Q1 2010

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VietnaM

freight transport Report
INCLUDES 5-YEAR FORECASTS TO 2014

ISSN 1750-5364
Published by Business Monitor International Ltd.


Vietnam Freight Transport
Report Q1 2010
Including 5-year industry forecasts by BMI

Part of BMI’s Industry Survey & Forecasts Series
Published by: Business Monitor International
Publication date: December 2009

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Vietnam Freight Transport Report Q1 2010

© Business Monitor International Ltd

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Vietnam Freight Transport Report Q1 2010

CONTENTS

Executive Summary .........................................................................................................................................5
SWOT Analysis.................................................................................................................................................6
Vietnam Road Haulage SWOT............................................................................................................................................................................... 6
Vietnam Political SWOT ........................................................................................................................................................................................ 6
Vietnam Economics SWOT .................................................................................................................................................................................... 7
Vietnam Business Environment SWOT................................................................................................................................................................... 7

Business Environment Ratings ......................................................................................................................8
Table: Asia Pacific Freight Business Environment Ratings................................................................................................................................... 8
Freight Industry Ratings ........................................................................................................................................................................................ 9
Transport Intensity Index..................................................................................................................................................................................... 10
Vietnam Logistics Performance Index (LPI)........................................................................................................................................................ 10
Economic Risk Summary...................................................................................................................................................................................... 10
Political Risk Summary........................................................................................................................................................................................ 11
Business Environment Risk Summary .................................................................................................................................................................. 12
Legal Code/Corruption........................................................................................................................................................................................ 12
Red Tape.............................................................................................................................................................................................................. 12
Labour Force....................................................................................................................................................................................................... 13

Industry Trends And Developments ............................................................................................................14
Road .................................................................................................................................................................................................................... 14
Rail ...................................................................................................................................................................................................................... 14
Air........................................................................................................................................................................................................................ 14
Sea ....................................................................................................................................................................................................................... 15

Industry Forecast Scenario ...........................................................................................................................17
Global Oil Products Price Outlook...................................................................................................................................................................... 17
Table: Oil Product Price Assumptions, Q108-Q409 (US$/bbl)............................................................................................................................ 19
Table: Oil Product Prices, 2007-2014 (US$/bbl) ................................................................................................................................................ 20
Macroeconomic Outlook...................................................................................................................................................................................... 21

Table: Vietnam – Economic Activity, 2006-2014................................................................................................................................................. 23
Transport Outlook ............................................................................................................................................................................................... 23
Table: Freight Transport Data And Forecasts, 2006-2014.................................................................................................................................. 24
Table: Freight Carried, Domestic, 2006-2014 (mn tonnes-km) ........................................................................................................................... 25

Trade Environment.........................................................................................................................................26
Table: Total Value Of Imports By Category, 2006-2014 (US$mn) ...................................................................................................................... 27
Table: Value Of Exports By Category, 2006-2014 (US$mn)................................................................................................................................ 28
Table: Vietnam’s Top Export Destinations, 2002-2006 (US$mn)........................................................................................................................ 29
Table: Vietnam’s Export Trade, 2003-2006 (% growth y-o-y)............................................................................................................................. 30
Table: Vietnam’s Import Trade, 2003-2005 (% growth y-o-y)............................................................................................................................. 30
Table: Vietnam’s Top Import Sources, 2002-2006 (US$mn) ............................................................................................................................... 31

Market Overview.............................................................................................................................................32
Multi-Modal.............................................................................................................................................................................................................. 32
Competitive Landscape........................................................................................................................................................................................ 32
Road.......................................................................................................................................................................................................................... 35

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Vietnam Freight Transport Report Q1 2010

Infrastructure....................................................................................................................................................................................................... 35
Competitive Landscape........................................................................................................................................................................................ 35
Rail ........................................................................................................................................................................................................................... 39
Infrastructure....................................................................................................................................................................................................... 39
Competitive Landscape........................................................................................................................................................................................ 39

Air............................................................................................................................................................................................................................. 42
Infrastructure....................................................................................................................................................................................................... 42
Competitive Landscape........................................................................................................................................................................................ 42
Company Profile: Vietnam Airlines ..................................................................................................................................................................... 46
Water ........................................................................................................................................................................................................................ 48
Infrastructure....................................................................................................................................................................................................... 48
Maritime Competitive Landscape ........................................................................................................................................................................ 49
Company Profile: Vietnam Petroleum Transport Jsc (VIPCO) ........................................................................................................................... 55
Table: Vietnam Petroleum Transport’s Key Financial Data................................................................................................................................ 56
Company Profile: Doan Xa Port.......................................................................................................................................................................... 57
Table: Doan Xa Port’s Financial Performance ................................................................................................................................................... 58
Pipelines ................................................................................................................................................................................................................... 59
Competitive Landscape........................................................................................................................................................................................ 59

Country Snapshot: Vietnam Demographic Data .........................................................................................60
Section 1: Population........................................................................................................................................................................................... 60
Table: Demographic Indicators, 2005-2030........................................................................................................................................................ 60
Table: Rural/Urban Breakdown, 2005-2030 ....................................................................................................................................................... 61
Section 2: Education And Healthcare.................................................................................................................................................................. 61
Table: Education, 2002-2005 .............................................................................................................................................................................. 61
Table: Vital Statistics, 2005-2030........................................................................................................................................................................ 61
Section 3: Labour Market And Spending Power .................................................................................................................................................. 62
Table: Employment Indicators, 1999-2004 more recent?]................................................................................................................................... 62
Table: Consumer Expenditure, 2000-2012 (US$)................................................................................................................................................ 62

BMI Methodology ...........................................................................................................................................63
How We Generate Our Industry Forecasts .......................................................................................................................................................... 63
Transport Industry ............................................................................................................................................................................................... 63
Sources ..................................................................................................................................................................................................................... 64


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Vietnam Freight Transport Report Q1 2010

Executive Summary
Container shipping line APL said in October 2009 that it was launching a new Japan-Thailand-Vietnam
(JTV) service to strength its regional short sea network and to better service local manufacturing and
consumption markets. Starting from October 30 the service would link Japan, South China, Hong Kong,
Thailand and Vietnam. Three ships would operate the JTV, each with a 1,200 twenty-foot equivalent
units (TEU) capacity. Jason Wong, APL vice-president for Inter-Asia was quoted in the media saying ‘the
new service will support a trading circle encompassing key origins and destinations ranging from South
East and East Asia to North Asia’. The port rotation was listed as Tokyo, Yokohama, Kobe, Chiwan,
Hong Kong, Laem Chabang, Ho Chi Minch City, Kaohsiung, and back to Tokyo.

