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Vietnam Infrastructure Report Q4 2011
Business Monitor International, Aug 2011, Pages: 102
Business Monitor International's (BMI) Vietnam Infrastructure Report (Q4 2011) 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.
With inflation still on the rise and interest rates likely to remain elevated until the end of the year, construction companies facing liquidity difficulties will remain unwilling to take up large-scale projects and carry out construction work that requires significant capital. That said, BMI’s near-term outlook for Vietnam’s construction sector is bearish, with real growth expected to slow to 4.0% in 2011. However, BMI holds a buoyant long-term outlook for the sector due to robust economic growth and an improving business environment for long-term fixed asset investment. BMI is forecasting construction sector growth to average 6.3% per annum between 2011 and 2015.
Major developments over the last quarter include:
- In July 2011, Vietnam launched a pilot competitive generation market, with the aim of gradually paying private generating firms market rates for their electricity – to spur them to boost supply. A total of 48 of the country's 73 power plants that have a capacity greater than 30 megawatts (MW) joined the competitive market in the same month, with 5% of their power to be sold to Electricity of Vietnam (EVN) on a cost-based price per hour basis.
- In July 2011, EVN announced that it will invest US$39bn in building an additional 95 power plants with a total capacity of around 49,000MW over the next ten years. A total of 38 of these will be constructed between 2011 and 2015. To meet this target by 2015, EVN would require investment of US$3bn a year for new power plants and transmission infrastructure between 2011 and 2015.
- In July 2011, the much-delayed 12.5km metro rail project in Hanoi was slated for completion one year behind schedule in 2016, according to Railway-Technology. Continued funding for the US$1bn project has been provided by the Asian Development Bank (ADB) and the European Investment Bank (EIB), along with the French government and the French Development Agency. Once completed, the rail line will run from Hanoi's main station in the city's Hoan Kiem district to the eastern Nhon area.
Vietnam’s business environment continues to be an issue, achieving a score of 53.7 in BMI’s Business Environment Rating matrix. Although the country’s infrastructure market continues to score quite well, downside risks from market volatility and country risk have further dragged down the overall score.
Corruption still remains a problem and is likely to continue to impede infrastructure development until government reforms can change the landscape. Yet, with increased foreign investment on the back of attractive growth rates there have been signs that the country is moving in the right direction in invoking structures (such as PPP regimes) to improve the business environment.
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