Friday 10 May 2013

Vietnam Risk overview May 2013

OVERALL ASSESSMENT [The Economist Intelligence Unit]
Operating risk in Vietnam is moderate. Security risk is very low, as neither internal nor external threats are a serious concern. The ruling Communist Party will maintain its tight grip on power for the foreseeable future. Corruption is endemic and poses a serious problem for foreign firms operating in the country. The judicial and regulatory systems are opaque, taxes in some instances are high, financial risk is rising, labour relations have worsened and infrastructure is inadequate. Vietnam's membership of the World Trade Organisation, which took effect in early 2007, has resulted in measures to liberalise trade and investment, and these will serve to make the operating environment more predictable. Macroeconomic stability cannot be assured given the current imbalances in the economy.

Security risk
Security risk is very low. Sporadic outbreaks of civil unrest are unlikely to become widespread, affecting the main commercial districts and posing a threat to business or foreigners. Land seizures to make way for development projects, often without adequate compensation for those evicted, are a source of growing anger in rural—and even some urban—areas. Moreover, there are sporadic incidents between religious groups and government authorities. Any protests are likely to meet with a strong response from the security forces, a strategy that carries with it a risk of inflaming resentment in the absence of any political accommodation of public grievances. Organised crime is increasing in Ho Chi Minh City, the business capital, but the risk of violent crime towards foreigners is low, and there is little risk of kidnapping and extortion affecting foreign business operations.
                      Tensions rise in the South China Sea
Moderate likelihood; Moderate impact; Intensity =9
Despite strengthening diplomatic and economic ties with China, a major area of disagreement that remains is the sovereignty of the islands in the South China Sea; both countries claim the Spratly and Paracel archipelagos and (more importantly) the surrounding seabed, which is believed to hold substantial hydrocarbon reserves. Several recent developments suggest that security in the South China Sea remains a potential flashpoint. In March Chinese patrol boats fired flares at four Vietnamese fishing vessels operating near the Paracel Islands, although the Vietnamese authorities claim that firearms were used. At around the same time, Chinese naval vessels expanded their normal patrol range to encompass James Shoal, just south of the Spratly Islands and only 80 km off the coast of Malaysia. Vietnam has been incensed by China's plans to ferry tour groups to the Paracels. In response, Vietnam is making a bid to strengthen a number of its regional alliances, and especially those with the US and an increasingly assertive Japan. Vietnam is also pushing for multilateral negotiations between the ten-member Association of South-East Asian Nations (ASEAN) and China, but China which prefers to deal with each ASEAN country separately and significant progress towards a binding ASEAN-China code of conduct for the South China Sea is unlikely. In the meantime, the risk of further incidents at sea, potentially including military skirmishes, remains high. Firms should be aware of the potential for disruptions to business if bilateral relations deteriorate rapidly.


Political stability risk
The Communist Party of Vietnam (CPV) engineered a seamless transition to a new leadership during its national congress in January 2011, and it will maintain its firm grip on power for the foreseeable future. The prime minister, Nguyen Tan Dung, was re-elected to serve a second term in office (from mid-2011), but continued economic underperformance has weakened his influence. As Mr Dung loses influence, the National Assembly (the legislature) is likely to play a more prominent role in holding the government and ministers to account. However, political leaders lack public accountability, and the process of policy formulation within the party remains highly opaque.

Government effectiveness risk
Government effectiveness is severely undermined by endemic corruption among public officials. The widespread lack of transparency and accountability is a major risk to doing business. Although the leadership appears intent on improving the situation, the entrenched nature of the problem will mean that progress is slow. Moreover, the quality of the bureaucracy will remain poor and will continue to hinder investment prospects, despite ambitious plans for administrative reforms. The planned implementation of key economic reforms, particularly of state-owned enterprises (SOEs), continues to be subject to opposition from protectionist lobbies and conservative members of the party, and a high degree of state control of key sectors of the economy will remain. However, equitisation (part-privatisation) is set to continue.

Legal & regulatory risk
The judiciary is not held in high esteem; there is no system of common law and decisions are often arbitrary. Interference in the legal process and the bribing of judges to serve particular interests is common. Contractual arrangements are backed by the force of law but the legal system is complicated. Contractual disputes often involve a prolonged period of negotiation preceding any attempt to resolve the matter in court. Abuses of copyright and industrial property are widespread and enforcement is weak, although the government has been strengthening the legislative and regulatory framework to enforce intellectual property rights. The risk of foreign assets being expropriated is limited. On the regulatory front, there are concerns that price controls affecting foreign firms could be introduced.

Macroeconomic risk
Vietnam's long-term economic growth prospects remain positive, but there are growing concerns about stability in the next few years. GDP growth slowed in 2011 amid a period of rapid inflation and some policy tightening; changed consumer expectations led to a further slowdown in 2012. The Economist Intelligence Unit expects another year of relatively slow growth (by Vietnamese standards) in 2013. Consumer price inflation will remain relatively rapid, at around 7.3% a year in 2013-14. On eth positive side, Vietnam recorded a substantial trade surplus in 2012. Although more rapid import growth will erode the trade surplus from 2013, the improved outlook for the current account will ease downward pressure on the dong.

Foreign trade & payments risk
Membership of the World Trade Organisation (WTO), which took effect in 2007, will ensure that the government continues with trade liberalisation measures. However, protectionist sentiment remains strong, particularly in state-owned enterprises (SOEs), and this may delay the implementation of liberalising reforms. The removal of tariff and non-tariff barriers is unlikely to be smooth. There are considerable regulatory restrictions for both capital inflows and outflows. The government has abolished the foreign-exchange surrender requirement, but some other regulations introduced in the wake of the 1997-98 Asian financial crisis have still not been eased. Some loosening of capital-account restrictions is likely, but full capital-account liberalisation is not expected in the next few years.
The government sacrifices free-trade opportunities to protect the state sector
High likelihood; Low impact; Intensity =8
The US has dangled a carrot before the Vietnamese government in the form of possible membership of a new free-trade bloc, the Trans Pacific Partnership (TPP). However, as a condition for joining, the US would like to see Vietnam curb the competitive advantage that it confers on its SOEs. The recent plight of one such SOE, the Vietnam Shipbuilding Industry Group (Vinashin), adds weight to the US's desire to eliminate such market distortions. Vinashin almost collapsed under the weight of debts of around US$4.4bn in 2010, and it has since defaulted on some of its foreign obligations. There are also problems at other SOEs, which have often depended on government-directed lending from state-owned banks to pay for their rapid diversification into non-core and often unprofitable businesses. State-mandated lending to SOEs has also reduced the volume of credit available to more efficient private firms, potentially setting back the country’s economic development. In addition, SOEs often choose to procure supplies or do business with other SOEs, instead of with the private sector. Yet, to reorient the economy away from the state sector in the manner that the US wishes would represent a major policy shift on the part of the Vietnamese government. As a result, the US pressure may prove counterproductive, with the Vietnamese government unwilling to co-operate and withdrawing its interest in the TPP altogether. Foreign investors should expect little or no progress to be made on Vietnam's TPP negotiations in the next two years.


Financial risk
The dong is managed under a crawling-peg exchange rate system, but owing to massive downward pressure on the currency, the authorities had to devalue the exchange rate on a number of occasions in the past two years. The stockmarket is volatile and remains an insignificant source of finance. Foreign participation in the financial sector will gradually improve under the conditions of Vietnam's membership of the World Trade Organisation. The government holds stakes in all major banks, and as a result it would be in a position to provide financial support were any bank to come under pressure. This limits the likelihood of a run on banking sector deposits.