Since our last report we have raised our macroeconomic forecasts for Vietnam. After GDP growth in
2008 of 6.2% we have now boosted the estimate for 2009 to 5.1% growth (was 2.0%). Our forecast for
2010-2014 is for an annual average GDP growth rate of 7.3% per annum, on a par with the also 7.8%
average rate achieved in the preceding five-year period. We maintain some adjustments to mode-specific
freight carried forecasts. In road haulage, we have trimmed our forecast to take account of the global
downturn and lower freight demand. We still see road-freight turnover running ahead of the general rate
of economic expansion in Vietnam. Air freight is beginning to emerge from a difficult period. WTO
membership has been supportive of greater freight transport turnover relative to GDP across all modes,
but particularly so for shipping. On the downside, the 2009 contraction in trade had a particularly strong
impact on shipping and Vietnam is expected to export less coal by sea as its domestic power needs rise.
The net result of this is that we expect freight carried growth across all modes, measured in million tonne
kilometres (mntkm), to average 7.6% a year in 2010-2014.


According to our latest estimates, transport and communications GDP will have risen by 6.3% in 2009,
1.2 percentage points (pps) faster than overall GDP, which we estimate to have increased by 5.1%. For
the 2010-2014 forecast period, we expect the transport and communications sector to continue outpacing
the economy as a whole in value terms. It will achieve average annual growth of 8.3%, versus 7.3% for
overall GDP. The total value of transport and communications GDP will rise to US$7.6bn in nominal
terms by 2014, representing 4.5% of Vietnam’s GDP.

By modes, we project that air freight to be the fastest growing, rising by 9.5% per annum, followed by rod
haulage at 9.3%, pipelines (8.4%), rail (8.0%), and shipping (7.2%).

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Vietnam Freight Transport Report Q1 2010

SWOT Analysis
Vietnam Road Haulage SWOT

Strengths

ƒ Vietnam’s strong domestic growth rate coupled with its geography; a long country
stretching for thousands of kilometres on a north-south axis creates a need for longdistance freight haulage

Weaknesses

ƒ The generally poor state of the road network. Despite new highway construction, only
13.5% of the road network is considered to be in good condition, only 26% has two or
more lanes and only 29% is tarred. Construction of the second north-south highway

may be a waste of resources given the pressing need for improvement of secondary
roads

Opportunities

ƒ The beginnings of local commercial vehicle production, which will help improve the
stock of lorries used by road haulage companies

Threats

ƒ The attractiveness of other modes of freight transport, particularly inland waterways
and coastal shipping. If progress towards a better-integrated national road network is
too slow, freight growth will divert away from the trucking industry

Vietnam Political SWOT

Strengths

ƒ The Communist Party government appears committed to the market-oriented reforms
necessary to double 2000’s GDP per capita by 2010, as targeted. The one-party
system is generally conducive to short-term political stability
ƒ Relations with the US are generally improving and Washington sees Hanoi as a
potential geopolitical ally in South East Asia

Weaknesses

ƒ Corruption among government officials poses a major threat to the legitimacy of the
ruling Communist Party
ƒ There is increasing (albeit still limited) public dissatisfaction with the leadership’s tight
control over political dissent


Opportunities

ƒ The government recognises the threat that corruption poses to its legitimacy and has
acted to clamp down on graft among party officials
ƒ Vietnam has allowed legislators to become more vocal in criticising government
policies. This is opening up opportunities for more checks and balances within the oneparty system

Threats

ƒ Vietnamese dissidents are seeking external help, especially from the US. This could
complicate Vietnam-US relations, with Washington having criticised Hanoi over its
restrictions on religious freedom
ƒ Although strong domestic control will ensure little change to Vietnam’s political scene
in the next few years, over the longer term, the one-party state will probably be
unsustainable

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Vietnam Freight Transport Report Q1 2010

Vietnam Economics SWOT

Strengths

ƒ Vietnam has been one of the fastest-growing economies in Asia in recent years,
averaging growth of 8.0% a year

ƒ The economic boom has lifted many Vietnamese out of poverty, with the official
poverty rate in the country falling from 58% in 1993 to 20% in 2004

Weaknesses

ƒ Vietnam suffers from substantial trade, current account and fiscal deficits, leaving the
economy vulnerable to external shocks. The fiscal picture is clouded by considerable
‘off-the-books’ spending
ƒ The heavily managed and weak dong currency reduces incentives to improve the
quality of exports, and also serves to keep import costs high, thus contributing to
inflationary pressures

Opportunities

ƒ WTO membership has given Vietnam access to both foreign markets and capital,
while making Vietnamese enterprises stronger through increased competition
ƒ The government will continue to move forward with market reforms, including
privatisation of the state-owned enterprises sector and liberalising the banking sector
ƒ Urbanisation will continue to be a long-term growth driver. The UN forecasts the urban
population to rise from 29% of the population to more than 50% by the early 2040s

Threats

ƒ Inflation and deficit concerns have caused some investors to re-assess their hitherto
upbeat view of Vietnam. If the government fails to curb inflation, it risks prolonging
macroeconomic instability, which could lead to a potential crisis
ƒ Prolonged macroeconomic instability could prompt the authorities to put reforms on
hold, as they struggle to stabilise the economy

Vietnam Business Environment SWOT


Strengths

ƒ Vietnam has a large, skilled and low-cost workforce that has made the country
attractive to foreign investors
ƒ Vietnam’s location – its proximity to China and South East Asia, and its good sea links
– makes it a good base for foreign companies to export to the rest of Asia and beyond

Weaknesses

ƒ Vietnam’s infrastructure is still weak. Roads, railways and ports are inadequate to cope
with the country’s economic growth and links with the outside world
ƒ Vietnam remains one of the world’s most corrupt countries. Its score in Transparency
International’s 2008 Corruption Perceptions Index was 2.7, lower than the regional
average of 4.6

Opportunities

ƒ Vietnam is attracting investment from key Asian economies, such as Japan, South
Korea and Taiwan. This offers possibility of transfer of high-tech skills and know-how
ƒ Vietnam is pressing ahead with the privatisation of state-owned enterprises and the
liberalisation of the banking sector. This should offer foreign investors new entry points

