Vietgazprom selects drillship for drilling program offshore Vietnam

Northern Offshore, Ltd., which operates offshore oil and gas production and drilling vessels, has announced that the joint operating company Vietgazprom, a joint venture between Petrovietnam and Gazprom, or VGP, has selected the drillship Energy Searcher for an upcoming drilling program offshore Vietnam.
The program is expected to commence after the conclusion of the contract with CNOOC. The duration is for a four-well program expected to last approximately 100 days per well. The estimated contract value is estimated at approximately $72 million.

Gary Casswell, Northern Offshore's president and CEO, said "We are pleased VGP has selected the Energy Searcher again and look forward to working with their team in Vietnam. Along with our other recent contract announcements, this will contribute significantly to our 2012 revenue backlog."

APL Logistics introduces Trucking service between Combodia and Vietnam

APL Logistics, a supply chain services company, has introduced containerized Cross-Border Trucking, a new service from Phnom Penh, Cambodia to Cai Mep port in Vietnam.
The new service offers shippers a later cut-off time at APL Logistics' container freight station in Phnom Penh.

"Cross-Border Trucking is a service recovery solution designed for shippers when production runs unexpectedly late," said Glenn Kong, Managing Director for APL Logistics in Cambodia. "Trucking from Phnom Penh to Cai Mep can also reduce transit times by as much as four days compared to feeder services from Sihanoukville port or barge services from Phnom Penh river port to Cai Mep port."

Cross-Border Trucking targets shippers who increasingly source manufactured goods in Cambodia, particularly in the retail, garments, and FMCG segments. With the additional flexibility, shipments from Cambodia to US destinations can still be delivered on-time.

Medium- and Long-Term: Outlook

Considerable economic progress has been made during the past decade. Significant structural reforms have resulted in impressive economic growth in the past decade, as well as a notable increase in living standards. Exports rose more than 25-fold between 1991 and 2008, and per-capita income increased eight-fold, leading the United Nations Development Program to name Vietnam "the most successful transition economy of the past decade." As part of its reform
efforts, Vietnam has been nurturing closer trade relations with its neighbors in the Association of Southeast Asian Nations, as well as Europe and the United States. Negotiations to join the World Trade Organization (WTO) were successfully completed in November 2006. Favorable medium-term growth outlook assumes re-acceleration of reforms. Over the longer term, political stability and effective reform implementation are critical to Vietnam's growth profile. Temporary stumbles and slowdown of the reform momentum may occur, but the evident benefits of economic opening suggest that the political will to continue the process should be found. We are therefore confident about Vietnam's long-term economic performance, and expect real GDP growth to average 7.0% annually during 2010–15. Natural resources, such as oil and gas, fisheries, phosphates, significant agricultural and hydroelectric potential, and the country's large and well-educated labor force are bound to attract significant investor interest in the future. Furthermore, China's experience with macroeconomic reform provides a real-life case study of transition from a controlled economy to a market-based economy, which might help avoid costly policy mistakes. Near-term risks to growth remain elevated, however. Near-term risks center on high inflation and ballooning trade deficits, which could threaten macroeconomic stability, particularly the exchange rate. Longer-term issues relate to the state's still-significant economic presence (accounting for some 40% of GDP) and its dominance of the financial sector,
which undermines the quality of bank lending, crowds out private investment, and poses challenges to banking-sector sustainability. Infrastructure development has not kept up with economic growth, leading to costly bottlenecks and pushing operating costs higher than in other countries in Asia. In addition, reform of state-owned enterprises remains inhibited by
concerns over associated socioeconomic dislocations and their impact on the legitimacy of the Communist Party. Growing regional economic disparities are another source of potential discontent. Increased trade openness following the WTO accession and the Association of Southeast Asian Nations/China free-trade agreement, will expose efficiency shortfalls in
state enterprises, causing corporate bankruptcies and mounting layoffs, which could trigger a popular backlash against

South China seizure

Disputes between China and its neighbours threaten regional development

CONFLICTS that emerged in the South China Sea of yore usually involved marauding pirates. Now the pirates of real consequence work their trade in the Gulf of Aden and the Indian Ocean, while the kind of trouble emerging in ocean waters of Southeast Asia are distinctly political.