Tax policy risk
Reforms to the corporate tax system were introduced in 1999 and there has been some tinkering with the legislation since then. The current unified standard corporate tax rate is 25%. The Law on Foreign Investment offers a range of tax incentives for investors, but these are largely offset by the high tax levels elsewhere. Personal income tax rates are the least competitive aspect of the tax regime, although the government has made some changes to improve this. Currently, the burden is particularly severe for foreign companies employing Vietnamese professionals who have historically looked to their employers to pay their tax bill (probably because most Vietnamese do not pay tax). Value-added tax (VAT), which was introduced on January 1st 1999, has been simplified.

SCENARIOS
The complexity and opaqueness of the tax system cause frequent and harassing tax inspections
High likelihood; Moderate impact; Intensity =12
Tax regulations are not transparent; companies are often unaware of which taxes they should be paying. The government, in turn, believes many businesses are evading tax payments, and conducts frequent—sometimes harassing—tax inspections. Personal income tax rates for better paid Vietnamese national employees are also very high. However, the government has amended the personal income tax regime by raising the threshold and removing the top rate. Corporate tax has been reformed; a unified rate of 25% is currently in place. Certain preferential rates will still apply. VAT, which was introduced on January 1st 1999, has also been reformed. Companies should note that advice from a tax specialist is essential (although even this may not be sufficient to avoid problems). Companies should also consult embassies, business associations or local chambers of commerce for help in lobbying the government for improvements.
                  Tax rates are raised
Moderate likelihood; Moderate impact; Intensity =9
In an attempt to make Vietnam's operating environment more competitive vis-à-vis its regional neighbours, the corporate income tax rate was cut to 25% in January 2009, down from 28% previously. However, there is a risk that the government may be forced to raise the rate of taxation, given the poor outlook for government finances. The tax regime is inadequate and in need of a major overhaul. Indeed, the personal income tax base is small. The General Department of Taxation is poorly prepared for the additional administrative burden of enforcing a new personal income tax regime designed to address the current inadequacies. This is a reflection of the fact that the pool of individuals eligible to pay personal income tax is expected to swell dramatically to around 12m, up from around 1m primarily high-income earners currently. The government's budget balance is expected to remain in deficit throughout the forecast period, and there are questions as to how the government will meet its financing gap. Firms should be aware that the corporate income tax rate could be raised in response to inadequate revenue collection on the part of the government, while personal income taxes, particularly for high earners, could also increase. Given the highly complicated nature of Vietnam's tax regime, it is advisable for companies to seek professional tax guidance. In addition, monitoring government statements regarding levels of taxation could also prove useful.



Labour market risk
Trade unions are a powerful political and economic force in Vietnam, but they are not independent of the government. Strikes are only legal under onerous conditions, and the incidence of illegal strikes is rising. With the increasing presence of foreign and foreign-invested firms in Vietnam, the labour code has, among other measures, lifted the restriction that foreign-invested enterprises had to recruit through authorised employment agencies. Companies wishing to employ unskilled labour should have few problems, but the availability of appropriately skilled or professional labour outside the main urban centres is limited. In practice, hiring and firing is less restricted than it appears on paper. However, the government is sensitive to large lay-offs, even if there are good economic reasons for them.

SCENARIOS
Strikes at foreign-invested firms cause some manufacturing facilities to close
Low likelihood; High impact; Intensity =8
Outbreaks of labour unrest will become more common in the coming years, as concerns about high inflation have created tensions in the industrial sector, with workers demanding wage increases to keep pace with the higher cost of living. According to the International Trade Union Confederation there were around 1,000 illegal strikes in 2011, up from 423 in 2010. Most of the strikes in recent years have occurred in foreign-invested enterprises, notably in garment and textile factories, and in Ho Chi Minh City (the business capital), Binh Duong and Dong Nai. Since 2006 Vietnam's labour market has shown an edge of volatility, with tens of thousands of workers in southern industrial parks and export-processing zones going on strike. More than 90% of disputes brought before the courts for settlement end with employers having to re-employ or compensate workers. However, the government has also passed a law that could force illegal strikers to pay up to three months of wages to their employers. A consultation process with union leaders regarding contract details may go some way towards preventing disputes. However, if the incidence of strikes worsens, damaging business profitability, it could force foreign firms to reconsider their operations in Vietnam. The closure of a major foreign-owned manufacturing facility would likely have a severely negative impact on further foreign investment in such facilities in Vietnam.
Firms are unable to recruit or retain skilled labour
High likelihood; Moderate impact; Intensity =12
The overall quality of the labour force is improving, but skilled labour is not plentiful and the labour force remains best suited to labour-intensive manufacturing. Vietnam is also short of managerial talent, leading to higher salaries for these employees. Demand for workers, both skilled and unskilled, is high, particularly in the country's industrial zones, export-processing zones and major cities. It is common for foreign firms operating in Vietnam to complain that retaining skilled employees has become increasingly difficult. Over 90% of the population is literate, but actual skill levels remain low compared with other countries in the region, largely as a result of an outdated educational system that is in need of significant reform. This has led to demand for labour far outstripping supply in some sectors. The government will need to focus on improving the education system as well as providing opportunities for vocational training. Foreign firms are likely to play a significant role in developing Vietnam's workforce by providing on-the-job training as well as supporting vocational programmes. Firms should be aware that recruitment of skilled Vietnamese labour could be difficult and costly.

Infrastructure risk
Although improving, Vietnam's infrastructure is poor and presents serious risks to business. This reflects wartime damage and decades of underinvestment during the era of central planning. Work is urgently needed on the energy transmission and distribution system, including extending the network to remote areas where many communities are still without electricity. The standard of the rail network will remain poor, but the government is upgrading the country's ports and airports. Significant extension of the road network is unlikely but a high proportion of major roads are paved and there will be further improvements to the main road arteries, making inter-provincial travel easier. Telephone density, especially the number of mobile phones, is increasing steadily, and this will continue. Internet access is also growing rapidly, and Internet service providers have ambitious expansion plans for broadband development.

Wednesday 8 May 2013

What, specifically, would larger ports in Vietnam do?

1) Larger ports would reduce or eliminate the need for transshipment of Vietnamese exports, restoring the comparative advantage of Vietnam’s cheap and relatively educated labor force. Right now, most goods exported from Vietnam to major markets are transshipped elsewhere in Southeast Asia onto larger vessels, adding costs to goods that Vietnam is able to produce more cheaply than China, Thailand, and other regional manufacturers. Depending on fuel prices, these additional shipping and handling costs eliminate some of the comparative advantage Vietnam offers investors and manufacturers, increasing shipping costs by as much as 28 percent.

2) In northern Vietnam, an improved port would bring Western Chinese exports to market faster and more cheaply. A deep water port near the northern Vietnamese city of Hai Phong would cut 800 kilometers off the shipping route of goods coming out of Western Chinaiii, giving foreign businesses further incentive to use Vietnam as a second regional base to offset the cost and risk of investing in China.

3) Improved ports would allow Vietnam to become a transshipment and consolidation point for goods coming in and out of China. Bigger ports would allow Vietnam to enter the transshipment market with competitive prices that could entice shippers away from more expensive transshipment points such as those in Singapore and Hong Kong.

4) A deep-water port in Central Vietnam would eventually allow for goods coming out of northern Thailand, Laos, and Burma to be consolidated with international shipments, as well as easier export of Vietnamese oil. The Vietnamese Government estimates that a central port would save Vietnam 1.5 billion USD a year in shipping costs for oil exports.

5) Better ports would allow Vietnam to fully realize its domestic manufacturing potential in the South, home to its large manufacturing base, by eliminating the major export bottlenecks currently experienced by domestic and international producers.