Threats

ƒ Ongoing trade disputes with the US and the general threat of American protectionism,
which will remain a concern
ƒ Labour unrest remains a lingering threat. A failure by the authorities to boost skill
levels could leave Vietnam a second-rate economy for an indefinite period


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Vietnam Freight Transport Report Q1 2010

Business Environment Ratings
The freight transport sector in the Asia Pacific region offers one of the most attractive business
environments for the industry worldwide. There are various reasons for this. First, the region offers a
powerful combination of future growth and economies of scale. It contains arguably the two most
significant of the four BRIC (Brazil, Russia, India and China) economies, which, it is argued, are the
powerhouses of future global growth. China and India combine vast geographical size, large populations,
globally competitive labour costs and as yet untapped infrastructure potential. To this must be added the
‘third BRIC’, Russia, which, although outside the region, has critically important trade and transport links
to Asia (such as crude oil exports to China). Second, at a ‘big picture’ level, most of the regional power
centres are committed to reasonably pragmatic and relatively stable, market-based policies. Countries that
in the past were either fervently communist (China, Vietnam) or capitalist (Malaysia, Taiwan) share a
much wider non-ideological common ground focused on how to achieve a sustainable rise in living
standards. This is not to say, of course, that the area is free of tensions and flash points (North Korea,
China-Japan, India-Pakistan to name just a few).

Table: Asia Pacific Freight Business Environment Ratings

Limits of potential returns

Risks to realisation of returns

Freight transport
market


Country
structure

Limits

Market
risks

Country
risk

Risks

Overall
rating

Regional
rank

Singapore

52.5

79.6

66.1

80.0


90.1

86.0

72.1

1

Australia

45.0

90.1

67.6

75.0

82.2

79.3

71.1

2

India

62.5


71.0

66.7

60.0

60.8

60.5

64.9

3

South Korea

47.5

76.4

61.9

60.0

74.6

68.7

64.0


4

China

72.5

47.6

60.1

60.0

68.4

65.0

61.6

5

Malaysia

42.5

67.0

54.7

60.0


70.9

66.6

58.3

6

Vietnam

50.0

71.3

60.7

55.0

50.5

52.3

58.1

7

Japan

42.5


72.5

57.5

55.0

58.6

57.1

57.4

8

Indonesia

50.0

71.4

60.7

50.0

46.8

48.1

56.9


9

Hong Kong

47.5

39.5

43.5

70.0

84.3

78.6

54.0

10

Thailand

40.0

59.2

49.6

55.0


58.1

56.8

51.8

11

Philippines

40.0

55.6

47.8

50.0

49.7

49.8

48.4

12

Pakistan

50.0


47.6

48.8

55.0

35.0

43.0

47.1

13

Taiwan

27.5

38.0

32.8

65.0

72.5

69.5

43.8


14

Scores out of 100, with 100 highest. Source: BMI

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Vietnam Freight Transport Report Q1 2010

Strong freight transport growth rates are combined with a very encouraging infrastructure investment
picture across most of the region.

By mode, road haulage will grow as road infrastructure and vehicle density is extended and as the shift to
smaller/higher value loads continues. Rail freight will benefit from long-distance economies of scale,
whether from the opening up of the Australian hinterland or big projects such as the new Silk Road route.
Shipping is being lifted by the surge in trans-Pacific commodity and manufacturers’ trade routes, while
air freight is growing on the back of liberalisation and the budget airline boom. While the freight transport
industry in the region suffers from patchy regulation and in some areas there are ongoing issues with
corruption and cronyism, it is on the whole much more open and competitive than in the past. A strong
positive factor is the dynamic and outward facing role played by foreign trade.

Freight Industry Ratings
Our overall freight transport rating for Vietnam stands at 58.1 (out of a theoretical maximum score of
100). This is composed of a score of 60.7 for potential returns (reflecting factors such as market size,
growth and the competitive environment), which gets a 70% weighting, and a lower score of 52.3 for
risks to those returns (reflecting factors such as market orientation, regulatory environment and other
country-risk issues), which gets a 30% weighting.


Vietnam’s freight transport traffic, measured in mntkm, rose by an annual average of 10.1% in 2005-2009
and, according to our projections, will decelerate to an annual average of 7.6% in 2010-2014.

According to official information, there is a wide range of transport sector investment projects in the
pipeline, across road, rail, air and sea. Work is under way to develop the Mekong basin area, and new
seaports are planned. While there is no doubt that Vietnam’s transport infrastructure is expanding, our
rating for this category is constrained by poor planning and limited project management experience.

Vietnam is moving towards a full market economy, but is doing so at a relatively slow pace, given that
the reform process started nearly two decades ago. The country gained access to the WTO in 2007. In the
transport sector, state-owned enterprises (SOEs) continue to be dominant in many areas. There is not yet a
clear legal framework for the protection of passenger and freight customer rights.

Freight transport competition remains limited, with SOEs dominating key transport modes. There are few
foreign entrants, although we expect more to arrive during the forecast period. To be able to operate in the
country, significant negotiations and procedures are required. Although the government favours attracting
more foreign direct investment (FDI), the local environment is not yet fully supportive of competitive
markets.

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Vietnam Freight Transport Report Q1 2010

Transport Intensity Index
This index is derived by calculating the average annual growth rate for total trade (imports plus exports)
over a 10-year period running from 2005 through to 2014. As such, it is a mix of actual performance (the
five-year 2005-2009 period) and projected performance (2010-2014). In Vietnam’s case, actual average

annual trade growth in 2005-2009 was a strong 17.8%, which in our projections will ease substantially to
10.8% per annum in 2010-2014. The annual average across the 10 years as a whole is 14.3%.

Vietnam Logistics Performance Index (LPI)
In 2007, the World Bank launched its Logistics Performance Index (LPI), intended as ‘the first in-depth
cross-country assessment of the logistics gap among countries’. The LPI was calculated on a five-point
scale and based on survey responses from over 800 logistics professionals. Countries were given an
aggregate LPI score, which was in turn made up of seven sub-categories, covering criteria such as the
quality of customs, infrastructure and international shipments, logistics competence, tracking and tracing,
domestic logistics costs, and timeliness.
In the 2007 survey, Vietnam was ranked 53rd in the world with an LPI score of 2.9. For comparison with
the major OECD economies, the Netherlands was ranked second in the world with an LPI of 4.2;
followed by Germany (third with an LPI of 4.1), the UK (ninth, LPI of 4.0) and the US (14th, LPI of 3.8).
In comparison with other Asian economies, Singapore was the world number one with an LPI score of
4.2, followed by Australia (17th, LPI of 3.8) and Taiwan (21st, LPI of 3.6). Then came South Korea (25th,
LPI of 3.5), Malaysia (27th, LPI of 3.5), China (30th, LPI of 3.3), Thailand (31st, LPI of 3.3) and Indonesia
(43rd, LPI of 3.0). Vietnam was therefore close to the bottom end of the regional LPI ranking, ahead of
Papua New Guinea (95th, LPI of 2.4) and Laos (117th, LPI of 2.3). In terms of the different components of
the index, Vietnam’s best performing areas, ranked in order, were domestic logistics costs, timeliness,
international shipments, and tracking and tracing. Weaker areas in descending order were customs,
logistics competence, and infrastructure.

