Tuesday, October 02, 2007

Vietnam's seaports: good destinations for foreign investment now

09:41' 01/10/2007 (GMT+7)

VietNamNet Bridge – The government of Vietnam has been calling for foreign investment in domestic seaport system development, and foreign investors have responded enthusiastically.

Seaports in Vietnam in deficiency or abundance?

Demand exceeds supply

Under the seaport development strategy by 2010, the seaport system is now capable of passing 100mil tonnes of goods. However, the actual volume of goods going through the ports has far exceeded the forecast level. In 2006, the figure reached 154,498 mil tonnes, an increase of 11.2% over 2005.

In fact, the error in forecasting was quickly realised and the overloading of Vietnam’s seaports was predicted. In December 2002, JICA estimated that the total volume of dry goods going though the ports in the southern key economic zone would be 50.13mil tonnes by 2010, including 2.27mil TEUs of container goods. Meanwhile, in 2005, the volume of goods going through the ports in HCM City alone (Saigon, Tan Cang, Ben nghe, VICT and Phuoc Long) reached 35mil TEUs, including 2.2mil TEUs of container goods.

The seaport development programme for the southern key economic zone released in 2005 forecast that the total volume of dry goods going though the regional ports would reach 52.9mil tonnes by 2010 (not including liquid goods and passengers). In 2005, the actual volume of goods going through HCM City’s main ports was 35mil tonnes, including 2.2mil TEUs of container goods. The figure would have been much higher if counting the goods going through other smaller ports in the region.

Experts said that with the expected annual growth rate of 15%, the total demand of put-through goods would be 70-80mil tonnes by 2010 for the southern key economic zone. As such, the zone alone will be overloaded by 20-30mil tonnes, and the situation will be more severe in 2007-2010, badly affecting the national economy, especially exports.

Big projects kick off

In a recent workshop on seaport development, Tan Hua Joo, Managing Director of APL Vietnam, said that if the current growth rate of exports was maintained, Vietnam would need some $5bil to build new and upgrade existing seaports.

In fact, foreign investment capital has been tapped into seaports since the second half of 2006, when a series of foreign invested projects kicked off.

In early August 2006, HCM City granted a licence to Saigon Central Container Port Company SPCT, the joint venture between Britain’s P&O Ports Saigon Holding Ltd and Tan Thuan Industrial Development Company IPC. The legal entity will spend $249mil to develop the internationally standardised container port, which has the harbour length of 950 m, and expected capacity of 1.5mil TEUs.

Meanwhile, the Ministry of Planning and Investment said that many other seaport projects were under implementation. These include the$187mil joint venture between Denmark’s Maersk A/S, Saigon Port and Singapore Port, which will develop the upstream port of Cai Mep-Thi Vai. If the port can be put into operation in 2010 as initially planned, the new port with two piers will have the handling capacity of 950,000 TEUs a year. A joint venture between Saigon Port and Singapore Port will build and develop a downstream port, Cai Mep-Thi Vai, scheduled to be operational in 2010.

Japan’s Sumitomo plans to build the Van Phong General Economic Zone with the total investment capital of more than $600mil. The main part of the project is a regional container port, which will be the impetus for the development of nearby urban and tourism areas. The list of big investment projects in Vietnam worth over $50bil includes ones on seaport development, and investors of seaport projects always make strong commitments on the construction process.

The Vietnam Shipping Lines Vinalines has been assigned by the government to be the main domestic investor in seaport projects. However, the corporation has also decided to cooperate with foreign partners to develop seaport projects. Vinalines has signed an MOU with US-based SSA marine on building wharfs No 2,3,4 in Cai Lan port in Quang Ninh province with the total capital of $100mil.

Vinalines is also considering calling for international cooperation, when preparing to implement projects on building the international transit port of Van Phong, capable of receiving 10-12,0000 container ships, and Lach Huyen deep water port, capable of receiving 60-80,000 tonne ships.

Most recently, in January 2007, Credit Suisse agreed to lend Vinalines $1bil to develop its fleet and build ports. The government has also decided to reserve $500mil out of the $1bil worth of international bonds to be raised this year’s end to build ports and develop its fleet.

Investors have all committed to speeding up the construction processes of the projects, and making thorough preparations for the projects, which shows that they are well aware of the opportunities and the attractiveness of investment in Vietnam’s seaports.

Phuoc Ha