6) Better ports would allow southern Vietnamese ports to become a major shipping hub for Cambodia, southern Thailand, and the larger Southeast Asia region. While there is probably not enough demand for a third major hub-like Singapore and Hong Kongvi, Vietnam could offer competitive rates that attract shippers serving specific routes. This demand for and use of expanded Vietnamese ports does not suggest that Vietnam will ever rival the two major  shipping hubs in Hong Kong and Singapore, or that it should. Hong Kong and Singapore are so far advanced in capacity and technology that there is no point in trying to match them.

However, Vietnam can integrate itself into regional shipping routes, shortening those routes where possible, eliminate its own transshipment costs, and make the export of goods out of the Southeast Asia landmass more economical and feasible. Beyond Vietnam’s own domestic situation, several global trends in shipping support the argument for bigger and better ports in Vietnam. First, ships are becoming enormous, since larger ships can save an exporter millions in fuel costs. Second, the global economic recession has driven the price of shipping down to record lows, making sea transport extremely attractive to exporters in companies of all sizes. In fact, despite the global recession, the number of exported and imported goods coming in and out of Vietnam’s major ports in the South has increased ten percent in the last year. Finally, as we are seeing now, Asia is the preferred place to park idle ships and warehouse idle goods waiting for shipment.xi In good times and in bad, having large, deep ports with plenty of berthing and storage space is a huge economic opportunity for an economy structured as Vietnam’s is.

Thursday 18 April 2013

Big ports in Vietnam’s south sinking deeply

All the three ports SP-PSA, TCCT and SITV have reported the sharp falls in the yield which is much lower than the designed capacity.
“Ports are getting very cheap because they are unable to find customers. The fee for 50-year leasing plus the unused land is VND10,000 per square meter only,said Tuoi, a broker of a real estate trading floor in Tan Thanh District of Ba Ria – Vung Tau. If you want the land with construction works on it, you have to pay VND40,000 per square meter,” said Tuoi.
“If you buy definitely, you just have to pay VND5 billion per hectare. Believe me, it would be a lucrative deal. When the port gets bustling, you would make a fat profit,” he added.
When the reporters said they wanted to lease a large land area to develop a port, Tuoi warned them that there are too many ports in the locality already, while very few ships dock at the ports.
A report of the Vietnam Seaport Association showed that in 2012, the 7 international container ports in the Cai Mep – Thi Vai deep water port complex area ran at 15-20 percent of the designed capacity only.
Since 2007, a lot of investors flocked there to pour money into deep water ports with the estimated total investment capital of US$2 billion. The ports include SP-PSA, CMIT, SSIT, Gemalink, TCCT, TCIT, SITV and the Cai Mep container international port.
The “port investment movement” has triggered a new competition among the deep water port developers who have been trying to slash the port service fees. According to the Vietnam Seaport Association, the service fees at the ports is now just US$32 per container on average, while port developers need to charge US$88 per container to break even. Especially, some service providers now charge US$23 only per container.
Both CMIT and SP-PSA, the joint ventures between the Saigon Port and foreign partners have reportedly taken loss. According to the Vietnam National Shipping Lines (Vinalines), by the end of December 2011, SP-PSA and CMIT had incurred the loss of VND460 billion.
“With the current low service fees, SP-PSA and CMIT would still incur loss,” said Nguyen Xuan Ky, Deputy General Director of CMIT.
An expert has warned that if the current situation cannot be improved, the material facilities and infrastructure items at the ports would degrade rapidly. “I am afraid that the port system would be damaged one day,” he said.
The ports’ developers said they have applied some temporary measures to “survive the difficulties.”
Cao Xuan Dung, Deputy Director of TCCT, said since August 2012, TCCT has accepted bulk cargo, general cargo, farm produce and steel as well. Prior to that, since late 2011, SITV and SP-PSA also shifted to receive bulk cargo and serve tourism cruises as well.
As for Gemalink, which is the US$345 million joint venture of Vietnamese Gemadept, South Korean Samwha and French CMA-CGM, the company’s shareholders’ meeting in 2012 decided to slow down the investment process until the national economy recovers.
Experts have suggested removing the port system in HCM City out of the inner area to avoid traffic jam, and to use the golden land areas to develop commerce and residential quarters. (Viet Nam Net – April 17)
Vian Company Limited

Tuesday 16 April 2013

Stock Market: Vietnam Port Operator DVP Estimates Pretax Profit at VND45.6B in Q1

Dinh Vu Port Investment and Development JSC (DVP), listed on the Hochiminh Stock Exchange, estimates its pretax profit at VND45.6 billion ($2.17 million) in the first quarter of this year, falling by 5.4% from the same period last year.
The figure exceeded its quarterly target by 16.9%, the local financial website Cafef.vn reported.
Revenue may reach VND114.52 billion in 2013, up 4% on year and surpassing its whole-quarter plan by 2.15%.
The company plans to pay a dividend of VND3,000/share for 2012 and VND1,500 for 2013.
DVP also projects to issue new shares in a move to double its registered capital to VND400 billion in 2013.