Economic Risk Summary
Vietnam Borrows Dollars
Japan will lend Vietnam US$1bn annually between 2010 and 2012, allowing Vietnam to bolster its
foreign exchange reserves. The State Bank of Vietnam (SBV) also announced on October 21 that it will
borrow US$1bn from the World Bank for the same purpose. The Asian Development Bank has
estimated that Vietnam's foreign exchange reserves fell from US$23.0bn to US$17.6bn between January
and June, as Vietnamese authorities supported the value of the dong. High inflation and a wide trade
deficit have already forced the government to depreciate the currency by 7.2% since August 2008. We

believe that further devaluations will be necessary in 2010 to rein in the trade deficit.

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Vietnam Freight Transport Report Q1 2010

Long-Term Risk
The 3.9% year-on-year (y-o-y) expansion in H109 was the lowest on record, but macroeconomic data in
Q209 and Q309 suggest that the government and central bank's stimulus measures are now gaining
traction. We have thus revised up our growth forecast for 2009 from 2.9% and 4.5%, but caution that
Vietnam will need support from a pick-up in global demand for a sustained economic recovery. On the
political front, the economic downturn has not yet seen any material repercussions in the form of street
protests. However, a campaign launched by Vietnamese Catholics to reclaim church property confiscated
by the state has put a spanner in the wheels of Hanoi's efforts to improve relations with the Vatican and
the US.

We have revised up our 2009 GDP growth forecast from 2.9% to 4.5% on the back of governmentsupported resilience in domestic demand and a slightly improved export outlook. However, the stimulusdriven performance in 2009 could come back to haunt Vietnam in 2010 as the government and central
bank will most likely need to stem a resurgence of inflation. We are thus content with raising our 2010
GDP growth forecast from 5.0% to 5.5%. In the longer term, we see annual GDP growth rising back
towards 8% in 2013 as the effects of the global recession in 2009 fade.

Political Risk Summary
US Attacks Lack of Political Freedom
The US House of Representatives approved a resolution on October 21 calling for the release of all
political prisoners in Vietnam. The resolution named 18 internet bloggers who have been jailed for
criticising the communist regime and demanded that Vietnam 'become a responsible member state of the
international community by respecting individuals' freedom of speech'. Earlier in the month the US

embassy in Vietnam had criticised the jailing of nine activists for displaying pro-democracy banners.
Congressman Joseph Cao demanded the US return Vietnam to its 2006 status as a 'country of particular
concern', which could bring economic repercussions.

Long-Term Risk
Tension between China and Vietnam remains high as the conflict over the disputed Paracel and Spratly
Islands in the South China Sea has intensified. This has paved the way for a further rapprochement
between Hanoi and Washington to check the expanding military might of Beijing. However, these
tentative efforts are being undermined by Hanoi's repression of Catholic activists seeking to expand
religious rights in the nominally atheist republic. With Vietnam becoming an increasingly important
potential ally, we believe the Obama administration will turn a blind eye to these human rights
transgressions.

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Vietnam Freight Transport Report Q1 2010

Business Environment Risk Summary
Vietnam is making headway in improving its dilapidated infrastructure with construction on a number of
ports, power plants and road projects being commenced in 2009. Nonetheless, it will take a number of
years, if not decades, until Vietnam's infrastructure rating of 37.2 comes anywhere near the 68.0 China
scores in the same area. On the legislative front, the government's privatisation process is gaining pace
again with an initial public offering of state-owned Bank for Investment and Development (BIDV), the
country's second-largest bank, scheduled for H110. We also foresee improvements in the business
environment from the Vietnam-Japan Economic Partnership agreement and a free trade agreement
currently under negotiation with the European Union (EU).


Port Enhances Trade Opportunities
Dubai's DP World announced on October 18 that the first vessel had been handled at the newly built
Saigon Premier Container Terminal, a US$230mn joint venture (JV) between the company and the
Vietnamese-state owned Tan Thuan Industrial Promotion Company The new terminal, located on the
western bank of the Soai Rap River, will have a capacity of 1.5mn TEU per year and serve Ho Chi Minh
City. In our view, this additional trade capacity is a positive development that will help prevent potential
bottlenecks as planned closures of outdated facilities along the Saigon River proceed over the next 10 to
15 years.

Legal Code/Corruption
Legal Code
Vietnam’s judicial system is based on communist legal theory and the French civil law system.

Corruption
Vietnam has a bad record on transparency. The state was ranked 121st (out of 180) in Transparency
International’s Corruption Perceptions Index in 2008, with a score of 2.7.

Red Tape
Vietnam compares favourably with its regional peers in terms of bureaucracy, and about the same as
developed states. According to World Bank data, 28 separate procedures are required to enforce a
contract, which takes an average of 120 days. The East Asia and Pacific average is 24 and 193,
respectively, while the process involves 18 procedures and 213 days in high-income OECD states.

Conversely, World Bank data state that it takes 11 procedures and 56 days to start a business in Vietnam,
compared with an average of nine and 61 in East Asia and Pacific and six and 25 in high-income OECD
states.

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Vietnam Freight Transport Report Q1 2010

Labour Force
Size
Reliable data on the labour force in Vietnam are difficult to find. However, it is estimated that the
working age population in the country is 42.1mn, approximately 61% of the total. An estimated 10.2mn
live in urban areas, with the remaining 31.9mn in rural areas. ‘Technically skilled workers’ form an
estimated force of 8.84mn, accounting for 20.99% of the total. The south-east region has the highest rate
of skilled workers (30.13%), followed by the Red River delta (27.99%) and Coastal South Central
(20.85%). The lowest rate was reported in the north-west region.

Education
The adult male illiteracy rate was estimated at 4% for males and 9% for females in 2000, with the youth
illiteracy rate 3% for both genders.

