EDF selected as
investor
Cong Thanh coalfuelled power plant,
Nghi Son Economic
Zone, Thanh Hoa
619
600MW
Cong Thanh Corporation
2011- 2014
Under construction
Da M'bri plant, Lam
Dong province
2
75MW
Southern Region Hydropower,
Mien Dong
2011-2012
Construction contract
awarded
40
10MW
ScottishPower Renewables
na
Plans approved - May
2011
Tidal energy farm
First unit completed,
Second unit
2007 - May
completed by
2012 end-2012 (May 2012)
A Luoi Hydropower,
Thua Thien Hue
Province
155.5
170MW
Cavico, Central Hydropower
Hua Na hydropower
plant, Que Phong
district, Nghe An
province
286
180MW
Hua Na Hydropower Joint Stock
Co, Lilama 35 Joint Stock Co
2008 late-2012
Completed
A solar and wind power
development, Ninh
Thuan province
249
124.5MW
na
2011-
Received investment
licences
2 wind power projects Nhon Hoi Economic
Zone, Binh Dinh
province
60
51MW
Central Region Wind-Power,
Phuong Mai Windpower
Q2 2011-
Under construction
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Table: Major Projects - Energy & Utilities - Continued
Project Name
Thermo power plant,
Nhon Hoi Economic
Zone, Binh Dinh
province
Thermoelectric power
plant, Hau Giang
Value (US
$mn)
Duyen Hai 2 coal-fired
power plant, Tra Vinh
province
2012-2014
At planning stage;
Document submitted
to Vietnamese
government
2,500
2,000MW
TOYO
Seeking formal
2011-2019 government approval
Suc Song Xanh
2011-
Construction
approved - Planned
production capability
of 124mn kWh of
electricity per annum
Vinacomin, BNP Paribas
[Sponsor], Bank of China
[Sponsor], Wuhan Kaidi Electric
Power Company, Wuhan Kaidi
Electric Power Engineering
Company, WULFF 2009 - 2013
Completed (April
2013)
60
577
1,500
Song Tranh 4
hydropower plant,
Quang Nam province
77
411
Hai Phong 1 thermo
power plant
na
Hai Phong 2 thermo
power plant
na
170
Solar power generation
plant, Quang Binh
province
Undersea (110kV)
power cable project
(Ha Tien Township Phu Quoc Island), Kien
Giang province
Status
STFE
2,250
Dadrinh hydropower
plant, along Tra Khuc
River, Quang Ngai
Province
Timeframe
1,400MW
Quang Trach 1 coalfired power plant,
Quang Binh province
Trung Son hydropower
project, Quan Hoa
District, Thanh Hoa
province
Companies
972
Waste-to-power
treatment plant, Binh
Phuoc
Mao Khe coal-fired
power plant, Quang
Ninh province
Capacity/
Length
14
112
© Business Monitor International
na
440MW
2011-2014
To start construction
in 2011; Project fully
financed by Huadian
Engineering
PetroVietnam, EPF Power, early-2013 1,200MW JPAWORR, Sumitomo [Sponsor]
2015
Under construction,
seeking funds,
selected to use local
power equipment
(July 2012)
1,200MW
48MW
260MW
300MW
300MW
125MW
na
Janakuasa
na
2011-2014
Under construction
World Bank [Sponsor], 47
Construction JSC (C47),
Samsung C&T Corporation
October
2012 - Q4
2016 (1st
turbine); 2017
Under construction
(November 2012)
na
Generator No 1 and 2
joined national grid
- Q2 2011
(Q211)
Hai Phong Thermo Power Joint
Stock Co
-September
2013
Third generation to
start in April 2013;
Fourth generator,
September 2013
Dakdrinh Hydropower Joint
Stock Co., Petrovietnam 2011 - 2014
Under construction;
US$178 credit
contract signed with
Credit Agricole Corp.
US$12mn loan
approved from Korea
na 2011 - 2013 Eximbank (June 2011)
EVN Southern Power [Sponsor],
World Bank [Sponsor], Prysmian
56km
Powerlink SRL Group [EPC]
May 2012 late-2013
EPC contract
awarded (May 2012)
Page 76
Vietnam Infrastructure Report Q4 2013
Table: Major Projects - Energy & Utilities - Continued
Project Name
Hai Duong coal-fired
power plant BOT
project, northern
Vietnam
Wind Farm, Bac Lieu,
Cuu Long province,
Mekong Delta
Value (US
$mn)
2,260
Capacity/
Length
Companies
Timeframe
Status
Jaks Resources Berhad, Wuhan
Jaks terminate
Kaidi Electricity Power
Q1 2014 - contract with existing
Engineering Company (EPC),
Q3 2017 partners, signed with
Sanjung Merpati (SMSB- (first turbine); new partners (January
1,200MW
Malaysia)
- Q1 2018
2013)
September
2010 September
2013
Under construction,
first phase (15MW)
completed (October
2012)
247
Cong Ly Construction, General
Electric (GE) [Equipment], Trade
99.2MW
and Tourism
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)
In discussion with Tra
Vinh province
People's Committee
2011 (July 2011)
Dakdrinh Hydropower Joint
Stock Co, PV Power,
PetroVietnam
BOO agreement
signed; US$15.5mn
equipment contract
awarded to Dongfang
2011-2013
Electric (July 2011)
PetroVietnam, Petrovietnam
Technical Services Corp
2011-2015
Under construction,
selected to use local
power equipment
(July 2012)
1,245MW
EVN [Sponsor], Bank of China
[Sponsor], Industrial and
Commercial Bank of China
[Sponsor], China Development
December
Bank (CDB) [Sponsor]; Thanh
2012 Dat China [EPC], Eastern
December
Electrification [EPC], Southwest
2016 (1st
Design Institute and Zhejiang turbine); - Q2
Power Construction [EPC],
2017 (2nd
Powe
turbine)
Under construction
(December 2012)
1,600
1,200MW
Petrovietnam, LILAMA
Corporation [EPC], Toshiba,
Sojitz, JBIC [Sponsor], August 2011
Sumitomo Mitsui [Sponsor] - July 2012
Under construction;
Steam turbine
generators from
Toshiba, Sojitz
(November 2011)
Mong Duong 1 coalfired power plant, near
Cam Pha Town,
northern Quang Ninh
Province
1,700
Hyundai Engineering &
October
Construction [EPC], Vietnam
2011 - Q1
Machine Installation Corporation
2015 (first
(Lilama) [Equipment], Vietnam turbine); - Q2
Electricity Corporation
2016
[Sponsor], Korea Eximbank
(Second
1,080MW
[Sponsor], ADB [Sponsor]
turbine)
Under construction,
US$510mn from
Korea Eximbank
(February 2013)
Srepok 4A hydropower
plant
na
Buon Don Hydropower Joint
Stock Co
Under construction
(Sep 2011)
Dakrinh hydropower
plant, Kon Turn
province
205
Song Hau 1 coal-fired
power plant, Hau Giang
province
Duyen Hai 3 coal-fired
power plant, Mu U
hamlet, Dan Thanh
commune, Tra Vinh
province, southern
region of Vietnam
Vung Ang 1 coal-fired
power plant, Ha Tinh
province
na
1,300
© Business Monitor International
125MW
1,200MW
64MW
2011 late-2012
Page 77
Vietnam Infrastructure Report Q4 2013
Table: Major Projects - Energy & Utilities - Continued
Project Name
Son My Power Centre
(LNG) BOT project,
Ham Tan District
Thermoelectric plant,
Ganh Dau Commune
Value (US
$mn)
4,670
344
Hydropower plant,
Song Bac River, Ha
Giang province
50
Capacity/
Length
3,000MW
200MW
42MW
Companies
Timeframe
Status
International Power, Sojitz,
October
Pacific 2011 - 2019
Feasibility study
prepared for
1,950MW Son My 1
power plant (Oct
2011)
Phu Quoc Investment and
Development Management
Board
October Received government
2011 approval (Oct 2011)
Song Bac Hydroelectric
Under construction
November (Nov 2011); US$50mn
2011 - loan from Sumitomo
end-2012
Mitsui Bank
US$309.9mn loan
from ADB, US$370mn
from KfW
2011 - June
Bankengruppe (Nov
2016
2011)
O Mon 4 combined
cycle gas-based power
plant, part of O Mon
thermal power
complex, Can Tho city
793.5
720MW
Can Tho Thermal Power
Company, ADB
Integrated gasification
combined cycle system
coal-fired power plant,
Hai Lang District,
Quang Tri Economic
Zone, central Vietnam
na
3,600MW
PHI Group, Sao Nam Group
December
2011 -
MoU signed (Dec
2011);
ADB, National Power
Transmission Corporation
December
2011 - June
2020
US$730mn loan from
ADB, first tranche of
US$120.5mn
approved (Dec 2011)
Power Transmission
Investment Program
(involves building
648km of transmission
lines in first tranche)
Coal-fired power plant,
Dung Quat Economic
Zone, Binh Dong
commune, Binh Son
district, Quang Ngai
Province
Waste plasmaconverted gas-fired
power plant first phase,
Ho Chi Minh City
730
2,000
400
O Mon 1 gas-based
power plant, part of O
Mon thermal power
complex, Can Tho city
na
Pleiku-My Phuoc-Cau
Bong 500kV
Transmission Line
447
Dak Nong-Phuoc
Long-Binh Long 220KV
Transmission Line
Ba Thuoc 2
hydropower plant
project
© Business Monitor International
67
72
860km
1,200MW
Sembcorp Utilities
Q2 2016 2020
At planning stage,
Feasibility study
under way (October
2012)
na
Trisun International
Development, Kien Giang
Composite KGC Company
March 2012
-
Project awarded
(Mar-12)
Can Tho Thermal Power
Company Limited, Daelim
Industrial [Design and
Construction], Sojitz Corporation
[Steam Turbines], JICA
[Sponsor], Mitsubishi Heavy
660MW
Industries [Equipment]
September
2012 October
2015
Under construction
(September 2012)
437km
National Power Transmission
Corp (NPT), ADB, AFD
Q3 2011 end-2012
Under construction
(February 2013)
na
National Power Transmission
Corp (NPT)
September
2011 end-2012
Under construction;
US$45mn from BIDV
Hoang Anh-Thanh Hoa
Hydropower Joint Stock Co, September
Hoang Anh Gia Lai Group 2009 - 2012
Under construction
na
Page 78
Vietnam Infrastructure Report Q4 2013
Table: Major Projects - Energy & Utilities - Continued
Project Name
Value (US
$mn)
Capacity/
Length
24
310
Song Bung 4
hydropower EPC
project, Bung River
Dong Nai 5
hydropower plant
Companies
Timeframe
Status
156MW
Alstom, Hydrochina Huadong
February
Engineering Corp 2012 - 2014
Contract awarded
(February 2012)
154MW
Vinacomin, Alstom , Hydrochina
2013 Huadong Engineering August 2015
Contract awarded
(February 2013)
Investment licence
received (October
2011); Site clearance
under way
An Khanh 2 coal-fired
power plant, Tan Phu
Commune, Pho Yen
District, Thai Nguyen
province
481
300MW
An Khanh Thermo Power Joint
Stock Co., Bank of China early-2012 [Sponsor]
2016
An Khanh 1 coal-fired
power plant, An Khanh
Commune, Dai Tu
District, Thai Nguyen
province.