Monday 11 February 2013

The Port of Cai Mep

The Port of Ho Chi Minh City has expanded to become the largest facility in southern Vietnam. It now accounts for more than 65% of port throughput in the Ho Chi Minh City area and 42% of throughput in Vietnam as a whole. In 2012, the port handled an estimated 3.22mn twenty-foot equivalent units (TEUs). The port comprises three cargo terminals, as well as depot and customs points, which are situated at different locations within the Mekong Delta area in south-east Vietnam, in an area measuring 60km in circumference.
#CaiMep is Vietnam's largest deep sea facility. The Port of Cai Mep was developed in response to the rapid growth in trade volumes at the Port of Ho Chi Minh, which caused congestion in the area. The Cai Mep facility is located approximately 85km south-east of Ho Chi Minh City, at the mouth of the South China Sea.
Connectivity
In 2012, Vietnam scored 4871 on UNCTAD's liner connectivity index - a considerable improvement on 2004's score of 12.86. Although the port is trailing far behind regional outperformer Singapore, it is well ahead of its neighbours Cambodia and the Philippines. BMI believes that this vast improvement in its connectivity score over seven years demonstrates Vietnam's growing importance in global containerised shipping. The country also now has direct links with major markets in the West. However, it should be noted that Vietnam's place in global container shipping is not yet assured, and that as the industry has struck difficulties Vietnam has been impacted more severely than more established ports of call. This has been demonstrated by the fact that Vietnam's score in 2012 marked a slight decline from 2011's peak of 49.71.
Getting Better Connected
Vietnam's Score On The Liner Connectivity Index, 2004-2012
?Vietnamese ports are well placed to take advantage of growing Intra-Asia trade volumes.
?The rapid growth in Vietnam's port volumes has attracted ample international investment in port terminals, giving rise to overcapacity concerns.
?Alleviating economic headwinds in the US and China will support Vietnam's export markets and container ports.
?We caution that Vietnam needs to invest in its freight transport network in its entirety to ensure efficiency at its ports.
Regional Role
The Port of Ho Chi Minh is a vital domestic and regional facility, with the port having rapidly expanded in response to sharp growth in the Vietnamese economy. Container traffic through the port accounts for over 65% of Ho Chi Minh City's market share and more than 40% of the entire country's.
Rapid Climber
Intra-Asian trade has been growing rapidly, with many shipping firms using this to cushion themselves from the slowly recovering big-money East-West routes. The Port of Ho Chi Minh has been a key part of this and it is not only regional trade for which Vietnam is becoming key. In 2009, Hanjin Shipping became the first carrier to launch a direct service between Vietnam and the US. In September 2010, Hanjin became the first line to launch direct Vietnam-Europe services, followed in October 2010 by CMA CGM making the country a port of call on its FAL3 service.
The Port of Cai Mep was developed in response to the rapid growth in trade volumes at the Port of Ho Chi Minh City, which caused congestion in the area. BMI notes that the terminal has a considerable advantage over Ho Chi Minh, in that it offers a draft of 14 metres (m), thereby enabling it to serve post-Panamax container vessels, which cannot call at other Vietnamese ports due to draft and turning restrictions.
The importance of the port's depth was reflected in December 2011, when Cai Mep International Terminal (CMIT) docked its largest ever containership. The 13,830TEU CMA CGM Laperouse is the biggest vessel to dock in the Vietnamese port, with its accommodation made possible by the post-Panamax cranes operating at the site.
BMI believes that Cai Mep's positive throughput growth outlook is in large part attributable to APM Terminal (APMT)'s operation of the terminal, as the company has poured in investment and attracted new clients operating on key trade routes. We believe APMT's presence will support continued growth at the port over the medium term (2013-2017) as it continues to improve the port's facilities and attract shipping lines keen to capitalise on Vietnam's positive macroeconomic outlook.
Cai Mep International Terminal (CMIT) at the Port of Ho Chi Minh City (also known as New Saigon Port), which is made up of a collection of terminals lying 50 kilometres (km) away from Vietnam's capital city, is on course to handle nearly 600,000 twenty-foot equivalent units (TEUs) in 2012 - its first full calendar year of operation - according to projections from Maersk Line sister company APMT. CMIT accepted its first vessel on March 30 2011 and in the following nine months to 2012 handled 186,000TEUs.
On The Up
BMI highlights the substantial investments APMT has made in CMIT since it opened in March 2011 as an important driver of growth. In addition to helping to construct the port, which it did through a joint venture (JV) with Saigon Port and Vietnam National Shipping Lines (Vinalines), APMT purchased two laden reach stackers, an empty reach stacker, two empty container handlers and a 25-tonne forklift - all of which were delivered by Konecranes in 2011. Weak infrastructure is one of the main factors holding back Vietnam's shipping sector - the country ranks 111th out of 145 countries on the World Economic Forum's Global Competitiveness Report on the Quality of Port Infrastructure. As such, APMT's commitment to improving CMIT's facilities is an important step both for the terminal and the country's shipping sector as a whole.
Investment in the port has allowed Cai Mep to attract a client base of some of the major players in the box shipping sector. While a foregone conclusion, given APMT's close connection with the company, Maersk Line began pulling into the port in August 2011, boosting throughput as expected. More significantly, CMIT has added CMA CGM and the Grand Alliance - comprising shipping lines Hapag-Lloyd, Nippon Yusen Kaisha (NYK), and Orient Overseas Container Line (CL) - to its client list. These lines not only provide positive prospects for the port given their direct impact on throughput volumes, but also because their presence signals the industry's confidence in the terminal's growth outlook and growing role in the region.
An important aspect of the addition of these lines to the terminal is that they have exposed CMIT to the two largest maritime trade routes: Asia-Europe and Asia-America. Maersk has added the port to its Transpacific string from Asia to North America, while CMA CGM and the Grand Alliance have placed it on their Asia-Europe routes, marking the first time Vietnam had been directly connected on either of these trade routes.
We highlight that Vietnam previously only played a role as a feeder port, relying on the transhipment of containers through one of Asia's larger, better-equipped ports such as Singapore. Exposure to these routes is in large part attributable to the port's ability to handle ultra-large container ships, which are becoming the standard for shipping containers on Asia-Europe trade routes. This was demonstrated in December 2011, when CMA CGM's 13,820TEU Laperouse docked at the terminal. We believe CMIT's proven capacity for handling these vessels marks an important step for the terminal and will be a key driver of growth over the medium term, though in the near term there are significant hurdles to be crossed.
Overcapacity Remains A Threat
The rapid growth in Vietnam's port volumes has attracted ample international investment in port terminals. However, concerns are being raised about the possibility of overcapacity in the country's container port sector. This a particular concern for operators at the Port of Cai Mep. In 2006, international terminal operators secured stakes in nine terminals at the port after the government invited foreign investment, believing that rising throughput volumes would be quickly soaked up by increasing capacity. Five of the nine planned terminals are in operation in the Cai Mep area, but are working well below capacity, with as little as 20% of capacity at CMIT being utilised. With additional new facilities due to come online, BMI believes this is a considerable cause for concern. Further, as container shipping lines look to consolidate their services Vietnam, as a relatively new addition, is at risk of being struck from the ports of call.
The lack of container traffic seen at the beginning of 2012 also poses problems for ports in the province of Ba Ria-Vung Tau. Ports in the region have a total container handling capacity of up to 8mn TEUs; however, the actual demand only comes to around 5mn TEUs. Ports in the Cai Mep-Thi Vai region of Ba Ria-Vung Tau have been failing to attract a significant number of vessels, despite a total investment of over US$7bn by the end of 2011, according to reports. The region contains several modern container ports and is set to open several more facilities in 2012 and 2013. Industry analysts attributed the failure to a lack of infrastructure, which has caused capacity to remain largely underutilised. Only 62.5% of overall port capacity in the province of Ba Ria-Vung Tau is in use.
It is in this atmosphere of concern over having grown too much too soon that the construction of Van Phong International Transshipment Port has been halted at the behest of the Vietnamese Transport Ministry. The decision to shelve the planned port - originally proposed to be completed by 2020 - was undertaken by the Vietnamese Deputy Prime Minister, Hoang Trung Hai and was made public in September 2012.
The estimated cost of the project was set to be US$3.6bn and the construction work would have included 37 wharves at length of 12.5km. The initial stage of the project began in October 2009 and was pencilled in to be completed by the end of 2012; however, financial mismanagement meant that the project fell way behind schedule. Vinalines, the project's investor, was urged to alter its plans by the Vietnamese government and so the company came up with the idea of expanding the port in order to handle container vessels up to 12,000TEUs.
The deputy prime minister asked the Transport Ministry to look into the feasibility of raising domestic and foreign investment to fund the project, which is located in Hon Gom peninsula. The Van Phong port has become the target for criticism, as Vietnam's attractiveness for potential investors weakens. The Van Phong site was described as too far from any major manufacturing companies, and the state's role in neglecting better infrastructure at strategic locations is being highlighted.
Global Headwinds Alleviating In 2013
We forecast Vietnam's real GDP growth figure to climb to 7.0% in 2013 following an expansion of 5.0% in 2012; this expansion in 2012 was the slowest since 1999, and reflected the headwinds buffeting Vietnam's key trade partners, namely the US and China. However, the outlook for 2013 is looking more sanguine, resulting in our growth rate of 7.0%. This is in keeping with our more buoyant general outlook for the global economy which has seen us make a significant upwards revision to our China growth forecast for the year from 7.1% to 7.5%, and bump the US's growth projection up to 2.3% following the avoidance of the fiscal cliff.
However, over the longer term, imports will be boosted by Vietnam's young population, as younger populations are generally more supportive of private consumption. The country has a population of 90.7mn, according to estimates for 2013 by BMI, 60% of which is under 35. We forecast that the population will be 94.1mn by 2017, with 57% under 35, and will rise to 97.7mn by 2022.
Road And Rail Links Need Investment
The Vietnamese government plans to deepen the Port of Ho Chi Minh City's draught, allowing larger vessels to access the facility. BMI notes that these works are badly needed, as we are seeing a growing trend of lines ordering larger container vessels. Recognising the need to cater for bigger vessels, Vietnam's prime minister has directed the country's ministry of transport and its Maritime Administration to focus on developing deep water ports. A channel depth of about 14m is required for non-tide restricted access for vessels with capacity of up to 8,000TEUs.
BMI notes that while Vietnam's port sector has received plenty of investment, due to growing Intra-Asia trade volumes, the freight transport networks that link the ports with production and consumer centres are badly in need of investment. Growth in box throughput at the nation's ports has far outpaced investment in its freight transport network. In 2010 (latest available data), total container throughput at the country's ports reached 5.98mn TEUs, up 550% from the 919,264TEUs handled in 1999.
With a rating of 123 out of 142 in the World Economic Forum's 2011-2012 Global Competitiveness Report, Vietnam's road infrastructure is the regional underperformer, trailing well behind regional leaders Singapore and Hong Kong. The country's rail infrastructure fares slightly better, with a score of 71 out of 123, placing it just ahead of the regional underperformer the Philippines. BMI believes there must be more private and state investment in developing these links if the country's ports are to take full advantage of increasing trade volumes. - --Business Monitor International.---

