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Vietnam Infrastructure Report Q4 2010
Business Monitor International, Aug 2010, Pages: 88
Vietnam Infrastructure Report provides industry professionals and strategists, corporate analysts, infrastructure associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Vietnam's infrastructure industry.
Vietnam’s construction sector retains significant promise moving into 2010 but continues to be held back by the regulatory environment in the country. Improving economic conditions in the region have helped to buoy industry value with BMI increasing its estimate from last quarter to US$7.6bn for 2010. Growth will remain strong over the forecast period as industry value soars to US$16.8bn by 2014 on the back of increasing foreign investment.
Key drivers from the past quarter include:
- The decision by the Vietnamese government to push for faster implementation and development of public-private partnerships (PPPs) for upcoming infrastructure projects. The move was announced at a conference held in Ho Chi Minh City in July. To entice investors, the Vietnamese government plans to give PPPs priority in projects that are highly feasible and expected to have the highest returns. A major problem with infrastructure projects in Vietnam had been the severe delays in project executions, due to inadequate planning and land clearance delays. To allay such fears, the Vietnamese government is prepared to set aside a sum of money to compensate business and property projects that have been delayed.
- Governmental plans to test a new build, operate and transfer (BOT) tender model for electricity projects, with the launch of the tender for the Nhhi Son 2 coal fired power plant in June 2010. The nebulous regulatory and legal environment governing Vietnam's power sector is rendering the BOT/Independent Power Plant (IPP) model, for procuring new power generation, almost unworkable. The situation is a product of the tradition of state-owned EVN's monopoly of the entire power supply chain and Vinacomin's monopoly over fuel (coal) supply, both of which have hindered the development of private participation in the power generation sector.
- The energy sector gathered momentum with several power plant projects gaining approval. These included a 600MW thermal power plant, a 49.2 MW hydropower project in Danang city, a 30 MW wind power plant and a coal-fired power station.
The outlook is strengthening for the country’s infrastructure sector; however, it is too early for changes to affect the sector’s forecasts and ratings. New PPP regulations offer the potential to revolutionise project financing in the country, but at present Vietnam still languishes near the bottom of BMI’s Project Finance ratings with a score of just 47.4. Corruption remains a major issue and while official statistics show that construction industry value accelerated in 2010 the true growth rate is doubtlessly impeded by lack of supporting business environment. Investments in transport reached VND3.2bn (US$1.7bn) in May 2010, since the beginning of the year supporting BMI’s forecast for upside in the sector to the end of the year. Vietnam’s business environment continues to be an issue for the country and this quarter saw it slip one place in the regional ratings. Although its business environment score stayed more or less static at 52.9 other countries in the Asia Pacific region started to see stronger growth as economic conditions improved. The country’s infrastructure market scored well; however, downside risks from market volatility and country risk dragged down the overall score.
Corruption still remains a problem for Vietnam and is likely to continue to impede infrastructure development until government reforms can change the landscape. With increased foreign investment on the back of attractive growth rates there are signs that the country is now moving in the right direction in invoking structures to improve the business environment such as public private partnership (PPP) regimes
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