Saturday, December 15, 2007

Vietnam's traffic is a mess

Looking for another avenue
00:01' 10/12/2007 (GMT+7)

VietNamNet Bridge - In any day of the week, you will see traffic snarl up Ho Chi Minh City’s already chaotic streets. Motorbikes, cars and bicycles are stuck for hours in narrow fume-clogged streets to the sound of a cacophony of horns.

The number of vehicles is increasing, while city streets are too narrow aggravating traffic jam. It is estimated that traffic jams cost the nation’s economic heart about $875 million per year.

Ho Chi Minh City is in the midst of an economic boom, but traffic jams are the scourge of the city. It is inhibiting, even restricting the city’s development.

The slow development of transport infrastructure is a hot issue that businesses, both foreign and local, are demanding be addressed by authorities.

Vietnam began its economic renovation programme in 1986 and the economy has recorded strong growth as it attempts to integrate with the emerging international order. Last year, the country’s economic growth was 8.2 per cent and it is expected to reach 8.7 per cent this year.

Over the past decade, the transport sector has positively contributed to Vietnam’s economic growth. Developing large-scale transport infrastructure in Vietnam has helped open up new business opportunities and promote income diversification and off-farm employment, facilitating the spread of economic linkages between growth centres and their surrounding rural areas, proving the importance of connecting remote areas to trunk routes with feeder roads.

However, the demand for transport is growing rapidly in line with the country’s economic development leaving transport infrastructure in a cloud of dust.

“Our country’s transport infrastructure is in a poor situation, with a small scale and limited capacity, which does not meet technical requirements or create smooth connections,” said Tong Quoc Dat, vice head of the Ministry of Planning and Investment’s Infrastructure and Urban Area Department.

According to a report from market researcher Business Monitor International, Vietnam’s road network is in a poor condition with only around 35 per cent of roads covered with asphalt. Improvements in network capacity and connectivity have led to truck speeds increasing from 40 to 50 kilometres per hour on average and bus speeds increasing from 50-60km/h to 70-80km/h on some routes.

However, increasing vehicle numbers and traffic speeds are not being met by infrastructure development.
Many transport infrastructure projects like the Ho Chi Minh national road, Lang-Hoa Lac expressway, Hanoi-Haiphong highway and a number of highways in the southern region, have been announced, but often little work has been completed. Investors and enterprises complain they would rather see action rather than words.

Vietnam needed to urgently build more highways to ease congestion situation and help enterprises save on transport costs, said Rick Howarth, general manager of Intel Vietnam.

Bridges are still a weak link in the system with 30 per cent of Vietnam’s 4,100 bridges restricted to low loads and 20 per cent are too narrow. Ferries were still operating in the northern and the southern economic zones, limiting the transport capacity of vehicles.

In the Southern Key Economic Zone, Dong Nai bridge is concerning many enterprises located in Dong Nai province and it is in danger of collapsing due to overloading. As a result, the government has announced a $100 million plan to build a new Dong Nai bridge.

The nation’s railway system is also coming off the rails. Communication equipment is outdated and only 40 per cent of the railway stations are supplied with semi-automatic signals. The quality of rail tracks and bridges is poor and many lines do not meet modern technical standards. Most of the investment in the sector is directed at strengthening bridges and stopping the network from deteriorating further. As a result, trains operate at low average speeds of 40 and 22km/h for passenger and freight trains respectively.

Ports and airports are also under strain. The country has 266 ports, but the lack of deep-seaport and poor port infrastructure is black cloud covering port sector development.

Nguyen Manh Kiem, chairman of Vietnam Construction Association, said: “Compared with developed countries in the region, Vietnam transport infrastructure is under average level.”

To improve infrastructure system, the Vietnamese Government recently raised its transport infrastructure investment. But, is it enough?

According to a World Bank report, transport expenditure in Vietnam increased by 21 per cent, per annum between 1994 and 2002.

“The large increase reflects the strong commitment of the government to modernise the transport system to support economic growth and is consistent with its policy to prioritise investment in transport infrastructure,” the report stated.

However, the construction of transport infrastructure was facing many difficulties, said Transport Minister Ho Nghia Dung.

The slowness in funds disbursement is one of the main difficulties of transport infrastructure development. During the first 10 months of this year, only $252 million was disbursed for transport infrastructure, accounting 64.2 per cent of government’s plan this year.

According to a prediction from Vina Capital chief executive officer Don Lam, the country needed about $40 billion between now and 2020 to develop its transport infrastructure.

The government was calling for investment from foreign investors and the private sector into large-scale infrastructure projects.

Nguyen Bich Dat, Deputy Minister of Ministry of Planning and Investment, said: “With a limited budget and a looming deadline for preferential financing, we urgently need capital.”

Another reason for the slow development of transport infrastructure is the problem of site clearance. Many infrastructure projects have failed to meet construction deadlines due to site clearance difficulties, with the Lang-Hoa Lac expressway, Thanh Tri bridge and Ho Chi Minh national road glaring examples.

Vietnam is considered one of the most attractive locations for foreign investment. Last year, about $12 billion was invested in Vietnam and the number is expected to reach $16 billion this year.

Most foreign direct investment (FDI) is channeled into locations with good transport infrastructure. Binh Duong, Dong Nai, Ho Chi Minh City, Hanoi, Ba Ria-Vung Tau and Vinh Phuc are the best locations for attracting FDI due to favourable transportation. However, transport infrastructure systems in these provinces are becoming congested.

Many investors are becoming concerned about Vietnam’s infrastructure development.

In order to ensure an 8 per cent economic growth rate after joining the World Trade Organization, infrastructure investment must increase to about 11 to 12 per cent of the nation’s gross domestic product instead of the current 9 to 10 per cent.

“If the transport infrastructure system is not improved, the attraction of FDI will surely be impacted,” said Tong Quoc Dat.

He added that poor transport infrastructure could stop investors from disbursing investment capital. “Transport costs will rise and safety will be compromised due to the congestion and low quality of transport infrastructure,” said Dat.