Vietnam and China both claim the right to explore for oil in waters off of south-central Vietnam. The latest outbreak in the conflict over the area occurred in June, when Vietnam’s foreign ministry claimed that a Chinese patrol boat had interfered with a seismic survey vessel operated by PetroVietnam, the state-run oil company, cutting survey cables in the process. PetroVietnam is working with ExxonMobil, Chevron and others looking for subsea oil there. China has been accused by the Philippines and Japan of similarly aggressive behaviour in the South China Sea.

The political dispute has gone quiet since then, but repercussions have emerged in the maritime business arena. Port operator China Merchants Holdings (International) has blamed political tensions between China and Vietnam for the delay in a project to build a container terminal in southern Vietnam. The CMIH venture will occupy 2,400 m of shoreline in Vung Tau Province, which is the site of several other proposed projects.

However, CMIH requires an investment certificate from the local government which has not materialised. The company says that political tensions between Vietnam and China are the most likely explanation.

CMIH is listed in Hong Kong, but is also part of the China Merchants Group, the mainland giant. If the company’s hunch on the delay is correct, then its project is victim to a decades-old dispute that should have long ago been defused at the negotiating table rather than fuelled by arbitrary naval displays. That Chinese company projects are being stalled because of it should be incentive enough to do so.

Source: Lloyd's List Asia

Commitment in Vietnam

The PV Gas LNG deal will be considered a test case of the Vietnamese government’s will to back a project all the way to completion

THE good news coming out of Vietnam about its maritime development is be applauded, but the reality is that Vietnam has a long way to go until it dispenses with the problems that brought on debacles like the Vinashin meltdown.

First that good news. Petrovietnam Gas has received approval to build a $1bn port that would allow Vietnam to begin importing liquefied natural gas. The government, according to the company, has agreed to its proposal to build a port in the south central province of Binh Thuan capable of handling 3m tonnes per year of LNG, to be completed in about three years’ time.

But in Vietnam, approval is one thing; expeditious development of a project another. The best avenue to financing the project would be via international banks, but these institutions — reluctant to lend anyway in the current volatile environment — are still feeling the burn from the $4bn in debt that state-owned Vietnam Shipbuilding Industry Group, or Vinashin, piled up due to mismanaged finances. Vinashin defaulted on payment of the first 10% of a $600m bond issued by Credit Suisse and other banks in 2007. Local investors felt the pinch, too, when Vinashin defaulted on a locally issued bond.

While PV Gas says that it is in negotiations with lenders for up to $700m of the $1bn pricetag, it will have to explain to potential backers how it will surmount potential obstacles.

Most serious among these is the difficulty of getting a solid commitment from Vietnam’s central government to back the project. In contrast to China, where the central government and individual state governments vie for control over regulation and investment priorities but the central government retains the upper hand, Vietnam’s central government has difficulty controlling the competing interests of its vying states.

In other words, the usual reassurance that a central government will back a project, reducing uncertainty over its completion, is problematic in Vietnam. Many local state industrial concerns hold powerful sway. While Vietnam now has demand for imported LNG, it is expensive. Interest groups favouring other energy sources such as coal or nuclear power could paralyse the government’s will to sustain the project.

After Vinashin, the PV Gas LNG deal will be considered a test case of the government’s will to back a project with more than approval, but support all the way to completion.

Source: Lloyd’s List Intelligence

Questions raised of Vietnam’s $1bn LNG port plans

Government approval means little but securing finance means everything

PETROVIETNAM Gas has received approval to build a $1bn port that would allow Vietnam to begin importing liquefied natural gas, but analysts doubt whether the project will ever see the light of day and point to a slew of daunting political, financial and economic barriers that must first be overcome.

PV Gas general director Do Khang Ninh assured local media that the government had agreed to the company’s proposal to build a port capable of handling 3m tonnes per annum of LNG in the south central province of Binh Thuan. Construction is slated to begin next year and to be completed by 2015.

“Everybody’s projects get approval. The government cannot say ‘no’,” said Nguyen Xuan Thanh, director of the public policy programme at the Fullbright Economics Teaching Programme in Ho Chi Minh City. “The question is, can they get access to finance?”

Mr Nguyen described a situation in Vietnam in which various interest groups, typically led by giant state-owned enterprises, vie for government favour.