Government Must Delay Launch Of Cai Mep-Thi Vai Port Complex

Government Must Delay Launch Of Cai Mep-Thi Vai Port Complex
The launch of the Cai Mep-Thi Vai port complex in the southern region must be postponed by the government of Vietnam. This was proposed by Vietnam Business Forum 2012's Infrastructure Working Group and representatives from some foreign-invested businesses providing port services, it was reported in December 2012. The complex is designed to handle the capacity surplus at seaport group 5, covering Ho Chi Minh City and Southern Ba Ria-Vung Tau province. An investment of US$660mn is required for the Cai Mep-Thi Vai project and a major share of the total investment has been received from ODA funds. Meanwhile, up to 90% of the construction work on the project has been reportedly concluded so far. However, the Ministry of Transport is still requesting that the Vietnam Maritime Administration go ahead with a bid to lease the port, which is scheduled to be completed in June 2013. Meanwhile, the businessmen said that the launch of the port in June 2013 would result in worsening the surplus situation in southern deep-water container ports.
CSCL Launches New Container Service
Chinese shipping company China Shipping Container Line announced that it has launched a new service between Haikou and Ho Chi Minh in Vietnam, reported Transport Weekly in November 2012. Haikou is located on the island of Hainan. The direct container service will operate on a weekly basis. It is intended to facilitate the transportation of products, including coconuts, fruit, rice and rubber, between Hainan and Vietnam.
Saigon Port Relocation Project Update
The Saigon Port relocation project in Vietnam has not made any considerable progress, owing to capital shortages, reported the Saigon Times Daily in December 2012, citing Saigon Port Company Deputy Director Huynh Van Cuong. 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.
The company is due to complete the construction of a 200m pier, but the road linking Hiep Phuoc Industrial Park with the current port has yet to be expanded. The company is preparing a proposal that is to be lodged with the transport and finance ministries, which will invite companies for the construction of the road to the Hiep Phuoc Port. Companies will be required to use their own capital for the road construction project.
DP World Praises Dredging Project
The official start of dredging work taking place at the Soai Rap river in Vietnam at the end of November 2012 was welcomed by global marine terminal operator DP World. The USD134mn project is aimed at improving transportation, reduce costs and should ensure that the navigation channel will become operational by the final quarter of 2014.The project is expected to take some 10 months and will encompass the dredging of an area some 54 kilometres in length, which will enable 50,000 to 70,000 gross tonnage ships to traverse the river, once the channel has been deepened to a 9.5 metre draft. A joint venture, Dredging International NV - Construction Consultation JSC for Maritime Building, was awarded the dredging contract back in June 2012.Senior Vice President and Managing Director DP World, Asia Pacific Region, Peter Wong explained: 'We are delighted to witness the start of this project. The deepened channel will be of great benefit to our customers who will be able to transport their products in larger ships and reach markets more quickly thanks to the new channel capacity.'It will also contribute to the development of the economic zones of HCMC and the South Economic Focus area, providing a new major transport artery for trade to develop and grow. The Saigon Premier Container Terminal (SPCT) was designed with this project in mind and we look forward to its completion,' he added.
Foreign Ships To Be Limited In Vietnam
Vietnam began the process of limiting foreign vessels operating in the country as of January 1 2013 in a bid to provide a boost for the domestic ship fleet. Vietnam's Ministry of Transport issued the ruling that will suspend licensing for foreign container ships in either three or six months from January 1, according to Vietnam News Briefs Service.
It is hoped that the regulation will provide a shot in the arm for around 24 domestic vessels and give them a foothold into an arena that is estimated to generate around US$47.6mn at present for foreign ships. The Vietnam Maritime Administration reckons that only 50% of the country's domestic container shipping fleet is being used at present, Vietnam News Briefs Service reports.
Business Monitor International

Friday 8 February 2013

Net exports remain the biggest downside risk to our outlook for the Vietnamese economy given that we expect external demand to remain sluggish as we head into H113; this will undoubtedly have a detrimental impact on the country's shipping sector. Despite recording an average monthly trade surplus of US$172mn since June 2012 (resulting in a year-to-date surplus of US$77mn), we do not see the case for a substantial pickup in external demand in the near term. Accordingly, we expect exports to expand at a moderate pace of 6.5% in 2013. We expect private consumption to grow at a relatively subdued pace of 4.9% in 2012 before accelerating towards 5.6% in 2013. However, we note that the risk of a sustained collapse in exports and further bankruptcies among SMEs, could potentially lead to widespread job losses in export-driven sectors. Indeed, the problems currently experienced at Vinalines are indicative of a deeper malaise in the Vietnamese shipping sector. State-owned shipbuilder Vinashin was bailed out in 2010 when its US$4.5bn debt threatened to bring down the entire Vietnamese economy.That said, we are sticking to our forecasts from last quarter for the Vietnamese shipping industry for 2013. Therefore, the Port of Ho Chi Minh City remains by far the country's largest port and will also be Vietnam's outperformer in terms of tonnage handled this year - forecast to increase 7.56% year-on-year (y-o-y) in 2013 to reach 38.75mn tonnes, compared with the Port of Da Nang's predicted annual growth of 4.33% (4.16mn tonnes). On the other hand, it will be the Port of Da Nang that will enjoy the higher levels of annual growth in terms of containers handled, with y-o-y growth set to come in at double figures in 2013, as opposed to the Port of Ho Chi Minh City's protracted growth of 8.03%.
Headline Industry Data
2013 tonnage throughput at the Port of Ho Chi Minh City is forecast to grow 7.56% to 38.75mn tonnes.
2013 tonnage throughput at the Port of Da Nang is forecast to increase 4.33% to 4.16mn tonnes.
2013 container throughput at the Port of Ho Chi Minh City is forecast to rise 8.03% to 3.48mn twenty-foot equivalent units (TEUs).
2013 container throughput at the Port of Da Nang is forecast to increase 10.54% to 133,366TEUs.
2013 total trade real growth is forecast to increase 5.70%.
Key Industry Trends
Government Must Delay Launch Of Cai Mep-Thi Vai Port Complex The government has announced that it is to delay the launch of the Cai Mep-Thi Vai port complex in the southern region, a scenario that was proposed by Vietnam Business Forum 2012's Infrastructure Working Group and representatives from some foreign-invested businesses providing port services, it was reported in December 2012. The launch of the port in June 2013 would result in worsening the surplus situation in southern deep-water container ports according to the group. CSCL Launches New Container Service
Chinese shipping company China Shipping Container Line has established a new service between Haikou and Ho Chi Minh in Vietnam, reported Transport Weekly in November 2012. Haikou is located on the island of Hainan. The direct container service will operate on a weekly basis. It is intended to facilitate the transportation of products, including coconuts, fruit, rice and rubber, between Hainan and Vietnam. Saigon Port Relocation Project Update
Progress has been slow at the Saigon Port relocation project in Vietnam, owing predominantly to capital shortages, the Saigon Times Daily reported in December 2012, citing Saigon Port Company Deputy Director Huynh Van Cuong. 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.
Key Risks To Outlook
The Thai and Vietnamese transport ministries have recommended that their governments extend the Khon Khen-Tien Sa Port road from the Laem Chabang Port in Thailand to Hanoi and Haiphong in Vietnam, reports the Saigon Times. The statement was made by Phan Thi Thu Hien, the deputy director of the Department of Transport and Legislation under the Directorate for Roads of Vietnam. The suggestion is aimed at improving the efficiency of the road as it is not being efficiently used by enterprises and if completed, this will provide upside risk to the industry going forward. The road, which will cover approximately 900km, will run along Ho Chi Minh Road from Lao Bao in Quang Tri to Hanoi and Haiphong. Hien added that the road was opened for traffic in June 2009; however, it was not used by any enterprise due to problems faced by transporters in supplying goods to deep inland areas. Ongoing upgrade work is a necessity if Vietnam's ports are to remain competitive and begin to make a foothold in what is an ever competitive region.In terms of downside risk, Vietnam's fortunes are very much intertwined with those of the US, considering the States are by far Vietnam's largest export partner so news of a sustained downturn in the US will come as bad news in difficult times. There are some risks to the US foreign trade outlook. While the Bush administration was firmly committed to broadening the US's free trade ties, the weakened domestic economy has put some pressure on the Obama administration to hold off on future deals for the time being. Nonetheless, the federal government approved two major free trade deals with South Korea and Panama in Q411 that had previously been put on the back burner. That said, there are some worrying signs, including the use of a 'buy American' clause in the recent fiscal stimulus package, and vocal concerns from the Treasury Department over the Chinese currency regime.
Downside risk also presents itself due to poor infrastructure in Vietnam as delays in the completion of road works to container terminals are hampering any attempts to make the country's biggest and deepest port, Cai Mep, use anything close to full capacity, according to the CEO for Asia Pacific of APM Terminals.
Henrik Lundgaard Pedersen said: 'There is a lot that can be done and should be done to attract larger vessels to make sure that you use the most modern port facility you have in Vietnam.'
Business Monitor International