na
100MW
An Khanh Thermo Power Joint
Stock Co.
2011 -
Under construction
(December 2011)
1,200MW
Tan Tao Energy Corporation,
China Harbour Engineering
Company [EPC]
June 2010 early-2014
Contract awarded in
2010
2,000MW
Tan Tao Energy Corporation,
China Harbour Engineering
Company [EPC]
June 2010 -
Contract awarded in
2010
Kien Luong Coal-fired
Power Complex (Phase
2), Kien Luong
Province
na
Kien Luong Coal-fired
Power Complex (Phase
3), Kien Luong
Province
na
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
Mekong Delta Wind
Power Centre, Vinh
Trach Dong Commune
Undersea power cable
project (Sa Ky Port - Ly
Son Island), Quang
Ngai Province
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)
1,700
PetroVietnam Power
Corporation, PetroVietnam
Construction Joint Stock
Corporation [EPC], Toshiba,
Sojitz [Equipment], Daelim
Industrial [Equipment], Babcock
& Wilcox Beijing Company August 2012
1,200MW
(BWBC) - end-2015
Power connection
agreement signed
(December 2012)
1,000
500MW
Vietnam Development Bank
[Sponsor], Export-Import Bank
of the United States [Sponsor]
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)
14.4
© Business Monitor International
Page 79
Vietnam Infrastructure Report Q4 2013
Table: Major Projects - Energy & Utilities - Continued
Project Name
Value (US
$mn)
Capacity/
Length
Companies
Timeframe
Status
na
50MW
ACO Group
July 2012 -
At planning stage
(July 2012)
Solar farm, Binh Thuan
province
Quynh Lap 1 coal-fired
power plant, Central
Nghe An province
1,500
1,200MW
Vinacomin, No 1 Construction
January
Consultancy JSC 2012 - 2016
Under construction,
selected to use local
power equipment
(July 2012)
Da Nhim hydropower
plant expansion project
na
80MW
Da Nhim-Ham Thuan-Da Mi Q1 2013 -Q4
Hydropower JSC
2015
At planning stage
(July 2012)
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
1,900
29.5
na
na
China Southern Group
At documentation
stage, BOT contract
yet to be signed (July
2012); Undergoing
land acquisition
July 2012 - process (August 2012)
Hitachi Zosen Corporation,
Japanese New Energy and
Industrial Technology
Development Organisation
[Sponsor], Hanoi government August 2012
[Sponsor]
-
Contract awarded
(August 2012)
August 2012
-
At planning stage,
undergoing land
acquisition process
(August 2012)
Vinh Tan 3 thermal
power plant BOT
project, part of Vinh
Tan Electric Centre,
Tuy Phong districts,
Binh Thuan province
na
na
O Mon 2 gas-based
power plant, part of O
Mon thermal power
complex, Can Tho city
na
720MW
Can Tho Thermal Power August 2012
Company
- 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 August 2012
Company
- 2015
At planning stage
(August 2012)
200MW
Song Da Group, Bharat Heavy August 2012
Electricals
-
Under construction;
First 100MW unit
commissioned
(February 2013)
25MW
September
2012 -
Received government
approval (September
2012)
2008 -
Construction halted,
56% completed
(January 2013)
2012 - Q3
2013
US$16.5mn
equipment supply
contract signed (July
2012)
Nam Chien hydropower
plant BO project, Son
La province
na
Geothermal power
plant, Dakrong District,
Quang Tri province
Nong Son coal-fired
power plant, Nong Son
District, Quang Nam
province
na
na
253.3
China National Heavy Machinery
Corporation (CHMC), Vinacomin
na
[Sponsor]
na
Power Transmission Company
No. 4, General Electric (GE), US
Exim Bank [Sponsor]
Pleiku-Phu Lam 500kV
transmission line, part
of North-South power
transmission
Vietnam distribution
efficiency project
Vinacomin
800
© Business Monitor International
500km
na
EVN, World Bank
Project financing
closed; US$449m
November loan from World Bank
2012 (November 2012)
Page 80
Vietnam Infrastructure Report Q4 2013
Table: Major Projects - Energy & Utilities - Continued
Project Name
Value (US
$mn)
Dong Nai 6/6A
hydroelectricity plant
Miyar hydropower
plant, Himachal
Pradesh
Duyen Hai 1 coal-fired
power plant, Tra Vinh
province
na
165
Capacity/
Length
135MW
120MW
Companies
Timeframe
Status
Duc Long Gia Lai Company
At planning stage,
undergoing
December environmental impact
2012 - end
study (December
2015
2012)
Moser Baer Projects
Received government
(CEA) approval
April 2013 (December 2012)
1,200
1,200MW
EVN
2012 -
Under construction,
financing secured
(January 2013)
na
na
na
-2015
Site selected (August
2010)
Water
Thanh My Loi
wastewater treatment
Song Hau 1 water
treatment plant PPP
project, Can Tho City
na
na
PetroVietnam
2011 -
Contract awarded;
Construction due to
begin (May 2012)
Song Hau 2 water
treatment plant, An
Giang Province
na
na
na
2011 -
Plan approved by the
government in 2010
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
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
Asian Development Bank (ADB)
US$85mn loan from
ADB and French
government; The rest
from Vietnamese
2011-2014
government
300
Gamuda, Gamuda Land Vietnam
Co., Japan International
200,000
Cooperation Agency (JICA),
m3/day Hanoi Water Drainage Company
Under construction,
almost completed
(June 2012)
154
Asian Development Bank
[Sponsor], Saigon Water
Corporation (Sawaco)
June 2012 - US$138mn loan from
late-2014
ADB (June 2012)
na
na
US$60mn
supplementary
financing provided by
2011-2014
ADB
13,300 m3/
day
JICA, Metawater, TSS, Hanoi
Water Supply, Sewerage,
Environment Investment
Construction
US$192.4mn loan
signed with JICA (Jul
2011); To form JV
with Vietnam
company (Sep 2011)
329
Phuc Hoa water
resource project
Bay Mau PPP
wastewater treatment
plant under Second
Hanoi Drainage Project
For Environmental
Improvement, Vietnam
© Business Monitor International
60
29
na
10km
2008-2012
October
2011 -
Page 81
Vietnam Infrastructure Report Q4 2013
Table: Major Projects - Energy & Utilities - Continued
Project Name
Value (US
$mn)
Capacity/
Length
Companies
Timeframe
Status
Phu Do wastewater
treatment plant, Hanoi
144
84,000m3 /
day Hanoi Water Drainage Company
July 2012 -
At planning stage
(July 2012)
Yen Xa water treatment
plant, Hanoi
288
275,000m3/
day
July 2012 -
At planning stage
(July 2012)
Seven water supply
projects, Ho Chi Minh
City
240
na
Saigon Water Supply September
Corporation (Sawaco) 2011 - 2015
Under construction
(September 2011)
September
2011 late-2012
Received approval
from Tay Ninh
provincial People's
Committee
(September 2011)
Sewage treatment
plant, Ben Rong
commune, Go Dau
district, Tay Ninh
Hanoi Water Drainage
Company, ODA [Sponsor]
300 tonnes
14.4
/day
Vietnam Green Environment
Company
512,000m3/
na
day
Center of Urban Flood Control,
JICA
July 2011 -
MoU for second
phase signed with
JICA (July 2011)
November
2011 -
US$2mn from JICA
for feasibility study
(December 2012)
April 2012 Q4 2013
Under construction
(April 2012)
Binh Hung wastewater
treatment plant second
phase, Binh Chanh
District, Ho Chi Minh
City
Hoa Lien Wastewater
treatment PPP project,
Da Nang city
190
na
JFE Engineering, Nihon Suido
Consultants, JICA [Sponsor]
Tra Bong water supply
project, Binh Son
district, Quang Ngai
province
197
200,000m3/
day
Anh Phat Water Supply Group
Joint Stock Co
Nhieu Loc-Thi Nghe
Canal Basin
environmental
sanitation project
US$317mn first phase
under construction
2003 - June (April 2012); Second
2012 (first
phase to cost US
phase)
$470mn
787
na
World Bank [Sponsor], Asian
Development Bank [Sponsor]