A key obstacle is the economic viability of using imported LNG, which is more expensive than other sources of fuel.

While Vietnam has offshore oil and gas reserves, they may not be enough to meet the country’s economic goals. In addition, tensions with China in the South China Sea and difficulties in attracting foreign investment to its offshore sector are prompting Vietnam to explore alternative sources of fuels. While LNG is one of them, there are plenty of alternatives including coal and nuclear power, Mr Nguyen said.

Traditionally self-sufficient in gas, Vietnam now faces a shortfall. The country produces 8.5bn cu m a year but requires 10bn cu m, hence the push for greater imports.

PV Gas is holding discussions with several potential LNG suppliers, including Qatar Liquefied Gas.

The uncertainties surrounding the project can also be seen from PV Gas’ often contradictory pronouncements in recent months.

The company’s plans have gone through several iterations, according to Tony Regan, consultant with Singapore-based energy consultancy Tri-Zen International.

Originally, the goal was to use a floating regasification unit as an interim solution while an onshore terminal was being constructed.

Then PV Gas changed tack and decided to go directly to building an onshore terminal, proposing a terminal in the southern province of Ba Ria-Vung Tau that would be operational from 2013 and have an annual capacity of 1m tonnes.

The company then proposed two additional terminals to be phased in later, one in the south central province of Binh Thuan that would have an annual capacity of 5m tonnes-10m tonnes and a third terminal near Hanoi.

Mr Regan said that he understood that PV Gas had sought government approval for the Ba Ria-Vung Tua terminal in May. “This location surprised many as it was on a bend in a busy river and likely to cause major congestion whenever LNG vessels came in or out,” he said.

He added that the latest announcement suggested that Ba Ria-Vung Tau plan had been rejected. “It seems they have moved to option B but with a more sensible capacity of 2m to 3m tonnes,” he said.

“If this is now packaged with the development of a new greenfield port, the goal to be operational by 2013 seems very ambitious.”

Mr Regan said another issue was where the markets for the gas would be now that the terminal has moved farther away from the main markets around Ho Chi Minh City.

Unless such questions hanging over the project are cleared, it is unlikely to get the full-fledged support from the government that it needs if it is to have any chance of raising finance.

On top of that, international and domestic investors’ appetite for investments linked to Vietnam’s state-owned companies is waning, especially in light of the outcry over the Vietnam Shipbuilding Industry group. “International banks are wary after Vinashin,” said Mr Nguyen. “It is very hard now to borrow abroad.”

Last year the shipbuilder was at the centre of a national scandal due to mismanagement leading to it being $4bn in debt. In December, state-owned Vinashin missed its first 10% repayment, or $60m, on a bond issue of $600m via Credit Suisse and other creditors in 2007.

Domestic investors have also suffered. Vinahsin defaulted on a local currency bond in April. It subsequently asked domestic investors to write off up to 90% of funds owed and wait four years for their next payment.

PV Gas already claims to be in negotiations with lenders for up to $700m. Foreign export credit agencies could also be a source of financing, depending on the country of origin of international contractors that bid on the port work.

Mr Nguyen said PV Gas may not wait to get all the funding before launching into building the port. “If you start the project, then you can force the government to continue to support it,” he said.

Source: Lloyd’s List Intelligence

Vietnamese waters a magnet for foreign operators

Bumi Armada and EOC have ordered FPSOs from Keppel for the region

BUMI Armada took delivery of floating production storage and offshore vessel Armada TGT earlier in 2011 from Keppel’s Singapore yard. The FPSO is set for deployment in Vietnam waters, which are increasingly becoming a magnet for foreign oil production, some of which is attracting local funding from Vietnamese banks.

Positioned in the Te Giac Trang field, in the Cuu Long Basin of the South China Sea, it will work for the Hoang Long consortium, whose partners include PetroVietnam, Thailand’s PTTET, and UK-listed SOCO.

The FSPO, on a seven-year time charter with further renewal options, will be operated by VietSovPetro, which is responsible for most of Vietnam’s oil production. The 55,000 barrel per day unit, also a conversion, has a 620,000 barrel storage capacity. Bumi Armada executive director and chief executive Hassan Basma said at the unit’s launch that its design overcomes a number of technological and weather-related challenges; the crude to be processed by the FPSO has a high wax content, and the shallow waters off southern Vietnam are prone to cyclones and tsunamis.