Wednesday 6 February 2013

Cargo via Vietnam Ports Forecast to Rise in 2013: U.K. BMI

Cargo via Vietnamese ports is forecast to rise in 2013, the U.K. market researcher Business Monitor International (BMI) said.
Specifically, the cargo output via ports in the southern economic hub of Ho Chi Minh City will rise by 7.56% to 39 million tons this year while the container cargo output via the ports expected to rise by 8% to 3.48 million tons.
Meanwhile, ports in Danang forecast to handle 4.16 million tons of cargo in 2013, rising by 4.3% and 133,000 TEUs tons of container commodities during the year, up 10.54%, it noted.
According to BMI, in 2013-2017, Vietnamese seaports will act as transshipment ports, just like Singaporean ports do, thus they will receive more large ships instead of just the small vessels as before.
Vietnam now has over 100 ports of different kinds. However, it has a surplus of small ports and a shortage of large ones. Port construction boom without planning has led to a situation where many ports are operating at 20% or 30% of their capacity.

Saturday 2 February 2013

Developing Seaport Infrastructure In Vung Tau

Due to the woes continuing to plague the economy, the seaport performance in Ba Ria-Vung Tau Province and the country as a whole was poor last year. However, four new seaport projects are going to be put into operation in the province this year, contributing to improving the seaport infrastructure, and may make some headway this year.
Ba Ria-Vung Tau Province Department of Transport has announced that four more seaport projects, namely Vung Tau Petro, Cai Mep-Thi Vai International, SSIT and the first phase of Gemalink, will be put into operation this year.
The seaports will have a combined design capacity of about 20-25 million tons of cargo. The southern coast province in 2013 looks to achieve cargo throughput of around 50.7 million tons and serve roughly 125,000 passengers at local seaports. It will spend more than VND4.2 trillion developing the new seaports this year, up some 10% against last year.
Ba Ria-Vung Tau is now preparing to invest in 15 seaport projects at a total cost of about VND56 trillion, with 10 in Thi Vai-Cai Mep area, four in Long Son-Vung Tau area and one on Con Dao Island.
Ryoichi Matsuno, general director of Thi Vai International Port Co., told Ba Ria-Vung Tau newspaper that work on the international seaport would start in the second quarter and would be completed two years later. "Although the project is being completed during the tough times, we are still optimistic about the port's potential,?he said. "We believe that when the port is put into use, the economy will also recover.?
Matsuno added that ports around the Thi Vai-Cai Mep area are mainly container ports. So, when the Thi Vai seaport opens, it will be the only big port with various activities, including loading steel products. This is really an advantage.
There are 26 operational seaport projects in Ba Ria-Vung Tau Province with a total capacity of more than 76 million tons annually. However, these ports handled just 50.46 million tons of cargo in 2012, equivalent to some 94% of the 2011 figure. The Thi Vai-Cai Mep complex has 14 projects and the Vung Tau-Long Son area has 11 projects. Ben Dam Port on Con Dao Island serves as a general port, including seafood handling.
Cargo throughput at the ports was 50.46 million tons in 2012, down 6% compared to 2011. Container throughput increased to 7.58 million tons (6.42 million tons in 2011) but transit container throughput decreased by 30%. The number of international passengers going to the country through the ports was put at more than 82,000 people last year, or 88% of the number recorded in 2011.
Overcoming difficulties
Since container seaports around the Cai Mep-Thi Vai area have been put into operation, particularly after successfully accommodating big vessels, some firms started to bring their mother vessels to the area to load containers. Especially, 16 new maritime routes have been set up to ship containers from Vietnam to Europe and the U.S. However, due to the ongoing economic crisis, over the past year, some foreign shipping firms have cut at least seven direct routes from Europe and the U.S. to the Cai-Mep Thi Vai area. The remaining nine routes are enough to create fierce price competition among seaports. This makes the prices of stevedoring services go down strongly, costing less than US$40 per 20-foot container, impacting business operation of ports, especially newcomers.
In addition to the economic turbulence, the slow relocation of seaports along the Saigon River and Ba Son Shipyard has a negative impact on seaports?activities of Ba Ria-Vung Tau. By this time, only Saigon New Port had completed the relocation while others had removed a part. Due to the delay, many container ships still flock to ports in HCMC, instead of those in the Cai Mep-Thi Vai area, which have had infrastructure ready to welcome the relocated seaports from HCMC as well as container ships. So there is a big gap between supply and demand here.
Talking with Ba Ria-Vung Tau newspaper, Nguyen Xuan Ky, deputy general director of Ca Mep International Seaport, said that to handle the long-lasting difficulties, enterprises must proactively carry out proper solutions, limiting mistakes. "Besides, the Government should quickly approve suggestions or master plans as well as issue new breakthrough policies to better the performance of the port complex,?he said. Some of the policies are reducing maritime charges, setting up a seaport authority and creating favorable conditions for the transportation of exports from the northern and central regions.
Meanwhile, Nguyen Thu Trang, deputy general manager of Baria Serece Joint Stock Company, the operator of Phu My deepwater port, said the port only handled 4.7 million tons of containerized goods, down 14.5% compared with the initial target. To solve the problem, the port has boosted marketing, reduced some spending and applied advanced technology. "It is forecast that the economic difficulty still exists in 2013, so port operators need to improve marketing, reduce expenditures and improve customer care,?she said.
To enable the Southern Focal Economic Hub to play a real part in the country's development and to help localities in the hub develop, it is necessary for the Ministry of Transport to boost the relocation of seaports along the Saigon River. The ministry also needs to issue a new policy to connect localities in the region in seaport cooperation. This not only helps bring benefits for each locality but also avoids overlapping and weak performance of each locality.
Saigon Times Group