Regulation
The Vietnam labour force is comparatively heavily regulated, according to World Bank’s Employment
Laws Index. Its score of 56 indicates that regulations are tighter than the East Asia and Pacific average,
and a bit tighter than OECD high-income states. Disaggregating the data, the regulations for hiring
workers are looser than those for firing workers, with scores of 43 and 48, respectively, the combination
of which suggests a more regulated workforce than regional peers.

Issues
Fears of growing unemployment and rising social unrest in the cities is slowing down the reform of
SOEs. The SOEs are an inefficient and loss-making legacy of a different era, and would have gone
bankrupt a long time ago if the market had had its way. However, the fear of creating mass
unemployment in the cities by laying off surplus labour has prevented meaningful reform. As a result, the
SOEs continue to crowd out the more productive private sector, while adding to the government’s fiscal

woes by forcing the state to absorb their losses.

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Vietnam Freight Transport Report Q1 2010

Industry Trends And Developments
Road
In October 2009 the government said that the Vietnam Road Administration, part of the ministry of
transport, would allocate VND1.4trn (US$78.4mn) worth of government bonds for upgrading National
Highway 25. The highway links Phu Yen province to the highlands province of Gia Lai, both in the
country’s central region. The highway was due to be completed by the end of 2012.

Rail
In late October 2009 it was reported that the cost of building an 191km express rail link between Ho Chi
Minh City and the Mekong Delta city of Can Tho had risen to an estimated US$9.63bn, up from an initial
estimate of US$4bn. Lao Dong newspaper said the initial lower cost estimate had been made by
Chungsuk Co of South Korea. The ministry of transport had appointed the Vietnam Railway
Administration as the main investor for the project.

Air
Starting in late October, Korean Air Cargo said it had launched a regular B747-400F twice-weekly
freighter service between Incheon and Hanoi, with a stop-over in Singapore. The Korean airline said the
service would take advantage of growing trade with Hanoi; it had already been operating a regular
airfreight service to Ho chi Minch City since 1998.

Vietnam’s first privately-owned airfreight company said in October that it would commence operations in

the first quarter of 2010. Trai Thien AirCargo said it would specialise in cargo operations on domestic
and international routes, with a focus on northeast and south east Asian markets. It said it would be using
Boeing 737-300 aircraft, converted from passenger to cargo payloads. The company is part of the Ho Chi
Minch-based Trai Thien Group which is also active in shipping, operating four cargo ships with a total
capacity of 13,391 deadweight tonnes (DWT).

The Civil Aviation Administration of Vietnam said it was reducing take-off and landing fees charged to
international airlines by 5%, effective until March 1 2010. The decision was said to be a response to a
proposal made by the Air Operator’s Commission (AOC) and Vietnam Airlines. Vietnam now hosts a
total of 44 airlines, of which 33 are mainly passenger operators, and 11 are cargo-only.

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Vietnam Freight Transport Report Q1 2010

Sea
At the beginning of November state media reported that work had begun on a US$3.6bn international
container port in Khanh Hoa province in the centre of the country. The Van Phong port would be
completed by 2020 with 42 wharves and the capacity to move 200mn tonnes of cargo a year. Prime
Minister Nguyen Tan Dung was quoted saying at a launching ceremony that the port would operate ‘at
regional level and be very competitive in the future’. Construction would take place over four phases with
the first due for completion by 2015.

Container shipping line APL said in October it was launching a new Japan-Thailand-Vietnam (JTV)
service to strength its regional short sea network and to better service local manufacturing and
consumption markets. Starting from October 30 the service would link Japan, South China, Hong Kong,
Thailand and Vietnam. The JTV would be operated by three ships, each with a 1,200 TEUS capacity.

Jason Wong, APL vice-president for Inter-Asia was quoted in the media saying ‘the new service will
support a trading circle encompassing key origins and destinations ranging from South East and East Asia
to North Asia’. The port rotation was listed as Tokyo, Yokohama, Kobe, Chiwan, Hong Kong, Laem
Chabang, Ho Chi Minch City, Kaohsiung, and back to Tokyo.

The US$360mn Saigon Premier Container Terminal (SPCT) was officially opened in October with the
Asta Rickmers, operated by French shipping company CMA CGM, the first container vessel to use the
facility. SPCT, with the capacity to handles 1.5mn TEUS per annum, is a JV between the Vietnamese
state-owned Tan Thuan Industrial Promotion Co., and Dubai Ports World (DPW).

Taiwan's Formosa Plastics Group is rapidly emerging as one of the largest, if not the largest, foreign
investors in Vietnam. The group has disclosed that it will live up to its commitment to the government to
build a deep-sea port in Son Duong, next to the Vung Ang Economic Zone, where it is investing
US$19.2bn in petrochemical, steel and oil refinery projects. A spokesperson for the group said that the
firm is hoping Son Duong will become the largest deep-sea port in Southeast Asia. The estimated cost of
building the port is US$1.2bn, and it is designed to accommodate vessels with a capacity of between
200,000 and 400,000 deadweight tonnes (dwt). The other port in the region, the Vung Ang Port, has the
capacity to accommodate ships of around 45,000DWT. The company did not give a timeframe for the
construction. The new port will significantly bolster Formosa Group's transport capabilities to and from
the Vung Ang Economic Zone. The economic zone is designed to house the steel industry, shipbuilding,
mechanical manufacturing and local industrial production. The group is currently building a steel
manufacturing unit and has received the government's approval to build a petrochemical complex and an
oil refinery. The Vietnamese government has been keen to develop surrounding infrastructure for the
economic zone to attract a greater number of companies, hence committing Formosa Group to the Son
Duong project. In March 2009, the government awarded a contract for the construction and operation of
the Vung Ang 2 thermal power plant to supply the economic zone. The plant will be operational in 2013,

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Vietnam Freight Transport Report Q1 2010

eventually reaching a capacity of 1.2 gigawatts (GW), and has an estimated cost of US$1.2bn. In terms of
road and rail links, the economic zone is near the national highways 8 and 9, which link the zone to Laos.
Major investments have been pledged for the port sector in Vietnam as port operators, shipping
companies and manufacturers seek to capture the growth of Vietnam's export market. With investments
taking place, the slow yet steady improvement of Vietnam's port infrastructure is reflected in the better
score it has received in 2009 in the Global Competitiveness Report. In 2009-2010, Vietnam placed 99th
out of 133 countries, up from 112th place in the 2008-2009 report, which assessed 134 countries.