As offshore activity grows in Vietnam, a joint venture led by the Singapore-based and Oslo-listed EOC, described as the production and construction division of Ezra Holdings, the Singapore-listed offshore service provider, will be putting its FPSO Lewek Emas to work. An existing FPSO owned by EOC, Lewek Arunothai, a conversion from a Knutsen tanker, is working gas and condensate deposits for PTTEP in the Arthit Field offshore Thailand. Ezra Holdings maintains a 46% ownership stake in EOC, whose other holders are mainly financial investors, with a few strategic shareholders, including companies in the Fred. Olsen group, sprinkled in.

The soon-to-be-deployed Lewek Emas, a suezmax conversion completed at Keppel’s Singapore shipyard, will be going to work for a Vietnamese division of the London-listed exploration and production independent, Premier Oil, and its partners in the field. Fitted with a disconnectable turret system, it will be employed under a six-year charter, possibly followed by six optional one-year renewals, in the Chim Sao field, with a rating of 50,000 barrels per day production (and 680,000 barrels of storage). The owning consortium also includes an arm of Keppel Corporation, KSI Production, and a local partner PetroVietnam Transportation. First oil is expected later this month.

With local involvement comes the ability to tap new sources of finance at a time that debt markets have had little appetite for new projects. Two syndicators, Vietin Bank, and PetroVietnam Finance Corporation, have put together a $227m loan package for Lewek Emas repayable over seven years. Indicative of the bigger trend where a new roster of Asian financiers are reaching out into the traditional territory of established lenders, this was the first foreign project gaining Vietnamese funding, according to the energy lending specialist PVFC, which counts the investment behemoth Morgan Stanley as a 10% shareholder.

Source: Lloyd's list Intelligence

Blystad newbuilding deal boosts troubled Vinashin

Car carrier order a vote of confidence in builder

A RECENT order by a foreign shipowner could signal an important vote of confidence for troubled state-owned Vietnam Shipbuilding.

Nam Trieu Shipbuilding Industry, or Nasico, an affiliate of the debt and scandal ridden shipbuilder, signed a deal with Norway’s Blystad group to build two 6,900-unit car carriers for delivery in second half of 2013 and the first half of 2014.

The signing ceremony was attended by Vietnam’s deputy prime minister Nguyen Sinh Hung who said the contract represented the trust in the Vinashin brand by domestic and foreign shipping companies.

Under the terms of a related contract, Norway’s Hoegh Autoliners will dispatch 16 people to assist in building the vessels.

Hoegh originally had placed the order for the two car carriers but had cancelled the order in light of the troubles at Vinashin as well as the deterioration in the world economy following the global economic crisis, local media reported.

Source: Lloyd's List Intelligence.

Oshima Shipbuilding joins Japanese exodus with new shipyard in Vietnam

Facility will focus on handysizes and handymaxes, with creation of up to 3,000 jobs

OSHIMA Shipbuilding will build a shipyard in Vietnam, joining a small but growing number of Japanese builders that have shifted production overseas as pressure from rising costs and the appreciation of the yen squeezes margins.

A spokesman at Oshima’s corporate headquarters in Tokyo declined to elaborate on the project, saying that official information would be revealed tomorrow.

The Vietnam yard is expected to focus on handysizes and handymaxes, Oshima’s traditional areas of strength, and provide employment for up to 3,000 workers.

“That size of vessel is best suited to Vietnam as it matches the country’s shipbuilding capabilities and port size,” said one shipbuilding analyst.

Oshima’s shipyard at Nagasaki, Japan, has an orderbook for 110 vessels amounting to 7.4m dwt. It produces mainly bulk carriers of size up to 122,000 dwt, according to Clarksons. The company is also the world’s largest builder of open hatch bulk carriers.

The 304 ha shipyard in Vietnam will be located in the Cam Ranh bay area of Khanh Hoa province in the south central part of the country. The area is already home to five shipyards, including Hyundai-Vinashin and STX Vietnam.

The precise scale of the investment remains unclear, with some sources saying the Japanese will invest as much as $500m, but others cite the much lower figure of Dong3.8trn ($182.6m).

The shipbuilding analyst described the shipyard as “medium” sized, suggesting $500m was “about right”.