na
200,000
m3/day
Kenh Dong Water Supply Joint
Stock Co, Ayala Corp, Manila
Water
2003 - H2
2012
Under construction
(April 2012)
na
Asian Development Bank (ADB),
Saigon Water Corporation
12.4km
(Sawaco)
- June 2012
Completed (June
2012)
Thu Duc 3 water
treatment plant, Linh
Trung Ward, Thu Duc
District, Ho Chi Minh
City
58
Passavant-Roediger [EPC],
Construction Corporation No. 1
[EPC]; Commerzbank [Sponsor],
Saigon Clean Water and
300,000
Investment Joint Stock
m3/day
Company
December
2012 - July
2014
EPC contract
awarded (November
2012)
Nhieu Loc-Thi Nghe
wastewater treatment
plant (second phase),
Thanh My Loi Ward,
District 2, Ho Chi Minh
City
na
850,000m3/
day
na
July 2012 -
Received HCM City
approval (July 2012)
Western West Lake
waste water treatment
plant, Hanoi
144
61,400m3/
day
na
July 2012 -
At planning stage
(July 2012)
Kenh Dong water
treatment BOT project,
Ho Chi Minh City
Water pipeline system
project (Binh Thai
intersection - Thu Duc
water plant), Ho Chi
Minh City
© Business Monitor International
Page 82
Vietnam Infrastructure Report Q4 2013
Table: Major Projects - Energy & Utilities - Continued
Value (US
$mn)
Capacity/
Length
Companies
Timeframe
Status
20
20,000m3/
day
ODA [Sponsor]
July 2012 -
At planning stage
(July 2012)
40,000
tonnes/yr
Vietnam Waste Solutions Co. August 2012
(VWS)
- 2022
At planning stage;
Design, feasibility,
geological study
completed (August
2012)
9
30,000m3/
day
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
30,000m3/
day
na
September
2012 -
At planning stage
(September 2012)
Son Tay water
treatment plant, Hanoi
12
9,000m3/
day
na
July 2012 -
At planning stage
(July 2012)
100
300,000
m3/day
Saigon Clean Water and
Investment Joint Stock
Company
2013-2024
At planning stage
(April 2013)
130
300,000
m3/day
Saigon Clean Water and
Investment Joint Stock
Company
2013-2024
At planning stage
(April 2013)
162
300,000
m3/day
Saigon Clean Water and
Investment Joint Stock
Company
2013-2024
At planning stage
(April 2013)
176
500,000
m3/day
Saigon Clean Water and
Investment Joint Stock
Company
2013-2024
At planning stage
(April 2013)
Project Name
Ha Dong waste water
treatment plant (first
phase), Hanoi
Green waste treatment
plant, Thu Thua district,
Long An Province
700
water supply project,
Pleiku, Gia Lai province
Tan Hiep 2 water
treatment plant, Ho Chi
Minh City
Thu Duc 4 water
treatment plant, Ho Chi
Minh City
Tan Hiep 3 water
treatment plant, Ho Chi
Minh City
Thu Duc 5 water
treatment plant, Ho Chi
Minh City
na = not available/applicable. Source: BMI Key Projects Database
© Business Monitor International
Page 83
Vietnam Infrastructure Report Q4 2013
Residential/Non-Residential Building - Outlook And Overview
Table: Table: Vietnam Residential And Non-residential Building Industry Forecasts, 2011-2016
2011
2012e
2013f
2014f
2015f
2016f
Residential and Non-residential Building
Industry Value As % of Total
Construction
67.3
67.3
67.7
68.0
68.3
68.7
Residential and Non-residential Building
Industry Value, VNDbn
109,392.6
120,647.8
135,707.8
151,876.7
170,011.8
189,630.4
Residential and Non-residential Building
Industry Value, US$bn
5.3
5.8
6.5
7.4
8.4
9.4
Residential and Non-residential Building
Industry Value Real Growth (%)
-1.9
1.0
6.0
6.1
6.7
6.5
Residential and Non-residential Building
Industry Value as % of GDP
4.3
4.1
4.1
4.1
4.1
4.0
e/f = BMI estimate/forecast. Source: Vietnam General Statistics Office, BMI
Table: Table: Vietnam Residential And Non-residential Building Long-Term Forecasts, 2017-2022
2017f
2018f
2019f
2020f
2021f
2022f
69.0
69.4
69.7
70.0
70.3
70.6
Residential and Non-residential
Building Industry Value, VNDbn
211,442.4
235,580.2
261,512.2
289,606.5
320,694.0
355,108.5
Residential and Non-residential
Building Industry Value, US$bn
10.6
11.8
13.1
14.5
16.0
17.8
Residential and Non-residential
Building Industry Value Real Growth
(%)
6.5
6.4
6.0
5.7
5.7
5.7
Residential and Non-residential
Building Industry Value as % of GDP
4.0
4.0
3.9
3.9
3.8
3.8
Residential and Non-residential
Building Industry Value As % of Total
Construction
f = BMI forecast. Source: Vietnam General Statistics Office, BMI
© Business Monitor International
Page 84
Vietnam Infrastructure Report Q4 2013
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 6.0% in 2013, compared to growth of 1.0% in 2012. Our optimistic
outlook for Vietnam's buildings sector is primarily driven by the country's conducive monetary conditions.
The government is seeking to boost economic growth and brought the policy rate down to 7.00% in May
2013; the lowest policy rate since December 2009. Given the lagged impact of monetary easing, this means
that the positive implications of this easing will only start to translate in H213.
Recovering After 2012
Residential And Non-Residential Building Industry Forecasts
e/f = BMI estimate/forecast. Source: BMI, Vietnam General Statistics Office
We believe that 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 a report from the Vietnam Ministry of Construction, 34,000 apartments and
15,300 houses across 55 provinces and cities were unsold at the end of March 2013, and they had an
estimated combined value of around VND125trn. This oversupply is particularly severe in the mid- and
high-end segment of the housing market.
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This oversupply of units has prompted a sharp decline in land and real estate prices as investors aggressive
lower their asking prices to offload their units. For example, Vietnam's Hoang Anh Gia Lai Joint Stock
Company had released a new apartment project in Ho Chi Minh (HCM) City's District 7 at prices that are
30-50% lower than those of similar projects in the area in October 2012 (cited from Intellasia).
Recovery Not To Last
Vietnam - Real Estate Index
Source: BMI, Bloomberg
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. Indeed, Vietnamese banks
are wary about providing credit to real estate developers as they already account for a significant portion of
their debts - 13% of total bad debts in the banking system according to the State Bank of Vietnam in
December 2012.
Although the aggressive rate cuts taken by the government in recent months could reignite demand for
housing, the scale of the oversupply makes this unlikely. According to Vietnamese investment group
Dragon Capital in September 2012, the current apartments in stock could take seven years to be fully
absorbed by the market unless demand stimulus measures are executed.
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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. The government is also considering halting
the development of new residential projects that have not completed their site clearances. The government
is also considering tax-incentives to spur demand for housing.
On top of this, the Vietnamese government is also reviewing the regulations - Resolution 19 - to allow
foreigners who invest, work and live in Vietnam to buy and own real estate as of March 2013. At present,
only 427 out of 80,000 expats in Vietnam are eligible to own properties in Vietnam, but there is growing
demand to ease this regulation and allow all foreigners to own properties in Vietnam.