In late August the vice-chair of the southern Vietnamese province of Ba Ria-Vung approved a plan for the
construction of a major road artery that will link the ports and industrial zones in the area. Ports in the
region include those of the Cai Mep district, one of the maritime hubs of Vietnam. This is a welcome
development for Vietnam's infrastructure, where investments have been funneling into ports, but
surrounding infrastructure poses constraints to trade. According to the plan, the road will be built in two
phases. The first phase pertains to the construction of an 8.3km road and five bridges, but no specific
route has been announced. Construction will start during the fourth quarter of 2009 and be completed by
2012. The second phase will start construction in 2012 and be completed in 2015 and pertains to the
construction of a 3.2km road and a bridge. The total estimated cost of the project is VND6.3trillion
(US$350mn). The Department of Transport will own the new road. Initial plans called for the
construction of an inter-port road system to begin from the lower Cai Mep container port, pass through
the Tan Thanh District and finish at the Phuoc An Port, the Saigon Times reports. Activity has mainly
been concentrated on boosting the capacity of the southern economic zone, especially in the Thi Vai
River area. Major global port operators with interests in the region include Hutchison Port Holdings,
Singapore's PSA International, Saigon Port, Denmark's Maersk and France's CMA CGM, all of which
have been involved in the operations and development of major Vietnamese ports in the Thi Vai River in
an effort to enter one of Asia's most promising markets. American Shipper estimates the amount invested
in Vietnamese ports is close to US$4.5bn, and that up to eight new terminals are under development at

Vung Tau along an 'S-shaped channel'. Most of these new builds are expected to open in 2011. However,
investors have expressed concern that the infrastructure surrounding the ports, such as roads and railways
will not be able to handle the rising trade volumes that are expected to pass through the new ports. Saigon
Times cites data from the Vietnam Maritime Administration that estimates that the throughput at the ports
of Ho Chi Minh City, Dong Nai and Ba- RIA Vung Tai will be 100mn tonnes in 2010 and double to
222mn tonnes by 2020.

.

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Vietnam Freight Transport Report Q1 2010

Industry Forecast Scenario
Global Oil Products Price Outlook
Tanks Still Brimming
Global product markets lost more ground in September, thanks to continuing distillate stock building and
the narrowing of the gasoline crack spread. Refiners were again obliged to trim operating levels as
margins contracted. Margins for West Texas Intermediate (WTI) crude at the US Gulf Coast halved in
September. European refinery performance improved as a result of precautionary run cuts. The Rotterdam
Brent margin widened in September by almost 50% to US$3.92 per barrel (bbl). Sadly, Singapore
refinery profitability came under increased pressure and a continuation of Asia Pacific’s margin weakness
bodes ill for downstream investment.

Casting a long shadow over the oil market is the excessive stock position, with refined product
inventories in particular forming a barrier capable of blocking further price appreciation. Early October
saw US stockpiles of distillate fuel, including heating oil and diesel, climb to their highest level since

January 1983, according to US Energy Department data. Gasoline inventories also jumped to 214.4mn
bbl as refiners boosted output. While there are indications that gasoline consumption trends have
stabilised in the US, there is no evidence of such an improvement in distillate demand.

US refiners such as Valero Energy and Sunoco have been cutting throughputs more aggressively than at
any time since the early 1980s, even though a cold winter is being predicted. Temporary plant closures
appear to be spreading, and maintenance activity either brought forward or extended. Refiners fear that
even low temperatures will not provide a sufficiently large demand boost to drain overflowing storage
tanks. The margin for producing heating oil and diesel may decline by more than one-third by January
2010, according to Energy Security Analysis.

The Energy Department predicts that heating costs in winter 2009/10 will fall 8% across the US, even as
the north east is faced with potentially frigid weather. February 2010 futures contracts in early October
showed that the premium of heating oil to crude oil will average US$5.00-5.50/bbl in January 2010, down
from the recent US$8.10/bbl. A year ago the future crack spread for heating oil was almost US$20.00/bbl.

An El Niño weather system in the Pacific Ocean may push down temperatures in the US north east in
Q110, predicted independent weather forecaster Commodity Weather Group in a late September 2009
report. Without an unusually cold US winter, distillate stocks are more than ample and could provide a
constant drain on market strength. Having said that, US heating oil futures reached a seven-week high in
early October on speculation that colder weather predicted for the rest of the month would boost demand
for home-heating fuel.

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Vietnam Freight Transport Report Q1 2010


In early October the Energy Department predicted that US demand for distillate fuels could fall more than
8% in 2009, with a decline to just 3.62mn barrels per day (b/d), the biggest setback since 1980. There was
enough heating oil and diesel in the US as of early October to last more than 50 days, with stocks up by
one-quarter in the first nine months of 2009, or by almost 34mn bbl to around 172mn bbl. It will require a
drop of more than 52mn bbl, or 30%, by the end of March to bring supplies down to the five- year
average.

Gasoil stockpiles in Europe’s Amsterdam-Rotterdam-Antwerp (ARA) area are also plentiful, amounting
to almost 22mn bbl as of October 8, according to Netherlands-based consultant PJK International. The
preceding four weeks had seen a welcome 4.6% decline from the previous record level. However, diesel
and fuel oil demand remains extremely weak.

The volume of refined products in floating storage, largely distillates, off north west Europe and the
Mediterranean had grown to about 50mn bbl as of the end of September, up from the end-August level of
around 40mn bbl, the International Energy Agency (IEA) said in its October Oil Market Report (OMR).

In spite of better economic conditions, the trends towards higher fuels taxation and the overhaul of
subsidies in some developing countries mean that a sustainable recovery in demand is far from certain. In
spite of evidence that US drivers may be migrating back to less fuel-efficient vehicles, the major shifts in
patterns of consumption resulting from vehicle ownership changes are unlikely to be reversed simply
because pump prices are temporarily lower. The move in Europe away from gasoline and towards diesel
is expected to continue for a while longer, in spite of steep price differentials. However, advances in small
petrol engine technology may mean these more economical units bring to an end the love affair with
diesel.

Over the longer term, expansion of the oil refining system is still needed, particularly as market growth is
likely to accelerate as the world pulls clear of recession/depression. However, refining margins look set to
remain under pressure. Coupled with weaker upstream economics and modest profits in fuels retailing,
the downturn in refining profitability means that both international and national oil companies may reexamine investment plans. The downstream oils market needs to see continued high level spending in
new crude distillation capacity, improved plant upgrading capability and better storage/distribution

logistics. There will inevitably be reduced capital expenditure if industry earnings and cash flow remain
under pressure. This can only result in the market tightening once again as demand picks up – with a
return to extreme price volatility and generally higher fuel prices.