Construction of Oshima’s plant is scheduled to begin in 2015 once Oshima secures the relevant licence and will finish in 2017.

Last July, Lloyd’s List reported that a licence that had been promised to STX Offshore and Shipbuilding was withdrawn by authorities of Khanh Hoa province due to the South Korean shipbuilder’s “sluggish implementation” of a plan to invest $500m in a project in the Van Phong Economic Zone that included a shipyard.

While there have been examples of Japanese shipbuilders moving production offshore, in general they have been slower to do so than their South Korean rivals.

In 1994, Tsuneishi was the first major Japanese shipbuilder to establish a yard in the Philippines. It also has facilities in China. Kawasaki Heavy Industries has a joint venture in China in Nantong COSCO KHI Ship Engineering, or NACKS.

With Japanese shipbuilders suffering from prolonged appreciation of the yen and rising labour and input costs, many are finding it increasingly difficult to put off moving some or all of their operations overseas.

According to the shipbuilding analyst, labour issues were probably a key consideration for Oshima. “The workmanship in Vietnam can be pretty good, even compared to China,” he said. “But there is more to building ships than craftsmanship, such as commercial considerations and supply chain issues. This is where the Japanese can add value.”

In contrast to China, where labour rates fluctuated frequently as supply of skilled workers tightened, in Vietnam there was higher workforce stability and lower workforce turnover. “The Japanese like a stable operating environment,” he added.

“The whole Vinashin disaster indicates that purely-Vietnamese run shipyards have not been as successful as the joint ventures run with foreign partners such as Hyundai-Vinashin,” he said.

State-owned Vietnam Shipbuilding, or Vinashin, is saddled with more than $4bn in debt, has defaulted on bond payments to both domestic and international investors and is currently in the midst of a giant restructuring.

It was not immediately clear whether Oshima will work with a joint venture partner on its Vietnam project.

Vietnam economic insight 2011

The Vietnamese economy witnessed strong growth throughout the 1990s, as liberal economic reforms instituted from the mid-1980s onwards bore fruit. International trade and investment flows received a substantial boost from the lifting of the US trade embargo in 1994. The economy was hit by the regional financial crisis in 1997–98, although the comparatively underdeveloped financial sector offered a degree of insulation from the full impact of these events. Gross domestic product (GDP) growth between 2005 and 2007 was the highest it had been since the Asian Financial Crisis of the late 1990s, peaking at 8.5% in 2007. A rise in exports and petroleum price hikes were largely responsible for this robust performance. Developments in 2006 included the successful completion of a bilateral trade agreement with the US, followed by the gaining of World Trade Organization (WTO) membership.

The global economic slowdown reduced the country's GDP growth rate to 6.3% in 2008 and to 5.3% in 2009. Vietnam initiated a stimulus package worth $8bn in 2009, with $5.2bn to be used for infrastructure and development projects, $1.6bn for tax breaks for enterprises and individuals, and $400m for social welfare. In early 2009, the government announced that it would inject $1bn to subsidize bank loan interest for businesses. The stimulus package fostered growth in the midst of the worldwide financial crisis, and the country grew at a healthy 6.8% in 2010.

The slowdown reduced GDP growth to 6.3% in 2008, down from 8.5% in 2007, and to 5.3% in 2009. The country’s economy recovered in 2010, growing at a rate of 6.8%. Vietnam has grown rapidly since the Communist Party of Vietnam's (CPV) turned away from central planning in the late 1980s under its Doi Moi policy. It acceded to the WTO in 2007 after years of negotiations, signaling the integration of Vietnam into the global economy. The country's state-owned commercial banks are generally inefficient compared to the smaller joint stock (private and part-private) commercial banks. Talks aimed at establishing a free trade agreement between the European Union (EU) and the Association of Southeast Asian Nations (ASEAN) have broken down; however, the EU has expressed its willingness to recommence negotiations in the future. The frenetic pace of credit expansion is expected to increase the volume of non-performing assets in the country. Vietnam is dependent on its exports, which accounted for around 64% of its GDP in 2010, and the country’s economy is likely to suffer in the medium term due to difficult external conditions.