Wednesday 30 January 2013

Infrastructure: Vietnam Inaugurates Japan-funded Int’l Port Complex

Vietnam’s Ministry of Transport and the Japanese International Cooperation Agency (JICA) jointly inaugurated Thi Vai-Cai Mep international port complex in Ba Ria-Vung Tau province’s Tan Thanh district.
The project, with total cost of VND13 trillion ($619 million), the majority of which comes from the JICA, was started in Oct 2008 by the Ministry of Transport’s Project Management Unit 85 (PMU85).
The first of the six bidding packages is building Cai Mep container port capable of receiving 100,000DWT ships and the second one is building Thi Vai port capable of receiving 50,000DWT ships.
Approved in 2004, the project was completed with the participation of some Japan contractors including Toa-Toyo, Penta-Rinkai, Penta-Toyo, IHI-MES and two domestic contractors including Cienco6-Truong Son and Maritime Safety Corp. In addition, Japanese JPC-Nippon Koei was the major supervisor of the project.
The project aims to form a system of consistent deep water seaports, infrastructure facilities and modern logistics services to meet the increasing demand for transportation in the southern region.
The complex will support direct maritime routes from Vietnam to other countries and cut travel time and cost, helping speed up the relocation of ports to HCM City’s suburban areas and ease traffic pressure in the city.
According to the Vietnam Port Association (VPA), Vietnam has 30 ports with 166 harbors and 350 wharfs. The logistics industry has attracted a number of foreign investors.
Toan Viet Limited Company

Vietnam: Vietnam opens its largest and deepest seaport

The Ministry of Transport today opened the Cai Mep Thi Vai International Port in the southern province of Ba Ria Vung Tau, the country's deepest and biggest seaport, which designed to meet the increasing demand of container shipping in the South.
The VND13 trillion (US$619 million) project, funded by ODA loan of JICA and counterpart budget of Vietnam government, will also open direct shipping channels with other domestic and international ports worldwide, cutting the intermediate and transit shipping costs
"The project will also help increase the social economic development of Ba Ria Vung Tau in particular and the southern region in general while save other ports in the South from overload burdens." said Deputy Prime Minister Hoang Trung Hai.
Hai said the port, which marks 40th years of relationship between Vietnam and Japan, will also play as a shipping hub connecting countries in the Mekong region.
He told the port's management board to fully ultilise the ports and operate the ports with safety.
According to transport Vice Minister Nguyen Van Cong, with direct channels and access roads, the ports will play an important role in attracting foreign directo investment (FDI) to the region as well as international maritime forwarders from the USA, Denmark, Singapore, Japan and Hong Kong".
Cong said the project built an international gateway which is capable of Vietnamese exports directly to Europe and North America ports without the need to stop at international transit terminals in the region.
"This shall enhance the the competitiveness of Vietnam exports while consolidating the postion of Vietnam in the world maritime transport" Cong added.
The project, managed by Ministry of Transport's Project Management Unit 85 (PMU85), consists of seven contract packages including four civil work packages, two equipment procurement packages and one supervision consulting service package.
Meanwhile, three most important packages of the project are Cai Mep Container Port, Thi Vai general goods port, bridges and roads connecting from National Highway 51 to the two ports.
The container port package includes two perths with total length of 600m which could accommodate 130,000 DWT vessels, and other facilities which could provide navigational capacity of 700,000 TEUs per year.
Meanwhile, the general cargo port have two perths with the m which total length of 600 cound serve 50,000 tonnes vessels and other port facilities that have loading and unloading capacity of 1.6-2 million tonnes per year.
The bridges and roads package includes 8.5 km road section and four lanes which could allow vehicles to run at the maximum speed of 80 km per hour.
Approved by the government in 2004, the project was completed with the participation of a number of Japan contractors include Toa-Toyo, Penta-Rinkai, Penta-Toyo, IHI-MES and two domestic contractors include Cienco6-Truong Son and Maritime Safety Corporation.
In addition, Japanese JPC-Nippon Koei was the major supervisor of the project.
According to the Vietnam Port Association (VPA), Viet Nam has 30 ports with 166 harbors and 350 wharfs.
Of these, only some that were rendered operational after 2006 are equipped with state-of-the-art loading and unloading facilities. This shortage has reduced loading capacity in Vietnam to only 50 percent compared to advanced ports in other countries in the Asian region.
Vietnamese logistics industry has attracted a number of foreign investors and there are currently close to 1,000 companies that have established in the country.
Meanwhile, Vietnamese companies are only able to supply simple logistic services. About 70 percent of the market share is captured by foreign companies; hence logistic services contribute little to the country's GDP.
The association says that Vietnamese logistic services have not yet fulfilled their potential. More than 90 percent of imported and exported commodities are transported via the sea and it is predicted that around 600 million tonnes of goods will be transported this way by 2015 and around 1,100 million tonnes by 2020.
Total container-handling capacity through ports is as much as 15.2 million twenty-foot equivalent units (TEU) as of 2015, and 29.2 million TEU as of 2020. - VNS
Thai News Service Co. Ltd.

Vietnam opens its largest and deepest seaport

The Ministry of Transport today opened the Cai Mep Thi Vai International Port in the southern province of Ba Ria Vung Tau, the country's deepest and biggest seaport, which designed to meet the increasing demand of container shipping in the South.
The VND13 trillion (US$619 million) project, funded by ODA loan of JICA and counterpart budget of Vietnam government, will also open direct shipping channels with other domestic and international ports worldwide, cutting the intermediate and transit shipping costs
"The project will also help increase the social economic development of Ba Ria Vung Tau in particular and the southern region in general while save other ports in the South from overload burdens." said Deputy Prime Minister Hoang Trung Hai.
Hai said the port, which marks 40th years of relationship between Vietnam and Japan, will also play as a shipping hub connecting countries in the Mekong region.
He told the port's management board to fully ultilise the ports and operate the ports with safety.
According to transport Vice Minister Nguyen Van Cong, with direct channels and access roads, the ports will play an important role in attracting foreign directo investment (FDI) to the region as well as international maritime forwarders from the USA, Denmark, Singapore, Japan and Hong Kong".
Cong said the project built an international gateway which is capable of Vietnamese exports directly to Europe and North America ports without the need to stop at international transit terminals in the region.
"This shall enhance the the competitiveness of Vietnam exports while consolidating the postion of Vietnam in the world maritime transport" Cong added.
The project, managed by Ministry of Transport's Project Management Unit 85 (PMU85), consists of seven contract packages including four civil work packages, two equipment procurement packages and one supervision consulting service package.
Meanwhile, three most important packages of the project are Cai Mep Container Port, Thi Vai general goods port, bridges and roads connecting from National Highway 51 to the two ports.
The container port package includes two perths with total length of 600m which could accommodate 130,000 DWT vessels, and other facilities which could provide navigational capacity of 700,000 TEUs per year.
Meanwhile, the general cargo port have two perths with the m which total length of 600 cound serve 50,000 tonnes vessels and other port facilities that have loading and unloading capacity of 1.6-2 million tonnes per year.
The bridges and roads package includes 8.5 km road section and four lanes which could allow vehicles to run at the maximum speed of 80 km per hour.
Approved by the government in 2004, the project was completed with the participation of a number of Japan contractors include Toa-Toyo, Penta-Rinkai, Penta-Toyo, IHI-MES and two domestic contractors include Cienco6-Truong Son and Maritime Safety Corporation.
In addition, Japanese JPC-Nippon Koei was the major supervisor of the project.
According to the Vietnam Port Association (VPA), Viet Nam has 30 ports with 166 harbors and 350 wharfs.
Of these, only some that were rendered operational after 2006 are equipped with state-of-the-art loading and unloading facilities. This shortage has reduced loading capacity in Vietnam to only 50 percent compared to advanced ports in other countries in the Asian region.
Vietnamese logistics industry has attracted a number of foreign investors and there are currently close to 1,000 companies that have established in the country.
Meanwhile, Vietnamese companies are only able to supply simple logistic services. About 70 percent of the market share is captured by foreign companies; hence logistic services contribute little to the country's GDP.
The association says that Vietnamese logistic services have not yet fulfilled their potential. More than 90 percent of imported and exported commodities are transported via the sea and it is predicted that around 600 million tonnes of goods will be transported this way by 2015 and around 1,100 million tonnes by 2020.
Total container-handling capacity through ports is as much as 15.2 million twenty-foot equivalent units (TEU) as of 2015, and 29.2 million TEU as of 2020. - VNS