The Ministry of Construction (MoC) is also seeking approval from the government in April 2013 to turn
commercial housing into houses for lease. This could ease financial pressures on real estate companies and
allow low-income people to secure housing. At present, rented houses account for more than 6.3% of people
who own houses in Vietnam, according to the MoC. Around 14% and 19% of all housing in Hanoi and in
HCM City are for rent respectively, with the rest of the cities around 5%. A national housing strategy
approved in 2011 had aimed to raise the proportion of rental housing to 20% by 2015 and 30% by 2020. As
of June 2013, the MoC was still finalising the rental housing plan.
In June 2013, the Vietnamese government approved a VND30trn stimulus package to provide loans for
purchasing and completing low-cost housing, though the impact of the stimulus package is expected to be
limited given its relatively small scale.
Besides government measures, other upside risks for the residential sector are 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.
Foreign investors could also remain interested in the real estate sector due to its long-term growth potential.
According to Vietnam's Foreign Investment Agency under the Ministry of Planning and Investment (cited
from Intellasia), foreign direct investment (FDI) inflows to the real estate sector amounted to US$1.85bn in
2012, more than doubled the figure in 2011 (US$850mn). FDI inflows to the real estate sector were also the
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largest among the various sectors, accounting for 14.2% of total FDI in Vietnam. These large FDI inflows
are due to investments made by Japan's Tokyu Corporation and Singapore's Keppel Land.
Lastly, the demand for affordable houses is still robust, as residential development in the past has largely
focused on high-end customers. The Vietnamese government is keen to meet this demand. For example,
there are plans to build 2.7mn m2 of social housing by the end of 2015 in HCM City. The social housing
programme is expected to provide accommodation for 100,000 college students and 93,000 workers, as well
as 17,500 apartments for low income earners. In Hanoi, city authorities have announced in July 2013 that
they will supply 15,500 apartments for low-income people by 2015. The project, which is in its first phase,
is expected to cost US$402mn.
The MoC had also introduced Circular No 02/2013, which allows companies to convert the apartment
structure of commercial housing projects to low-cost housing. As of April 2013, 12 housing projects had
been given permission to convert to low-cost housing.
Non-Civil Building To Outperform
We believe that the main driver of growth for the residential and non-residential building sector is nonresidential. Although the lack of external demand for Vietnam's manufacturing goods is set dampen the
demand for industrial buildings (such as factories and warehouses) over the coming years, the demand for
Vietnam's resources could remain robust and this could drive demand for energy-related facilities and nonresidential buildings. A key sector is the petrochemicals industry. Around nine petrochemicals projects are
at the planning stage and are expected 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 annum 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 annum (tpa)
polyethylene, 500,000tpa polypropylene and 400,000tpa 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 projects 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
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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.
Another key project is the US$8bn Nghi Son oil refinery in the central province of Thanh Hoa. The US
$2.1bn engineering, procurement and construction (EPC) contract for the project was awarded to GS
Engineering and Construction and SK Engineering & Construction making it Vietnam's largest ever
EPC contract for the oil and gas sector. Under plans first unveiled in 2008, Nghi Son refinery is a joint
venture between PetroVietnam with a 25.1% stake, Kuwait Petroleum International with 35.1%, Japan's
Idemitsu Kosan with 35.1% and Mitsui Chemicals with 4.7%. The project is expected to be completed by
2017 and have an annual capacity of 10mn tonnes of crude oil, or 200,000, 1.5 times greater than Dung
Quat's current capacity.
Vietnam's relatively low cost of labour could also still attract investors to develop manufacturing capacity in
the country. In March 2013, Samsung started building a US$3.2bn high-tech complex in the Thai Nguyen
province, which will house Samsung's largest mobile phone factory in the world.
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. As such, there is a growing demand for hotel rooms. For
example, Ho Chi Minh City's tourism authority had projected an additional supply of 27,000 hotel rooms by
2020 as part of its master plan. As of April 2013, Ho Chi Minh City had 49,900 hotel rooms, with 27% of
them three- to five-star units.
The rising popularity of integrated gaming resorts across the region also epitomises this growing desire to
travel, 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 multi-billion dollar developments.
The Vietnamese government has therefore set a US$4bn minimum investment threshold for its 135 hectare
(ha) project, which will include a 30,000m2 casino with a 30-year operating licence, as well as five- or six-
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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 annum 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 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.
Meanwhile, a US$1bn hotel project site invested by Vietnam's Kinh Bac City Development in Hanoi
remains a wasteland. The project has been in a limbo since 2009, where Japan's Riviera Group pulled out
of the project due to financial difficulties and Kinh Bac stepped in to take over the investment. As of
December 2012, the project is used for agriculture, parking and football pitches.
In June 2013, Vietnamese media reported that local authorities had cancelled 93 projects on Phu Quoc
Island - including a EUR2.6bn luxury resort project proposed by Swiss Trustee Group - because the
investors of these projects were unable to find sufficient financing
The US$4.2bn Ho Tram Strip is also facing a delay in its opening due to the pull-out of its first resort's
operator and financing problem. In March 2013, the developer of the Ho Tram Strip - Asian Coast
Development (Canada) Limited (ACDL) - announced that MGM Resorts International (MGM) would
no longer be able to manage the first of the Ho Tram Strip's five resorts in Ba Ria-Vung Tau province.
ACDL had signed an agreement with MGM for the first resort in November 2008. The Ho Tram Strip,
valued at US$4bn, is the largest tourism complex in Vietnam, with five five-star hotels, two of which
have casinos and golf courses. ACDL is building the second hotel tower of the first resort, with 559 fivestar rooms, while an eight-hole golf course designed by Greg Norman is under construction.
The lack of proper planning and delays in the development of the Ke Ga seaport has also adversely affected
resort investors in the Binh Thuan Province. The construction of the Ke Ga seaport required the land of 12
resorts, which the government prompted requested to be shut down for the seaport. The resort investors
were expected to be compensated, but Vinacomin delayed their disbursement of compensation, resulting in
losses for the resort investors.
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There are also concerns about the potential for an oversupply in hotel rooms. Room rental rates in Hanoi
had decline in H113 and this could worsen over the near term as the hotel room supply in Hanoi is expected
to reach nearly 10,000 rooms by the end of the year, up 13.5% from the previous year.