Revised Forecasts
During Q309, BMI estimates that the global wholesale price for premium unleaded gasoline will have
been US$76.56/bbl. This compares with US$69.89 in the second quarter of 2009. During the three

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Vietnam Freight Transport Report Q1 2010

quarters to September the price has ranged from a monthly low of US$49.33 in January 2009 to the June
2009 level of US$79.87/bbl. Gasoline prices in Q309 are down 40.2% from US$127.92 Q308.

For Q409 we now forecast an average global gasoline price of US$71.19/bbl, a decline of 7.0% from the
previous quarter, but a y-o-y decline of almost 41% from the US$120.63/bbl seen a year earlier. For the
whole of 2009, the BMI assumption for gasoline is an average US$67.46/bbl, with the price having
peaked in June. The overall y-o-y fall in 2009 gasoline prices will be 33.7%.

Table: Oil Product Price Assumptions, Q108-Q409 (US$/bbl)

Gasoline

Q108

Q109


Q209

Q309e

Q409f

Rotterdam Premium Unleaded

54.96

50.67

71.46

79.12

69.60

NY Harbour Unleaded

57.84

51.18

69.51

74.83

72.95


Singapore Premium Unleaded

56.32

54.80

68.70

75.72

71.01

Global average

56.37

52.22

69.89

76.56

71.19

Rotterdam

79.66

56.45


67.52

75.98

79.51

NY Harbour

81.95

58.44

66.57

74.64

75.34

Singapore

74.73

55.45

66.54

74.08

70.93


Global average

78.78

56.78

66.87

74.90

75.26

Rotterdam

77.89

55.19

64.72

74.61

90.14

Mediterranean

78.40

55.85


65.22

74.79

90.75

Singapore

70.25

53.19

66.15

74.15

82.33

Global average

75.52

54.74

65.37

74.52

87.74


Jet/kerosene

Gasoil

e/f = estimate/forecast. Source: BMI

Jet prices averaged US$74.90/bbl in Q309, using the composite for New York, Singapore and Rotterdam.
The annual decrease was 48.6%, with jet exceeding the decline in gasoil prices. The monthly low during
the previous six months was US$53.75 in February 2009, with the price reaching US$77.19/bbl in June
2009. For Q409 we assume an average global jet price of US$75.26, a quarter-on-quarter (q-o-q) rise of
0.5% and a y-o-y fall of 4.5%. For 2009 the annual level is forecast to be US$68.45/bbl. This compares
with US$124.95/bbl in 2008.

In Q309 gasoil averaged US$74.52/bbl, based on a composite global price. This is a y-o-y fall of 46.9%
over Q308, illustrating a recession-induced relative weakening of diesel versus gasoline. Our revised
Q409 forecast is for global gasoil at an average US$87.74, a q-o-q increase of 17.7%. The seasonal effect

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Vietnam Freight Transport Report Q1 2010

and likely rise in year-end crude prices are set to have limited impact on gasoil prices as a result of the
unusually large inventory position. For 2009 as a whole, the BMI forecast is for an average price of
US$70.59/bbl, assuming a monthly high of US$94.09/bbl in December. The full-year outturn is a 41.8%
fall from the 2008 level.


Table: Oil Product Prices, 2007-2014 (US$/bbl)

Gasoline

2007

2008

2009f

2010f

2011f

2012f

2013f

2014f

Rotterdam Premium Unleaded

75.75

100.12

67.71

96.11


98.43

104.22

104.22

104.22

NY Harbour Unleaded

78.75

102.54

67.12

97.51

99.87

105.74

105.74

105.74

Singapore Premium Unleaded

74.98


102.64

67.56

93.81

96.08

101.73

101.73

101.73

Global average

76.49

101.77

67.46

95.81

98.12

103.90

103.90


103.90

Rotterdam

81.13

126.61

69.87

99.16

101.56

107.53

107.53

107.53

NY Harbour

82.48

127.13

68.75

99.88


102.29

108.31

108.31

108.31

Singapore

79.17

121.11

66.75

92.69

94.93

100.51

100.51

100.51

Global average

80.93


124.95

68.45

97.24

99.59

105.45

105.45

105.45

Rotterdam

77.02

122.62

71.16

101.01

103.44

109.53

109.53


109.53

Mediterranean

77.69

121.75

71.65

104.10

106.62

112.89

112.89

112.89

Singapore

77.03

119.53

68.95

95.75


98.06

103.83

103.83

103.83

Global average

77.24

121.30

70.59

100.29

102.71

108.75

108.75

108.75

Jet/kerosene

Gasoil


f = BMI forecast. Source: 2000-2006 historical data: EIA; 2007-2008 historical data: IEA

In 2008 naphtha was the weakest performer of the major refined products, gaining 31% to US$87.40/bbl
during the year. In Q309 naphtha averaged an estimated US$64.80, compared with US$110.80/bbl in
Q308 and US$54.70 in Q209. BMI puts the average naphtha price in 2009 at US$52.66/bbl, down 39.7%
from the previous year’s level.

Looking further ahead, we see gasoline prices recovering to US$95.81/bbl in 2010, rising further to
US$98.12 in 2011 and stabilising around US$103.90/bbl from 2012. The price of jet is forecast to average
US$97.24/bbl in 2010 and US$99.59 in 2011, before levelling out at US$105.45/bbl from 2012. Gasoil is
expected to rebound to US$100.29 in 2010, reaching a plateau of US$108.75/bbl from 2012.

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Vietnam Freight Transport Report Q1 2010

Macroeconomic Outlook
Double Dip Now Our Core Scenario
With Vietnam's balance of payments yet again approaching breaking point, we expect a sharp tightening
of fiscal and monetary policy in 2010, which will see real GDP growth dip to 4.4% from an expected
5.1% in 2009. This will raise criticism of economic policy at the 11th National Congress in January 2011,
but we expect the market reform agenda to be maintained.

We have shifted our Vietnam growth outlook from expecting a gradual economic recovery in 2010 to a
double-dip scenario with real GDP expansion dipping from an expected 5.1% in 2009 to 4.4% in 2010.
This is based on our expectations that fiscal and monetary policy will have to be tightened sharply in
early 2010 in order to rein in the widening trade deficit and halt inflationary pressures. Our outlook for

Vietnam has much in common with that for China. However, while the policy aims of the respective
governments are similar, we view the macroeconomic concerns in Vietnam as more alarming, at least in
the short term, as Hanoi’s fiscal and monetary resources are considerably more limited.