Tuesday 15 January 2013

South Vietnam Ports

Concerned by increased valuation of the Chinese currency, rising Chinese labor and benefits costs, and eastern China's less favorable tax treatment, companies began looking toward Vietnam for other global sourcing opportunities. With relatively plentiful young labor and plans to build new ports near Hanoi and Ho Chi Minh City, the Vietnamese government was working hard to attract new factories. However, the Vietnamese government was about 20 years behind its Chinese counterparts in export-related infrastructure investment.
By late 2006, production had migrated en masse to Vietnam and the production shift continues to this day. One furniture executive predicted that most of the furniture industry would soon be in Vietnam, but he also noted that Vietnam needed to upgrade its roads and its only deep-water port (Thomas, 2008). Furniture is one of the most space-consuming products and the United States' largest containerized imports by volume (U.S. Census Bureau, 2009). The value of furniture-classified exports from Vietnam to the United States increased 1,405 percent between 2002 and 2007 (U.S. Trade Statistics, 2009). Other industries such as toys and electronics moved into Vietnam between 2006 and 2008. For example, in 2006, Intel announced greater investment in Vietnam than in China over the previous decade (Folkmanis, 2006). The exports that moved via ocean put an enormous strain on the port infrastructure and the inadequate road infrastructure (Conti, 2009). Inflation spiked from an estimated 7.3 percent to over 25 percent by May 2008 (U.S. Department of State, 2008) as the country was impacted by rapid growth.
Cargo sat on the docks waiting for consolidation, and furniture containers congested roads to the various ports and the feeder vessels. To move from the outlying factories to the port, container trucks competed with motorbikes and cars on city streets. The new ports, scheduled for completion in 2009 at Hiep Phuoc and Vung Tau, offered little short-term relief. Trucks moving with the 40-foot "High Cube" containers popular for furniture and other light goods had to take circuitous routes or hire a person to push low-hanging telephone wires above the tall container during transport. Ocean freight companies began to levy new surcharges to consolidate freight and reduce the allowed dwell time for freight awaiting consolidation. Local landlords found that they could charge rates higher than Shanghai, Hong Kong and Los Angeles and receive a two and a half year payback on their warehouse investment (Anonymous, 2009b). Capacity issues caused delays in unloading ships that could cost $5,000--$6,000 U.S. per day. Prices to transport by air versus ship increased costs from around $1,100 U.S. per container to $32,000 U.S. per container (Tam, 2009). The performance impact of these unexpected changes was severe.
The theory of FMR provides a broad framework that suggests organizations be wary of FMR for inputs from adjacent and unrelated industries. However, it does not provide any specifics regarding when such risk may exist, only that it may. The above cases of Vietnam and China offshoring provide initial evidence for the following propositions:
  Proposition 1: Moving a significant quantity of offshore production
  to a new geographic area will create FMR for capacity of supply
  chain services. (2)

  Proposition 2: Firms that anticipate and plan for impending FMR for
  supply chain services from product and nonproduct-market rivals will
  experience better on time performance of goods produced in that
  region than those that only focus on the behavior of product-market
  competitors.

  Proposition 3: Firms that anticipate and plan for impending FMR for
  supply chain services from product and nonproduct-market rivals will
  experience better cost performance on goods produced in that region
  than those that only focus on the behavior of product-market
  competitors.
Shifting market conditions create these situations, and impair the organization's ability to achieve its sustainable competitive advantage. Although the first proposition may seem obvious, rivalry and its negative impact are commonplace in global markets; the rivalry for supply chain services often seems to be unanticipated, creating disruptive effects. When rivals in the same or different industries are using similar resources, effectively managing those resources becomes even more critical to a firm's competitive advantage (Sirmon et al., 2008). Perhaps more importantly, propositions 2 and 3 suggest that although such shortages may be inevitable, the ability to effectively cope with them by managing supply chain assets more effectively than others creates an opportunity to increase competitiveness.
The potential for logistics and other supply chain capacity problems should be obvious; however, the movement of manufacturing from China to Vietnam reveals that they are not. As Markman et al. (2009) point out, competitive blind spots evolve. Even when there is no product rivalry, mobile and versatile resources such as many types of unskilled and entry-level labor and transportation capacity, can cause new and unexpected firms to compete in factor-markets. Domestic examples presented in the following section further support that supply chain services are subject to FMR.
---Journal of Supply Chain Management Jan-2013

Thursday 3 January 2013

Haiti welcomes 2013 with Bold Strategic Alliance with Vietnam

PORT-AU-PRINCE, Haiti, Jan. 2, 2013 /PRNewswire/ -- The governments of Haiti and Vietnam are demonstrating that South-South cooperation can lead to the fruitful exchange of resources, technology and knowledge. A series of significant agreements signed in late December 2012 provide the framework for a novel form of long term cooperation that will allow Haiti to address food security, one of its key challenges.
The government of Haiti hopes that these agreements will enable Haiti to leapfrog development stages as it attempts to create a resilient agricultural production system. As 2013 rolled in, these agreements were already translating into concrete positive benefits including lower prices for rice, Haiti's key staple food.
According to Haitian Prime Minister Laurent Lamothe, "The principal goal of the agreements we have signed with Vietnam is to find innovative ways to insure food security for all of our citizens." Lamothe's strategic plan identifies ways to mitigate the impact of natural disasters on Haiti's food supply and to reduce its reliance on the import of agricultural products such as rice. The Haitian government's goal is to achieve self-sufficiency in the production of food.
The Vietnamese experience is particularly relevant to Haiti which imports most of the rice its citizens consume. In the past thirty years this small Southeast Asian country has gone from facing periodic food shortages in the aftermath of the war with the United State and being a net importer of rice, to becoming the world's second largest exporter of rice.
Improvements came by increasing land under cultivation, relying on technology to improve seeds and mountain rice production techniques, and by depending on smallholders rather than on large farming estates. In 2011 Vietnam produced 40 million tons of rice a year, most of it grown on 7.2 million hectares by some 10 million farming households each cultivating between one half to one hectare.
Vietnam will provide Haiti with technical cooperation to address the production of rice and other agricultural products. It will send experts to help introduce a progressive system of mountain rice production that includes the mechanization of agriculture, soil erosion prevention techniques, and the introduction of drought resistance rice varieties.
The agreements include a few immediate benefits for Haiti. Vietnam will supply Haiti with 300,000 tons of rice annually, which will address periodic food shortages. As part of the new relationship with Vietnam's Vietell, the state owned mobile network company donated 400 tons of rice. As a result, Haitians are welcoming 2013 with the price of rice 33 percent lower than last year.