As China becomes increasingly expensive as an outsourced manufacturing location, Vietnam has become a popular alternative. Foreign direct investment has leapt over the past year from $4.4bn in the first five months 2007 to $15.3bn in the same period this year. However Vietnam is suffering from more financial instability than China, with inflation running at 25% and the Vietnam Dong depreciating significantly.
The logistics infrastructure is also less developed than in China. Like its larger northern neighbour the economy is heavily dependent on goods flowing through container ports and airports. However the development of this sector remains poor.
After a recent fact-finding visit to the country, Transport Intelligence's Managing Consultant, Joel Ray, commented that "while there are many infrastructure plans in place, the execution of these is poor, with many completion dates scheduled for 2012 and beyond". For example the new Long Thanh airport complex in Saigon/Ho Chi Minh City is not scheduled for completion until 2010-12 with the cargo terminal not scheduled for completion until 2015. It appears that work has not yet started on the project.
The development environment is also quite different to China, with the local population able to object effectively to developments. For example, Mr. Joseph Wann Shang Jye, the manager of the Vietnam International Container Terminal in Ho Chi Ming City, cited the ability of local residents to block the building of a new road to the terminal due to their hope for higher compensation.
The port facilities in Saigon, the leading economic area in Vietnam, are constrained to ships of 1,00 TEU and docks are highly congested. There are four big new container ports being built by DP World, APM Terminals and HPH south-east of Saigon in the region of Cai Mep and Thi Vai. However these face the problem of moving goods across the Mekong Delta which requires substantial improvement in bridges across the region's many rivers as well as an improvement in the local roads. Again these types of developments tend to be severely delayed by objections by the local population.
Consequently Vietnam faces a number of big challenges. Not only is its macro-economic environment difficult in the short-term but it is having big problems in delivering the logistics infrastructure which is a prerequisite for realising its economic potential.
Transport Intelligence
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