Vietnam’s Transport Sector Master Plan

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An efficient transport system is vital for Vietnam’s development, both in boosting urban area prosperity and reducing rural inequalities. Transport is high on the Government’s priority list because it is critical to the two biggest economic sectors; Services and Tourism, and Manufacturing.

The current Transport master plan for Ho Chi Minh City has a total of 469 projects totaling US$ 121 billion. The Hanoi Transport master plan 2016 -2030 requires capital investment of US$ 55.4 billion.

Investment in the Mekong delta transport infrastructure will see investment of US$ 4.1 billion in the next 3 years alone. Indochine Engineering report that according to Global Infrastructure Outlook, Vietnam will require US$ 605 billion across all infrastructure projects between now and 2040, with an expected gap of over US$ 100 billion. With limited foreign exchange reserves (currently reported at their highest ever level of US$ 45 billion) and relatively small capital account surpluses, Vietnam has been highly dependent on Multilateral and Bi-lateral donor finance and soft loans for much of its infrastructure development.

In 2016, roads represented 94% of transport usage and with the growth in urbanization at over 3% per annum traffic congestion is a huge issue. Ho Chi Minh City is estimated to have over 8 million motor scooters and 1 million cars. It is estimated that 8,000 new bikes and 750 new cars travel the roads every day.

Further major investment is required for roadways due to the rapid rate of urbanization and the rapidly growing middle class population, leading to increases in vehicle ownership.

Investment is also required into public transport. Public transport meets less than 10% of transport needs in Hanoi and Ho Chi Minh City. Air transport is growing rapidly, as is the number of inbound and domestic visitors (2016 10 million and 67 million respectively) an increase of 28% and 25% respectively. There are 135 airstrips in Vietnam, with few of these capable to accommodate wide bodied aircraft, and many are still controlled by the military but are slowly opening to commercial traffic.

Vietnam boasts 3,400 kilometers of coastline and 80 seaports plus 41,000 km of inland waterways of which only 8,000 are used commercially. Increased investment is required in seaports, riverports and waterways.

The Vietnamese rail network is under-developed with only 8 lines and 2,500 km of rail track. Most of the track is single track and speeds are very slow taking a minimum of 24 hours to travel from Ho Chi Minh City to Hanoi. A high speed north south line has long been discussed but the huge investment has been a hindrance in getting Government approval.

While there are, and will continue to be numerous investment and related work opportunities the low level of Government finance will slow investment. This has led to a dependence on BOT and BT projects to incentivize infrastructure investment with exchanges of land for investments. Many of these projects have not been tendered or not been tendered transparently, according to the Government Inspectorate and these projects have now been suspended.

State control and subsidized pricing also acts as a deterrent to commercial investment but as the needs grow, more flexibility in policies is starting to materialize.

Chairman’s Insights – November 6th 2017

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