Current challenges

Inefficient state-owned banks State-owned commercial banks dominate the Vietnamese banking sector. Such institutions are generally inefficient compared to the smaller joint stock (private and part-private) commercial banks, and while the government has injected funds into the former in an attempt to improve their operations, much-needed restructuring has not been undertaken. Consequently, the country's banking system lacks credibility, and does not generally follow the Basel norms. Furthermore, the state-owned commercial banks are not audited by reputed international firms, which create doubts about their future sustainability, especially considering the fact that the government has pushed these banks to lend aggressively. The banking system could collapse if non-performing assets increase.

Default on international loans

The Vietnamese government is coming under increasing pressure due to problems relating to debt repayment by large state-owned enterprises. For example, in December 2010 Vinashin defaulted on the scheduled repayment of a $600m syndicated loan received from international lenders. The government made a decision not to bail out the company (being under no legal obligation to do so), and in adopting this approach has sent out a strong message to other state-owned enterprises. However, the default by Vinashin has severely dented the image of the country in international financial markets. The lenders might have thought Vinashin's structure meant it had an implicit state guarantee. The default is likely to have a negative impact on the country, making it difficult for other state-owned enterprises to borrow in international markets.

Future prospects

Free trade agreement with the EU Vietnamese foreign policy focuses on improving the country’s economic situation through an increase in investment and external trade. Therefore, it follows a pragmatic approach that aims to develop friendly relations with all nations. The Vietnamese government has shown an eagerness to enter into free trade negotiations with a number of countries and regions, which indicates its commitment to a reform agenda. Despite the suspension of negotiations between the ASEAN and the EU, the latter has shown a willingness to make deals with individual countries. Vietnam would gain from a free trade agreement with the EU, which would provide a significant boost to its exporters, as import duties are expected to drop to zero. The EU’s October 2008 announcement that it will negotiate individual agreements with South Asian countries including Vietnam bodes well, as it will open up new markets for the country.

Tight credit conditions

The government is aiming to slow the pace of domestic credit in 2011 to 20%. Domestic credit rose by 28% in 2010 after a significant increase of 45% in 2009. The frenetic pace of credit expansion is expected to increase the volume of non-performing assets in the country, particularly because lending in Vietnam is more due to political allegiances rather than financial viability. The government removed the long-term cap on lending rates in March 2010, which resulted in an increase in the interest rate from 12% to around 19%, leading to a fall in credit offtake. All of these factors indicate that the credit situation in Vietnam is likely to remain tight in the medium term.

Future risks

Downward pressure on the dong Vietnam has witnessed strong demand for the US dollar, which is due to a large trade deficit and high inflation. This has resulted in considerable downward pressure since late 2009, which pushed the State Bank of Vietnam to devalue the country's currency on many occasions. The devaluation of the dong against the US dollar amounted to 5% in November 2009, and in February 2010 a devaluation of 3% took place. The dong was devalued by 8.5% in February 2011, when the official rate fell by 8.5%. Overall, during 2008 to early 2011 the value of the dong fell by more than 18%. Accelerating inflation in the first half of 2011 has put even more pressure on the currency, which could result in the central bank devaluing it further still. Devaluation is likely to make exports expensive, and servicing of debt in foreign currencies would also become more costly. Vietnam’s manufacturing sector could be affected, as it imports intermediate goods that will become more expensive were devaluation to continue apace. The downward pressure of the dong and the subsequent devaluations pose a significant risk to the country in the medium term.

Dependence on exports

The global economic slowdown reduced GDP growth to 6.3% in 2008, down from 8.5% in 2007, and to 5.3% in 2009. The Vietnamese economy recovered in 2010 to register a growth rate of 6.8%. The economies of the US, Japan, and the EU, which together receive 60% of Vietnam’s exports, are not in great shape. Vietnam is dependent on its exports, which accounted for around 64% of its GDP in 2010. If the economies of the US, Europe, and Japan do not improve, the country’s economy is likely to suffer in the medium term.

