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Vietnam Freight Transport Q1 2011
Business Monitor International, Dec 2010, Pages: 43
Business Monitor International's Vietnam Freight Transport Report provides industry professionals and strategists, corporate analysts, freight transportation associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Vietnam's freight transportation industry.
At the end of August 2010, Vietnam was said to be considering establishing a joint venture (JV) to upgrade Phu Bai International airport in Thua Thien-Hue province. The government has urged the Ministry of Transport to submit a JV plan involving foreign investment to upgrade the airport. The country's Prime Minister Nguyen Tan Dung has approved a master plan to invest VND12.5trn (US$642mn) in the modernisation of the airport by 2020. The project will increase the airport's annual passenger capacity to 5mn by 2020 from the current capacity of 500,000 passengers, which will be further increased to 9mn passengers by 2030. The airport's annual cargo capacity will also be increased to 100,000 tonnes by 2020 and 200,000 tonnes by 2030. The Vietnamese government has ambitious plans to modernise and expand the country's airport infrastructure, though some plans - like the Long Thanh international airport - have been in the pipeline for years with little progress being made. However, the government's willingness to get projects off the ground provides grounds for optimism.
Moving into 2011, we believe Vietnamese macro-economic growth is being driven primarily by domestic consumption and infrastructure investment. On the negative side, exports are being constrained by what we see as a double-dip global economic slowdown led by important trading partners such as the US and China. A widening trade deficit will be a drag on growth. The interplay of these factors has led BMI to maintain our GDP estimate for 2010 at 6.7% growth, a rate we see slowing to 5.6% in 2011. Although these growth rates are slower than the high single-digit percentages experienced before 2009, they are still relatively supportive of the freight transport sector.
Over the next five years, we are predicting that growth will come out at a fairly vigorous annual average of 6.3%. Risks to this projection remain. Overheating is one of them, with the possibility of inflation rising too sharply. On the political front, the National Congress of the Communist Party due to be held in early 2011 is still a factor persuading the government to keep consumption levels expanding.
Road building and road usage are both expanding strongly. Indeed, it can be argued that a large part of the country's economic growth is road-based. In 2011, we see a relatively moderate growth rate of 6.9% to 30.19bntkm.
Vietnam's airfreight industry is recovering modestly against the background of a troubled global aviation sector, with repercussions from the European volcanic ash crisis in Q210 also playing a part. In Vietnam itself the industry is beginning to experience intense competition. In terms of air cargo volume, BMI sees growth of 5.3% to 147,910 tonnes in 2011, compared to growth of 2.1% in 2010.
BMI is projecting strong growth in 2011 volume handled at the Port of Ho Chi Minh City (also known as SNP, Saigon New Port), up by 7.5% to 21.84mn tonnes, after the 6.2% rate estimated in 2010. Going forward, we believe growth will be vigorous. SNP is also expected to see 4.4% container handling growth to 2.627mn TEUs in 2011, following growth of 3.5% experienced in 2010. At Da Nang Port (DNP) we see 2011's volume gaining by 2.8% to 2.68mn tonnes. DNP will see box growth of 7.1% to 58,919 TEUs Rail freight carried increased by an estimated 6.7% in 2010, and is set to experience a bit of a slowdown in 2011, with growth of 4.7% to 4.251bntkms. This suggests that Vietnam will not be making the most of the potential of rail, one of the most fuel-efficient forms of bulk transport.
In real terms, Vietnam's total trade (imports + exports) recovered by 5.4% in 2010, a rate which we see accelerating slightly to 6.2% in 2011 despite the effects of the 'double dip' global economic slowdown.
Over the five years to 2014, we calculate that total foreign trade will expand at an annual average rate of 6.5%, just ahead of the growth of the economy as a whole (+6.3%). Over this period, exports will grow at an average per annum rate of 7.3%, ahead of imports at 5.9%. In nominal terms, exports will gain 15.4% to US$73.37bn in 2011, while imports will grow 14.9% to US$87.0bn. We expect Vietnam to continue to run a balance of trade deficit throughout our five-year forecast period running to 2014. In the immediate short term, the deficit will widen as the growing economy sucks in more imports, despite the effects of two devaluations of the Vietnamese dong (in November 2009 and February 2010).
Vietnam's principal export commodities are crude oil and manufactured goods. The country's main imports are machinery and equipment.
Vietnam's main export partners are the US, Japan, Australia, China and Germany. The country's main sources for imports are China, Singapore, Japan, South Korea and Thailand. Vietnam's geographic position on the South China Sea allows the country access to the main transpacific and intra-Asian shipping routes, enabling the country to meet its trading needs.
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