Major Projects Table - Residential/Non-Residential Construction And
Social Infrastructure
Table: Table: Major Projects - Residential/Non-Residential Construction And Social Infrastructure
Project Name
Value (US Capacity/
$mn)
Length
Companies
Timeframe
Status
Commercial Construction
Eight ibis hotels in Vietnam's
major cities
na
na
Accor, Benthanh Group
2010-
At planning stage first hotel to open in
2012
Six tourism construction
projects, Nhon Hoi economic
zone, Binh Dinh
518
na
na
2011-
Projects approval
received
South Hoi An resort project,
Chu Lai Open Economic Zone
(OEZ), Quang Nam
4,000
Happyland Vietnam
Entertainment Complex
project (includes US$600mn
Happyland theme park project
and US$140mn Movie World),
Ben Luc District, Long An
Province
35,000,00
2,000
0m2
21,000,00
0m2
Genting Group,
VinaCapital
At planning stage,
Genting withdraws
from project (October
July 2011 2012)
Sanderson Group
November
2011 - April
2014
Under construction
(Nov 2011)
2011 -
Contract (foundation
works) awarded
SSG Tower, Ho Chi Minh City
11
na
Ryobi Kiso Holdings,
Ryobi Kiso Holdings, Phu
Cuong
Empire Residences and
Resort project (include 5-star
hotel), Ngu Hanh Son District
476
na
Thanh Do Construction
and Investment
2011 - -2012
Under construction
(August 2011)
Casino resort (including
30,000m2 casino and five-star
hotels), Phu Quoc Island
4,000
1,350,000
m2
na
August 2011 2020
At tendering stage
(August 2011)
Three condominiums, Ho Chi
Minh City
57.9
549 units
Ssangyong Engineering,
Keppel Land
September
2011 -
Contract awarded
(September 2011)
January 2007
- October
Good Choice
2011
Investment licence
revoked (Oct 2011)
Wonderland World Vung Tau
complex (includes a five-star
hotel, four 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
Tokyu Binh Duong Garden
City (includes 7,500
apartments, and commercial/
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1,300
na
143
na
1,200
na
July 2012 -
At planning stage,
project announced
(July 2012)
Tokyu Corporation, January 2013
Becamex IDC
-
Under construction
(January 2013)
na
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Table: Major Projects - Residential/Non-Residential Construction And Social Infrastructure - Continued
Project Name
entertainment facilities), Binh
Duong province
Value (US Capacity/
$mn)
Length
Companies
Timeframe
Status
na 210sq km
na
2012-2025
At planning stage
(April 2013)
Long Thanh international
airport area development plan
(including tourism complex
and condominiums), Dong Nai
province
Education
Ayunpa secondary school, Ca
Mau general Hospital
na
na
Korea Eximbank
2010-
US$6mn loan signed
138
na
AFD
2011-
US$29mn loan from
French AFD agreed
54
500 beds
Clearance Compensation
Corporation
April 2012 mid-2014
BT contract signed
(April 2012)
Healthcare
Social development project
(educational and healthcare
buildings), Ho Chi Minh City
Orthopedic hospital BT
project, Binh Chanh
District,Ho Chi Minh City
Industrial Construction
Nghi Son oil refinery, Thanh
Hoa province
Solar cell factory, Dong Nam
Industrial Park, Hoa Phu
Commune, Cu Chi Dist, HCM
City
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
9,000
PetroVietnam Construction
[Sponsor], Mitsui
Chemicals [Sponsor],
Idemitsu Kosan [Sponsor],
Kuwait Petroleum
International (KPI)
[Sponsor]; JGC
Corporation [EPC],
Contract signed,
Chiyoda [EPC], Technip
Construction contract
Coflexip [EPC], GS
awarded to GS, US
Engineering &
$5bn funding from
200,000
Construction [EPC], SK
JICA and Korea EXIM
b/d
E&C [EPC], GS, Q3 13 - 2017
Bank (June 2013)
1,000
Under construction;
commission of US
$300mn module
factory postponed
(Nov 2011)
390
238MW
First Solar Group, First
Solar Vietnam
Manufacturing Co Ltd 2011-H2 2012
120MW per annum Indochina Energy &
Industry Company Limited
120MW
(ICE)
120MW
Indochinese Energy
Company
4,500
1.4mn
tonnes/yr
Siam Cement Group
(SCG), QPI Vietnam,
PetroVietnam, Vietnam
National Chemical
Corporation (Vinachem)
291
na
CapitaLand, Keppel Land,
PepsiCo
na
Under construction;
First to have capacity
May 2011 - of 30MW per annum
2011- 2013
120MW/year - Under
construction
Vinachem to withdraw
from project, Land
acquisition and EPC
tender to be
completed by
2013-2016 end-2012 (July 2012)
Residential Construction
Residential developments and
manufacturing projects
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2010-
contract signed
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Table: Major Projects - Residential/Non-Residential Construction And Social Infrastructure - Continued
Project Name
Value (US Capacity/
$mn)
Length
Companies
Timeframe
Status
600,000
units
na
2015-2020
At planning stage
na
Daewoo Engineering &
Construction, Hi Brand
Vietnam, Inpyung
2011-2013
Contract awarded
Development of 60mn square
metres of residential space
(public housing)
Commercial-residential
complex, Hanoi
19,700
188
na = not available/applicable. Source: BMI Key Projects Database
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Industry Risk Reward Ratings
Vietnam - Infrastructure Risk/Reward Ratings
Vietnam has achieved a score of 54.2 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 emerging South East Asian
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.
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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 & utilities sector, is dominated by state-owned firms. The ports and urban railways 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.
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. Companies under the PPP model would enjoy corporate tax reductions and
exemptions, as well as land use fee or land rental exemptions. Companies are also allowed to buy foreign
currencies for project execution. Investors under the PPP model would ask not have to worry about site
clearance as it would be done by the local officials, according to Nguyen Danh Huy, deputy head of the
planning and investment department, in a seminar in mid-2012.
However, progress on these tasks is proceeding very slowly and the PPP framework for areas such as
payments for land rental, land clearance and compensation remained unclear. The Ministry of Planning and
Investment has since introduced draft amendments to Decision 71/QD-TTg, but it remains to be seen if they
are effective. Over 20 projects have been proposed for development under the PPP format, but only the Dau
Giay-Phan Thiet expressway is at a tendering stage, with the rest in the pre-feasibility study stage.
Country Risk
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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 banned Vietnam's Social and Environmental
Development and its Managing Director, Nguyen Xuan Doan, for five years, following allegations of fraud
among World Bank-financed water supply projects. Joint ventures 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.
Asia - Infrastructure Risk/Reward Ratings
BMI View: The average Risk/Reward scores for the Asian infrastructure sector remain largely unchanged
from the previous quarter. However the composition has changed slightly, with greater rewards being
offered in emerging South East Asian countries and poorer rewards being offered in the most populous and
more developed economies in Asia. Overall, the potential for returns in Asia's infrastructure sector remains
considerable, reinforcing the region's status as the world's most attractive and concentrated infrastructure
and construction market.
The average Risk/Reward scores for Asia's infrastructure sector this quarter remain relatively unchanged
from the previous quarter. There is still a substantial disparity in the demand for infrastructure throughout
Asia, translating into a significant divergence in rewards and risks among the Asia Pacific (excluding Japan)
infrastructure markets. A sizeable 40-point differential exists between the top- and bottom-ranked countries
in our 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 can be summarised as follows:
■
The most populous countries in the region continue to present sufficient scope in rewards to overcome
risks, but there are growing threats to these rewards. Policy inertia and continuity are a problem in India
and Indonesia, suggesting that risks at a grass-roots level will remain considerable for these countries.
■
Emerging South East Asian (SEA) countries (particularly Malaysia and Thailand) are offering greater
rewards for their level of risk, as they push forward with their multi-billion dollar infrastructure-building
programmes.
■
The more developed countries in the region continue to present the most attractive business environment,
but the decline in external demand and structural problems in their investment climate (particularly for
Taiwan and Singapore) are dampening rewards in their respective infrastructure markets.
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A Mixed Bag
Asia - Infrastructure BE Risk/Reward Ratings, Scores out of 100
Source: BMI
Nearly Developed Markets: Affected By Export Environment
A general malaise in economic activity continues to befall Asian countries that are nearing developed
market status in terms of their infrastructure market maturity (i.e. Singapore, South Korea, Hong Kong and
Taiwan). Their export-oriented economies leave them highly vulnerable to the deleterious effects of a
languorous global economy, which negatively affects the demand for infrastructure. This is highlighted by
the steady decline in their respective manufacturing purchasing managers' indexes. With latest economic
data indicating that China, the largest export partner for most of these countries, is on course for an
economic slowdown in H213, this non-conductive economic environment for infrastructure is expected to
continue over the near-term.
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Ominous Signs For H213
Exports To China, % of Total & Selected Purchasing Managers' Index
Source: BMI, HSBC, Markit, DOTS
This quarter, we have revised down our rewards score for Taiwan from 50.3 to 45.4. This is because the
potential rewards in Taiwan have not only affected by the adverse trade environment, but also by the
structural problems in its business environment for infrastructure - namely the lack of major regulatory
changes to maximise the potential for greater cross-strait economic integration with China, and Taiwan's
worsening demographic profile. These issues cap the potential rewards for infrastructure as they lead to
slower economic growth, which reduces the demand for electricity and transport links such as urban
railways, ports and airports. Taiwan's worsening demographics picture could also impose greater fiscal
constraints on the government (i.e. a decline in tax revenues due to shrinking working population and an
increase in public welfare expenditure), making it more difficult to justify and finance new infrastructure
projects.
We have also revised down our rewards score for Singapore from 56.2 to 54.6. That is because, besides
poorer demand for infrastructure, we are expecting a near-term cyclical drop (i.e. in 2014, 2015) in project
opportunities in the city-state. Most of the major infrastructure projects to be developed this decade
(2011-2020) have either started construction (such as the 42km Downtown Line urban railway project), are
scheduled to start construction in 2013 (such as the fourth terminal in Singapore's Changi airport) or are
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expected to be awarded in 2013 (such as the 30km Thomson Line urban railway project) or in 2017 (such as
a fifth airport terminal).
Greatest Potential To Realise Rewards
Nearly Developed Countries In Asia - Infrastructure Rewards (LHS) And Risks (RHS) BER, Scores out
of 100
*Higher Score = Lower Risks. Source: BMI
That said, these markets continue to offer the best business environments for realising investment returns as
they are highly developed in terms of their legislative and regulatory environments and present very little in
the way of risks to sponsors and financiers. The average score for risks in these developed markets is 78.3
out of 100, significantly higher than the other nine Asian markets (higher scores indicate lower risks) which
have an average of 50.7. These optimal risk scores reflect a high degree of policy continuity - a major
criterion to project execution and viability - and is the key factor allowing South Korea and Singapore to
secure the first and second spots in our Asia Infrastructure Risk/Rewards Ratings table.
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Giants Of Asia: Sizeable Rewards, Sizeable Risks
These developed markets however, do not offer the highest rewards to investors. Asia's largest emerging
economies - China, India and Indonesia - continue to head the group in terms of rewards, securing first,
second and third place respectively for rewards among the Asia markets. 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. However, they also present numerous risks, as indicated by their below-average risks scores.
