Vietnam Special Report: Hai Phong – The Gateway Connecting Vietnam with the World
January 21, 2016
Over the last 10 years, Vietnam’s GDP has grown from US$66 billion in 2006 to US$186 billion in 2014 at an average growth rate of 13% annually (at current US$ terms). At the same time, inbound and outbound trade has expanded positively in value. The positive growth in economic performance has spurred the development of logistics infrastructures and the establishment of the major logistics hubs supporting international trade.
The Vietnam logistics system is in its early stage as compared to global logistics network. Since Vietnam joined WTO in 2007, total trade volume has almost doubled (by 168%) from 2007 to 2014. This has supported the growth of logistics capacity development and improvement. Annual throughput nationwide has doubled, from 4.9 million TEUs in 2008 to 10 million TEUs in 20142.
Ho Chi Minh and Hai Phong have the two most significant seaports in Vietnam. Although throughput capacity of Ho Chi Minh port is currently only equivalent to a quarter of Hong Kong’s, and one-sixth of Singapore’s in 2014, and Hai Phong’s capacity is about 50% of that of Ho Chi Minh, the annual throughput for these ports is growing. Since 2008 to 2014, annual throughput of the South Vietnam with Ho Chi Minh taking the lead increased by 105%. Over the same period, total throughput of the North Vietnam with Hai Phong taking the lead increased by 88%3.
Notably, for the North Vietnam, Hai Phong contributes 98% of total nation’s throughput in 20144. Hai Phong with advantages in location with over 100 kilometres of coastal line, and has the potential of a rising logistics hub domestically at the current stage, and regionally in the future. At the time being, a lack of fully- integrated infrastructure has been the main reason that Hai Phong’s logistics has not performed to its full capacity.
The Hai Phong local authority has been very active in promoting the city to investors, at the same time, has shown efforts in improving the city’s infrastructure system and network in connection with other cities and provinces, especially those key cities connecting regional logistics hubs such as Hanoi, Quang Ninh. While this helps improve the connectivity and facilitate the operation of various businesses operating in the related source and end markets, it would also enhance investors’ confidence to the prospects of Vietnam in general and the North Vietnam and Hai Phong in particular.
Although TPP opens up huge opportunities for Vietnam trade with expansion to the key markets such as the U.S., Japan etc., and spur inbound and outbound trade between Vietnam and the participating countries, it is not all wine and roses and the challenges of an emerging economy still remain. While leveraging the opportunities, Hai Phong also needs to address some issues that are of concern to foreign investors into Vietnam and the city. According to World Bank’s Report on Ease of Doing Business 2014, Vietnam ranks 90
(out of 189 surveyed countries), improving 3 rankings as compared to 2013. Issues remaining include cross- border trade and investor protection, construction permit, property registration, and contract enforcement.
According to the Provincial Competitiveness Index (PCI) report 2014, Hai Phong only ranks 34 among 63 cities and provinces, far lower than Da Nang (ranking 1), Ho Chi Minh City (ranking 4), Thai Nguyen (ranking 8), Bac Ninh (ranking 10)… Among the issues noted in the PCI report, transparency, infrastructures and labour quality are highlighted.
Therefore, in order to become a local hub in the near future and regional hub in the long run, it is critical that Hai Phong should address the issues of administrative procedures, transparency, as well as pay attention to improving labour quality as growing FDI is poured into the country a well as the city and infrastructures are developed.
Hai Phong is having both foundation and opportunities to grow and realize the potential of becoming a major logistics hub of Vietnam and, in the future, a connecting dot in regional and global logistics network. With the completion of major infrastructures, Hai Phong hopes to tackle one important issue that has been of concern to foreign investors. Gradually, if other issues are addressed, it is expected that Hai Phong would fulfill the vision to become a logistics hub in the region, contributing to the growth of the country.