Fiscal situation

In June 2011 the Ministry of Finance stated that Vietnam had a budget deficit of VND27.78tn ($1.33bn) during January and June 2011, which is less than the VND30.65tn deficit recorded one year previously. Vietnam’s budget deficit was estimated to be around VND68.6tn ($3.52bn) for 2010, which constituted 5.8% of GDP. The country's budget deficit was less than the National Assembly’s full-year estimate of 6.2%. The budget deficit for 2009 was around 8% of GDP. The fiscal deficit was recorded at 5.5% in 2007 and at 4.7% in 2008. In January 2010 the government took action to bolster its fiscal position byissuing only its second international sovereign bond, in the form of a 10-year $1bn bond. The bond issue was fully subscribed, indicating that the government is not facing any major difficulties when it comes to accessing international debt markets. However, the bond issue was tendered at a yield of 6.95%, higher than other comparable issues by Indonesia and the Philippines.

The country consistently witnessed a current account deficit during 2002–08. The current account deficit increased from $0.3bn in 2006 to around $7bn in 2007 (or from 0.5% to 10.3% as a percentage of GDP), before climbing further to $12.7bn in 2008 (which is 15.5% of the country’s GDP). Vietnam had a current account deficit of around $2bn in 2010, which was lower than the estimated figure of $4bn.

Meanwhile, the country’s trade deficit was around $17.9bn for 2010, higher than the figure of $12.3bn recorded in 2009.

The country’s external debt increased from $27.8bn as of December 31, 2009 to $33.4bn as of December 31, 2010.

According to the United Nation Conference on Trade and Development, foreign direct investment inflows into the country dropped from $8bn in 2008 to $4.5bn in 2009.

Exports and imports

Vietnam had recorded increased exports every year since 2003 until the global economic crisis led to a decline in 2009. The country’s exports came down to $59.5bn in 2009, from $67bn in 2008. Exports recovered in 2010 to reach $62.2bn. Similarly, imports came down from $85bn in 2008 to $72bn in 2009, before recovering to $80bn in 2010. Total trade in the country dropped from $152bn in 2008 to $131.4bn in 2009, before recovering to $142.4bn in 2010. Vietnam’s major exports include crude oil, marine products, rice, coffee, rubber, tea, garments, and shoes. In 2010 Vietnam's major export partners were the US (which accounted for 20% of Vietnamese exports), Japan (10.7%), China (9.8%), and South Korea (4.3%). Vietnam’s major imports include machinery and equipment, petroleum products, fertilizer, steel products, raw cotton, grain, cement, and motorcycles. In 2010 Vietnam's major import partners were China (which accounted for 23.8% of Vietnamese imports), South Korea (11.6%), Japan (10,8%), Taiwan (8.4%), Thailand (6.7%), and Singapore (4.9%).

Inflation
The country recorded inflation of 7.5% in 2006, which rose to 8.1% in 2007 before reaching a staggering 23.1% in 2008. This upward trend was due to an increase in the cost of foodstuffs in the first half of 2008. As a result of declining food and fuel prices, inflation came down to 6.8% in 2009; however, rising oil and food prices increased inflation to 9.4% in 2010. Inflation reached 22% in July 2011, a figure which poses a serious threat to Vietnam’s economy. The government has to restore macroeconomic stability, and must remain committed to slowing down lending growth.

Environmental impact
Industrial production in Vietnam has increased at an extremely fast pace. However, the enterprises responsible have poor environmental records due to the obsolete equipment they use and their inadequate treatment of wastewater and air emissions. Many industrial pollutants have the potential to do considerable damage to the health of the country’s citizens. For instance, Vedan (Vietnam) Enterprise Corp., a unit of Taiwan's Vedan Group, makes monosodium glutamate. The company was caught illegally discharging untreated wastewater from its monosodium glutamate factory in Dong Nai province into Thi Vai River in 2008, affecting individuals living along the river. It agreed to pay a VND218.9bn ($11.5m) fine as compensation for the environmental damage it caused to three provinces in South Vietnam. The government of Vietnam introduced a penalty for water pollution in early 2007; however, enforcement continues to be erratic.

The Ho Chi Minh City authorities agreed to spend around VND54bn ($2.77m) from its budget to protect the water quality of a section of the Dong Nai River basin in 2011. The money will be used to build automatic monitors of water quality, and to increase supervision of water discharge into the river by industrial parks, residential localities, and trading facilities. Currently, wastewater from domestic usage has reached nearly 1.2 million cubic meters, which is released into the environment every day. The city authorities plan to build a total of nine large wastewater treatment facilities by 2020, in order to reduce the direct release of wastewater.