Below Average Risks
China, India And Indonesia - Infrastructure Rewards (LHS) And Risks (RHS) BER, Scores out of 100
*Higher Score = Lower Risks. Source: BMI
China, for example, is expected to increasingly present greater threats to its rewards. The country's
infrastructure market still presents considerable opportunities, but these opportunities are increasingly
located in tier-two and tier-three cities - areas where the economic viability for some of these projects are
highly questionable. In addition, the new government has been quick to implement changes to the
infrastructure programmes in China, starting with the break-up of the powerful Ministry of Railways and
greater considerations towards environmental issues. These changes suggest to us that the new government
is re-thinking several of the previously announced infrastructure projects in transport (especially railways)
and power generation, and we could see a severe scale down in infrastructure investment. Lastly, the
structural deficiencies within the Chinese economy (shaky financial system, overvalued property market,
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expensive infrastructure build-up, and huge industrial overcapacity) still remain and are starting to flare up.
This creates the potential for a deep slowdown in China's economic activity, which could cap infrastructure
demand over the near-term.
India is also experiencing greater threats to its rewards and this is reflected by our downward revision of its
rewards score from 66.3 to 64.6. Some of these threats are: the relatively high cost of capital in India; a
weak rupee, costlier overseas equipment and raw materials for Indian infrastructure companies ; and the
numerous business environment issues that continue to delay infrastructure development (e.g.
environmental clearances, land acquisition, convoluted bureaucracy).
Most importantly, it is becoming increasingly difficult for the government to push forward regulatory
reforms that improve India's investment climate for infrastructure. This is due to its weakening political
position and the upcoming parliamentary elections. The ruling government, the United Progressive Alliance
(UPA) coalition, has been politically weakened by the withdrawal of several coalition members - namely
the All-India Trinamool Congress in September 2012 and the Dravida Munnetra Kazhagam in March 2013.
Without their support, the ruling party, the Indian National Congress (INC), is forced to rely on the fickle
support of smaller regional parties for policy execution. The UPA government is also constitutionally
obliged to hold parliamentary elections by 2014. These two events not only increase the difficulty for the
UPA to carry out market-friendly reforms, but could also push the UPA to take a more populist stance in the
months preceding the elections.
As for Indonesia, the country continues to present vast opportunities across the entire infrastructure
spectrum - the central government announced in March 2013, that the next phase of Indonesia's 2011-2025
economic master plan (MP3EI) has 40 'priority' infrastructure projects worth INR337trn between 2014 and
2017.
However, the country's political landscape is hindering the push for regulatory reforms, mirroring the
situation in India. President Susilo Bambang Yudhoyono is constitutionally prohibited from standing for the
presidential elections in 2014, and the prospects of his Democratic Party for the upcoming elections are
shrinking due to successive corruption scandals. This creates the potential for a more populist regime to rise
in prominence as the Democratic Party and other presidential candidates could seek to secure popular
support by increasing subsidies, watering down pro-business reforms, and enacting nationalistic polices.
South East Asia: Better Rewards
South East Asian countries on the other hand, are offering greater rewards for their level of risk as they push
forward with their multi-billion dollar infrastructure-building programmes. This quarter, the average score
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for rewards among the South East Asian countries in our Asia Infrastructure Risk/Rewards Ratings table
increased from 50.3 to 51.7, with Malaysia, Thailand and Vietnam the main contributors for this increase.
SEA Offers More
Asia - Q412 & Q113 Infrastructure Rewards Ratings, Scores out of 100
Higher Score = Higher Rewards. Source: BMI
In Malaysia, uncertainties surrounding Malaysia's economic investment plans - namely the country's 10year Economic Transformation Programme (ETP) - are dissipating following the electoral victory by the
ruling Barisah National coalition. Although the ruling party has conceded a greater number of seats to the
opposition as compared to the previous election in 2008, it continues to hold a simple majority in
parliament, ensuring policy continuity. This is a major tailwind for infrastructure development as the ETP is
very much focused on creating project opportunities in roads, ports and urban railways.
In Thailand, the government's plan to finance its ambitious THB2.0trn infrastructure plan via debt continues
to move up the gears, with the government set to start borrowing and disbursing funds for the plan in
FY2013/14 (October - September). The likelihood for the plan to be implemented is very high as the
government is very keen to spur infrastructure development, as highlighted by the recent approval for the
loan and contractors to carry out the projects under its long-term water management and flood prevention
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scheme. In addition, access to financing and project execution for infrastructure development in Thailand
has improved markedly, with the country successfully launching its first infrastructure fund and a new
public-private partnership act in April 2013.
In Vietnam, economic conditions in the country are slowly improving, creating greater demand for
infrastructure. In addition, the cost of capital remains relatively low, making it more financially viable to
carry out infrastructure projects. Having said that, we highlight that this recovery is still at an early stage
and fraught with numerous hurdles. Investor sentiment remains stubbornly depressed by uncertainties over
the build-up of bad debt in the banking sector and a lack of confidence in the government's ability to
address its deteriorating fiscal position and steer the economy amid the challenging global economic
environment. This makes it difficult for infrastructure projects in Vietnam to reach financial closure.
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
47.5
88.9
62.0
70.0
78.2
74.9
65.9
Singapore
37.5
86.2
54.6
90.0
88.6
89.2
64.9
2
China
72.5
60.9
68.4
40.0
67.8
56.7
64.9
3
India
75.0
45.4
64.6
55.0
54.2
54.5
61.6
4
Hong Kong
35.0
90.1
54.3
85.0
72.3
77.4
61.2
5
Malaysia
55.0
64.3
58.2
55.0
62.3
59.4
58.6
6
Indonesia
67.5
48.2
60.8
35.0
60.7
50.4
57.7
7
Thailand
47.5
72.3
56.2
50.0
61.4
56.9
56.4
8
Vietnam
52.5
60.4
55.3
40.0
59.7
51.8
54.2
9
Taiwan
30.0
74.0
45.4
75.0
69.9
71.9
53.4
10
Philippines
42.5
55.1
46.9
35.0
58.8
49.3
47.6
11
Pakistan
25.0
43.6
31.5
35.0
45.4
41.3
34.4
12
Cambodia
32.5
25.9
30.2
25.0
45.3
37.2
32.3
13
Regional
Average
47.7
62.7
53.0
53.1
63.4
59.3
54.9
-
1
Scores out of 100, with 100 highest. Source: BMI
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Market Overview
Competitive Landscape
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.
Table: Table: Vietnam EQS Data
Name
Latest FY
Earnings
Revenue
Operating
Market Cap Growth (% y- Profit Growth Total Debt/
(US$mn)
o-y)
(% y-o-y)
EBITDA
Interest
Coverage
Ratio
PE
Ratio
Vietnam
Construction &
IMPO
12/2012
239.3
-13.7
-43.5
7.3
0.9
28.8
Songda Urban &
Industrial Zo
12/2012
66.7
-64.5
-472.1
na
-131.1
na
HCM City
Infrastructure INV
12/2012
101.5
19.3
na
43.4
0.0
5.6
Becamex
Infrastructure Devel
12/2012
105.9
-53.6
-38.9
2.0
6.9
14.9
PetroVietnam
Construction Co
12/2012
96.1
-51.8
na
na
-2.7
na
Development Invest
Construct
12/2012
69.4
-0.2
-66.8
19.6
0.5
na
Kinh Bac City
Development SH
12/2012
107.8
-55.6
na
na
-0.3
na
Cotec Construction
JSC
12/2012
71.5
-0.7
-12.5
0.0
451.3
7.0
na = not available/applicable. Source: Bloomberg
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Company Profile
Cavico Corporation
SWOT Analysis
Strengths
■
It is diversified across a number of inter-related sectors.
■
A portfolio of completed projects sets a precedent for the company in Vietnam's
construction and infrastructure sectors.
Weaknesses
■
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.
Opportunities
■
Vietnam is one of the best-placed Asian economies to weather the global financial
crisis.
Threats
■
The government's willingness to improving infrastructure seems undiminished.
■
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.
Company Overview
Cavico Corp. is the largest private infrastructure and mining company based in Vietnam
(while mining activities are at the heart of the company's operations, for the purpose of
this report we will only focus on Cavico's infrastructure operations). 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.
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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.
Strategy
According to the company's declared business strategy, the key points that will guide
investment 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 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% year-on-year (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 its 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.
Recent
■
Developments
■
■
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-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 6 megawatts (MW) and is
estimated to cost US$6.7mn.
In March 2011, Cavico Corporation announced that its subsidiary, Cavico
Construction Manpower & Services, 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 was valued at approximately
US$1.3mn. Cavico expected to complete the project within seven months from the
start of construction.
In January 2011, Cavico Corporation announced that its subsidiary, Cavico
Hydropower Construction, 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
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■
Financial Data
capacity once it becomes operational. Song Giang Hydropower Joint Stock Company
expects to invest a total of US$23.2mn in the plant.
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.
In Q210, revenues rose by 7.9% y-o-y to reach US$14.7mn. Net profit for Q210 was a
loss of US$1.8mn, compared to 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$4-5mn.
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Electricity Vietnam Group (EVN)
SWOT Analysis
Strengths
■
EVN's power companies account for 55% of Vietnam's total electricity generation.
■
EVN has outlined ambitious plans to build 74 new power stations by 2020, in line with
the country's power sector development.
• EVN has a diversified portfolio and is involved in all types of power plant projects.
Weaknesses
■
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.
Opportunities
■
High debt levels are inhibiting plans for expansion.
■
The Vietnamese government is committed to energy sector development visible in its
ambitious plans to increase Vietnam's total installed generating capacity from 20GW
in 2011 to 75GW by 2020.
Threats
■
Vietnam's Electricity Law (2005) might make operating in the electricity sector more
complex, especially in relation to transitional procedures.
Company Overview
Electricity Vietnam (EVN) was founded in 1995 as a state-owned utility engaged in the
generation, transmission, trading and distribution of electricity. EVN owns five limited
liability power companies: Electricity North Vietnam (EVN NPC); Southern Electricity
Corporation (EVN SPC); Central Electricity Corporation (EVN CPC); TP Power
Corporation Hanoi (EVN HANOI); and the Electricity Corporation TP. Ho Chi Minh City
(EVN HCMC). In addition, the subsidiary in charge of EVN's transmission grids is the
National Power Transmission Corporation (NPT).
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 build-operatetransfer (BOT) power plants. Despite further privatisation plans, power transmission
companies and 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.
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EVN has also played a role in Vietnam's successful rural electrification programme by
implementing power projects financed by the World Bank.
Strategy
EVN is expected to face many major changes over the coming years due to the launch
of the 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, EVN announced that it will invest US$39bn in building an additional 95 power
plants with a total capacity of around 49,000 megawatts (MW) over the next 10 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, this target appears to be difficult to achieve. EVN is suffering from crippling
debts and is unable to raise sufficient capital to meet its investment needs. In late-June
2012, EVN said that it faced a funding gap of around VND185trn (US$8.9bn) for power
plant projects between 2011 and 2015, while its overdue payments reached
VND10.15trn (US$488mn) at the end of 2011.
One reason for EVN's high debt levels is artificially low electricity prices in the past, and
a lack of sophistication in setting electricity prices. Electricity prices in Vietnam were 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 non-core businesses such as the
Vietnamese telecoms sector is 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 - 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. EVN was 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
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now the most likely candidate to acquire the telecoms subsidiary, according to local
media reports.
Weather conditions have also played a part in damaging EVN's profit-generating ability.
A sizeable portion of its portfolio is hydropower and severe droughts across the country
have reduced water levels for hydropower reservoirs, hampering their ability to generate
electricity. As a result, EVN has to rely on expensive oil-based generation sources and
electricity imports from China to meet the shortfall.
In a bid to ease EVN's current financial difficulties and meet its investment targets, the
Vietnamese prime minister has 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. This has taken
place in January 2013, where EVN secured a US$120mn loan from Vietnam
Development Bank for two new thermal power plants (Vinh 2 and Duyen Hai 1). The
utility was also seeking a government guarantee for its loan to build Duyen Hai 3
thermal power plant in mid-December 2012.
EVN would also be allowed to issue domestic bonds in 2013 to meet its funding gap,
but it remains to be seen if investors would be interested given the bond scandals with
several state-owned companies such as Vinashin.
Lastly, the government had allowed EVN to hike electricity prices twice (5% in July, 5%
in December) in 2012, increasing electricity prices by a total of 10%. Electricity prices
averaged VND1.437 (US$0.07) at the end of December 2012 and the hike in December
could potentially allow EVN to earn an additional VND7trn (US$330mn) in 2013. There
are also plans (as of March 2013) to adjust electricity prices if input costs increase by
2-5% over the current average power price, according to a draft decision about the
mechanism for retail power price management and adjustment.
Recent
Developments
In June 2013, EVN reported that it aims to have six new generators with a combined
capacity of 1420MW operational in 2013. They are two generators in Nghi Son 1 thermo
power plant, a generator in Quang Ninh power plant, a generator in Hai Phong power
plant and two generators in Ban Chat hydropower plant. According to EVN's seventh
power plan, the utility will put 20 generators with a combined capacity of 6,366MW into
operation between 2013 and 2015.
In March 2013, the Vietnam Ministry of Industry and Trade issued a decree stating that
EVN's CEO will be dismissed if the utility fails to maintain the expected return on equity
or suffer losses for two consecutive years. In return, EVN will be given permission to
adjust the electricity prices within the regulated price limits.
In January 2013, EVN announced that it plans to issue VND10trn (US$483mn) worth of
bonds in the domestic market, while converting its debt to PetroVietnam into bond debt
via a VND14trn (US$673mn) issuance.
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In December 2012, EVN pulled out from the US$800mn Lower Se San 2 hydropower
plant project in Cambodia. China's Hydrolancang International Energy is expected to
purchase EVN's stake in the project, with the electricity produced from the dam to be
used in Cambodia.
In November 2012, EVN signed an agreement with the World Bank to finance an US
$800mn project aimed at ensuring stable power supply in Vietnam. The World Bank will
provide a loan worth US$449mn with an annual interest rate of 1.25% over a 25-year
period, with a five-year grace period. Meanwhile, a US$30mn loan will be provided by
the Clean Technology Fund, carrying an annual interest rate of 0.75% over a 20-year
period, with a 10-year grace period. Technical assistance estimated to be worth US
$8mn will be provided by the Australian Agency for International Development.
In June 2012, Vietnam 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 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 SPC and Prysmian Powerlink SRL Group signed a US$112mn
engineering, procurement and construction (EPC) contract for an undersea cable
system in Vietnam. The cable system, which will be the longest of its type in South East
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 EVN SPC.
In January 2012, VnExpress reported that the acquisition of EVN Telecom by mobile
operator Viettel would 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.
Financial Data
In January 2013, EVN announced a profit of VND6trn in FY2012, a reversal from the loss
of VND3.5trn in FY2011. This return to profitability was attributed to the company's
hydropower business and electricity price hikes. However, the company still had debts
amounting to an estimated VND34trn at the end of 2012.
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Global Industry Overview
Industry Trend Analysis
We do not believe that rising yields will have a detrimental effect on infrastructure investments, which have
benefited in various ways in the low bond yield environment in Europe and North America. The most
widespread effect has been the diversification of institutional investor's assets into infrastructure. We do not
see this new higher yields environment detracting from the diversification of capital into alternative asset
classes, though we do see changing attitudes on how capital is ultimately deployed into projects. Another
aspect we examine is the proliferation of infrastructure bonds, focusing on Africa, where the model has
been taken up by various governments in the region. Despite the uptick in yields on Sub-Saharan African
Eurobonds, we maintain our view that they will remain an important and growing source of international
capital for governments looking to finance infrastructure.
Infrastructure fund raising has soared in recent years as investors took heed of the asset class' long term
benefits. The primary factor that has fuelled the momentum and galvanised interest from the cash-rich
pension fund community into infrastructure were the low yields on offer in traditional safe-havens, such as
US treasuries. We have been following the trend as new institutional investors came into the market. With
yields now rising -especially in the long term end of the curve- we explore what the outlook is for
infrastructure investments in a rising yield environment.
Our assessment is that, while the diversification of institutional investors' portfolios into infrastructure (inter
alia) was certainly galvanized by the persistently low yields of Treasuries and successive rounds of
quantitative easing, the rise in yields will not change this trend, though it could decelerate it. We consider
three factors behind this view.
■
Firstly, the share of infrastructure assets in portfolios of major pension funds remains low, therefore
there is no major opportunity cost associated with keeping capital within infrastructure funds.
■
Secondly, infrastructure remains a good match for the maturities of liabilities especially of pension
funds, therefore the underlying merits of such an investment strategy are firmly established.
■
Thirdly, while tapering talk in the US has fuelled the rise in long term Treasury yields, the aggressive
monetary easing in Japan has opened up the prospect of fresh funds flowing into infrastructure
(either directly via equity or funds) from Japanese investors who are wary of a new risk environment
in the domestic bond market. The US$100bn Japan Pension Fund Association is already spearheading
this with one investment nearly completed in the Midland Cogeneration Venture in Michigan and plans
to invest up to US$1.5bn in Australia, the US and Europe.
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Steeper Curve Raises Long Term Financing Costs
US T-bills Yields, January 2013 versus July 2013
Source: Bloomberg
The main risk we see associated with rising yields is related to the opportunity cost of long term
infrastructure projects. With the US Treasury yield curve becoming steeper, the net present value of projects
will edge downward, deterring long term investments to the benefit of short-term projects. This could be
manifested in lengthier timeframes for project financing to be finalised for larger projects.
It could also accelerate a trend we have seen associated with the rise of institutional investors and pension
funds in the market and the reduction in appetite to go through funds of funds - therefore prompting a
reduction in fund raising.
While infrastructure fundraising has been reaching new highs, this is due to a few major funds concentrating
the majority of capital following large scale fundraising. Global Infrastructure Partners (GIP)
significantly bolstered the 2012 infrastructure funds market with their second fund that raised US$8.25bn in
Q4 2012. According to data by Preqin, unlisted infrastructure funds have secured US$14.5bn in new
commitments in the first half of 2013, nearly 80% higher than the same period the year before. About 40%
of the total raised so far this year. However, it is noteworthy that while the fundraising activity is higher
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compared to last year, there are still 144 unlisted funds looking to raise a total of US$93bn by the end of
this year; nearly impossible in our view, and suggesting that not only is competition high, but also that
compared to expectations, what has been raised thus far is about 15% of the target.
This has reinforced our opinion that institutional investors are looking increasingly to by-pass the funds
sector and go straight to the source, like in the case of the Midland Cogeneration Venture. With long-term
cost of financing for projects rising alongside the yields, the traditional 2:20 fee structure, as well as the
five to ten year business model has lost some of its appeal. Although smaller institutional investors who do
not have the in-house capacity to get a "hands-on" approach in projects will continue to be drawn to
infrastructure investment funds, we anticipate large pension funds and institutional investors to continue
their diversification into infrastructure in a more direct way. The unsuccessful attempt of CVC Capital
Partners to raise the targeted US$2.6bn for its infrastructure fund appears to be symptomatic of the
weariness of big institutional players to go through funds to gain exposure to the sector through an
intermediary.
Industry Trend Analysis
BMI View: Despite the uptick in yields on Sub-Saharan African Eurobonds, we maintain our view that they
will remain an important and growing source of international capital for governments looking to finance
infrastructure. Consequently, we anticipate a number of countries to issue infrastructure focused bonds
over the latter half of 2013, allowing them to fund projects already earmarked, thus supporting our bullish
construction growth outlook for the region.
In our special report on African Infrastructure, 'Making Sense Of The Infrastructure Deficit' published in
October 2012, we highlighted government bonds as holding the greatest potential for raising international
capital for the infrastructure sector. For those countries in a position to issue Eurobonds, we saw them as a
valuable way to tap into international capital markets, by allowing them to access a wider pool of investors
who feel more comfortable, or have the mandate of, lending to a government than an infrastructure project.
This method of raising capital is more affordable than traditional infrastructure debt (especially over the
past 18 months) and generates funds much quicker with far fewer hurdles than development funding. It also
comes with less strings than loans from China.
Eurobond issuances have taken off over the past 12 months in Sub-Saharan Africa (SSA), with a number of
recent issuances, and more planned before the end of the year. Most include at least a partial allocation for
infrastructure, with many fully earmarked for the sector.
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Higher Yields, But Still Worth It
Africa - Selected Eurobond Yields, %
Source: BMI/Bloomberg
Recent Eurobond issuances:
■
In July 2013 Nigeria issued a US$500mn five-year, and a US$500mn 10-year Eurobond to fund power
plants.
■
In April 2013, Rwanda issued a US$400mn Eurobond, the capital will be used to pay for the construction
of the Kigali convention centre, a hydropower plant and funds for the national airline.
Planned Eurobond issuances:
■
Cote d'Ivoire is planning to issue a US$500mn Eurobond by October 2013. The proceeds are planned to
go towards funding infrastructure projects.
■
Kenya is planning to issue a US$1bn Eurobond in the second half of 2013. The funds will go towards the
construction of three berths at the planned Lamu port.
■
Zambia is planning to issue US$750mn in bonds in 2013. 90% of the proceeds will be directed to road,
rail and energy infrastructure. Also in Zambia, the power utility (ZESCO) and the country's Road
Development Agency, are looking to issue international bonds.
■
Ghana is planning to issue a US$1bn Eurobond in 2013. The funds will be used for infrastructure
projects, as well as meeting financial obligations.
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■
Senegal is planning to issue a US$500mn Eurobond in 2013, the proceeds will be used to fund its
financing gap.
We anticipate the majority of these planned bond issuances to go ahead despite rising yields across the
region. Our Africa Country Risk team anticipates that rising yields is a trend that will continue over the
coming months, owing to changing rate expectations in developed markets (see 'Regional Eurobond
Strategy', July 10). The primary cause of the trend reversal which saw Eurobonds begin to sell off over
recent months has been investor perceptions in the US. This has been reinforced by expectations that
Federal easing in the US will be phased out, leading investors to reassess the value of emerging and frontier
market debt.
Factoring In Extra Funds
Sub-Saharan Africa Construction Industry Value And Real Growth
150
10
100
7.5
5
50
2.5
2017f
2016f
2015f
2014f
2013f
2012
2011
0
SSA construction industry value, US$bn (RHS)
SSA construction industry, real growth % y-o-y (LHS)
e/f=estimate/forecast, Source: National Statistics, UN, BMI
However, whilst we expect yields to continue to rise, we highlight that Eurobonds will remain an attractive
tool for SSA governments to raise capital, given that borrowing costs remain some way below historic
averages and considerably lower than raising capital by other means.
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This bodes well for the infrastructure sector as many of these bonds are being targeted at infrastructure
investment (see above bullet points). We believe that access to capital through government debt is a major
support to those countries in a position to do so. Indeed many of those countries have major government
infrastructure investment plans which run into the billions with the expectation that at least in part; they will
be funded by bond issuances. We have factored many of these plans into our forecasts for strong growth in
the region's construction sector, hinged on the access to capital provided by international bonds and the
view that despite rising yields, more Eurobonds will be issued.
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Methodology
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:
■
Stated infrastructure and development programmes;
■
Likely increases owing to related urban or industrial sector developments;
■
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.
Definition of Construction Industry Value
Data Methodology
Infrastructure Data Sub-sectors - BMI Assumptions And Methodology
BMI's Infrastructure data examines the industry from the top down and bottom up in order to calculate the
industry value of infrastructure and its sub-sectors.
For the bottom up 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 allows 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 comprehensive enough to provide a solid starting
point for our calculations.
The top-down approach uses deduction to form the main hypothesis. We have separated the 39 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 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.
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Tier I- Developed States. Common characteristics: 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 averages around 30%.
Tier I countries: Canada, Germany, Greece, UK, US, France, Hong Kong, Taiwan, Singapore, Israel, Japan,
Australia.
Tier II - Core Emerging Markets. Common characteristics: the most rapidly growing of emerging markets,
where infrastructure investments are a strategic government priority. Significant scope for new
infrastructure facilities from very basic levels (eg highways, heavy rail) to more high value projects
(renewables, urban transport). Infrastructure as percent of total construction averages around 45% and
above.
Tier II countries: Colombia, Malaysia, Mexico, South Korea, Peru, Philippines, Turkey, Vietnam, Poland,
Hungary, South Africa, Nigeria, Russia, China, India Brazil, Indonesia.
Tier III- Emerging Europe. Common characteristics: regional socioeconomic trajectories, development
defined by recent or pending accession to European structures such as the EU. 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 averages between 30% and 40%.
Tier III countries: 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 apply the bottom-up approach, ie
calculating the ratios from our Major Projects Tables where data was not otherwise available.
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Definitions
Construction Industry Value
Construction/infrastructure industry value measures the output of the construction/ infrastructure
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)
Put simply, Gross Value Added is the value of goods and services produced by an area, sector or producer
minus the cost of the raw materials and other inputs used to produce them. GVA is mainly composed of the
income made by employees (earnings) and the business (profits/surplus) as a result of production.
GVA is often confused with Gross Domestic Product (GDP). The difference is that GVA doesn't include
subsidies and taxes on the products and services produced, notably VAT. The reason GVA is preferred to
GDP for regional statistics is that it is not possible to allocate tax sub-nationally
To calculate industry value by infrastructure sub-sector, such as transport, we use BMI's Major Projects
Database (base year=2005). This allows us to calculate historical ratios between general infrastructure
industry value and its sub-sectors, which we then use for forecasting. While our Major Projects Database is
not exhaustive, they are sufficiently comprehensive to provide a strong starting point for our calculations.
GrowthOur 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$)
These are derived indicators. We use BMI's Country Risk team's GDP and exchange rate forecasts to
calculate these indicators.
Capital Investment
Total Capital Investment
Our data is derived from GDP by expenditure data from each country's national statistics office (or
equivalent). It is a measure of total capital formation (excluding stock build) over the reported 12 month
period. Total capital formation is a measure of the net additions to a country's capital stock, so takes into
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account depreciation as well as new capital. In this context, capital refers to structures, equipment, vehicles
etc. As such, it is a broader definition than construction or infrastructure, but is used by BMI as a proxy for
a country's commitment to development.
Capital Investment, % Of GDP, Per Capita (US$)
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 (ie 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, % Of Total Spending (US$bn)
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 in the sector.
Construction Employment, % Change 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 industryspecific 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 industryleading, 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, Objective measure of size of sector. The larger the sector, the greater the opportunities
US$bn
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 Subjective evaluation against BMI-defined criteria. This indicator evaluates predictability of
process
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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