As a consequence, we find it likely that the inevitable shift towards tighter monetary and fiscal policy will
come earlier in Vietnam than in China. Indeed, while Hanoi’s fiscal and monetary stimulus has helped
economic growth recover from a low of 3.1% y-o-y in Q109 to 5.2% in Q309, it has also been a key
factor, in our view, behind a considerable widening of the trade deficit over the same period to US$1.9bn
in October 2009. While the return to positive growth in G3 markets in H209 and 2010 should give some
support to Vietnamese exports, we believe a continuation of the current accommodative policy would
lead to a further widening of the trade deficit.

With Vietnam’s foreign exchange reserves in Q409 estimated to be below the three months of imports
seen as a minimum, we believe drastic policy action will be needed to avoid a balance-of-payments crisis.
This will include:
ƒ A downward adjustment of the dong towards our VND19,000/US$ end-2009 forecast, from
VND17,862/US$, to stem the outflow of US dollars through the trade channel.
ƒ A hiking of policy rates to uphold public confidence in the dong, stem capital outflows, and contain
upward pressure on inflation through higher import prices. We are expect 500 base point (bps) of
hikes in 2010, bringing the Vietnam base rate from 7.00% in November 2009 to 12.00%.
ƒ A reduction of the fiscal deficit from VND118trn (US$6.6bn), or 7.2% of GDP, to VND105trn
(US$5.9bn), or 5.7% of GDP, in 2010 on the back of reductions in current and capital expenditure
growth.

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Vietnam Freight Transport Report Q1 2010


Implications For Growth
We expect the fiscal and monetary tightening to lead to a double dip in growth after the tentative rebound
seen in the last three quarters of 2009. We are expecting real GDP growth to come in at 4.4% in 2010, as
weak growth in G3 markets will weigh on exports and prevent a marked improvement in net exports in
spite of the devaluation of the dong.

This will mean that the slowdown in domestic demand will be harder felt. With inflation expected to
average roughly 9.0% in 2010, we expect government consumption to decrease by 3.5% in real terms,
which will shave 0.3 percentage points (pp) off headline growth. A more marked effect will be coming
from a slowdown in private consumption growth as credit conditions are tightened. We expect private
consumption growth (in real terms) to slow to 2.3% from an expected 4.9% in 2009 and 9.2% in 2008.
This should see the contribution to growth from private consumption decrease to 1.6pp in 2010 from
3.3pp in 2009 and a massive 6.0pp in 2008.

On the other hand, we expect an increase in the contribution from gross fixed capital formation from
0.4pp to 1.1pp as foreign direct investment (FDI) disbursements, down 12.1% y-o-y to US$8bn in
January-October 2009, recover and state-and aid-financed projects gather pace. However, the precarious
state of the property market, where activity and prices have been supported by the loan-subsidy
programme, is a risk to this forecast. While only a minority of property purchases are financed through
bank lending, higher interest rates should still have an impact on the market and on commercial and
residential construction.

Policy Rebalancing Needed At 2011 Party Congress
We expect the slowdown in growth in 2009 and 2010 to make economic policy the main matter of debate
during the Communist Party of Vietnam (CPV)’s 11th National Congress, scheduled for January 2011.
The macroeconomic rollercoaster ride experienced in recent years has raised criticism against Prime
Minister Nguyen Tan Dung, the most important proponent of economic reform, from more conservative
members in the Politburo. We believe the mainstay of the CPV is still behind Nguyen’s reform agenda,
meaning that there will be no drastic shift in the socio-economic development strategy for 2011-2016.


However, we expect measures to be taken to achieve greater macroeconomic stability, including a
reduction of official growth targets, a shift in monetary policy towards inflation targeting and increased
exchange rate flexibility. This is likely to come at a cost to economic growth in the short term, and we are
consequently forecasting real GDP growth of 5.5% and 6.0% in 2011 and 2012, respectively, as the
global economic environment is expected to be less conducive than in the 2003-2007 boom years. A
failure to take a decision on rebalancing economic policy would, on the other hand, mean a high risk of a
continuation of macroeconomic volatility.

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Vietnam Freight Transport Report Q1 2010

Table: Vietnam – Economic Activity, 2006-2014

2006

2007

2008

2009f

2010f

2011f


2012f

2013f

2014f

Nominal GDP,
1
VNDbn

974,266

1,144,015

1,478,695

1,628,770

1,825,075

2,053,255

2,288,455

2,562,686

2,855,653

Nominal GDP,
1

US$bn

60.9

71.1

89.8

85.7

96.1

108.1

123.7

138.5

154.4

Real GDP growth,
1
% change y-o-y

8.2

8.5

6.2


5.1

4.4

5.5

6.0

6.8

6.9

GDP per capita,
1
US$

724

835

1,035

974

1,077

1,195

1,350


1,492

1,640

84.4

85.6

86.8

88.0

89.2

90.4

91.6

92.8

94.1

Industrial production index, % y-o-y,
3
average

16.8

16.7


14.9

6.8

10.0

12.0

14.0

14.0

14.0

Unemployment, %
of labour force,
3
end of period

4.8

4.6

5.0

5.5

5.5

5.0


4.5

4.0

4.0

Population, mn

2

1

2

3

f = BMI forecast. Source: IMF (General Statistics Office); IMF; General Statistics Office

Transport Outlook
Since our last report we have raised our macroeconomic forecasts for Vietnam. After GDP growth in
2008 of 6.2% we have now boosted the estimate for 2009 to 5.1% growth (was 2.0%). Our forecast for
2010-2014 is for an annual average GDP growth rate of 7.3% per annum, on a par with the also 7.8%
average rate achieved in the preceding five-year period. We maintain some adjustments to mode-specific
freight carried forecasts. In road haulage, we have trimmed our forecast to take account of the global
downturn and lower freight demand. We still see road-freight turnover running ahead of the general rate
of economic expansion in Vietnam. Air freight is beginning to emerge from a difficult period. WTO
membership has been supportive of greater freight transport turnover relative to GDP across all modes,
but particularly so for shipping. On the downside, the 2009 contraction in trade had a particularly strong
impact on shipping and Vietnam is expected to export less coal by sea as its domestic power needs rise.

The net result of this is that we expect freight carried growth across all modes, measured in mntkm, to
average 7.6% a year in 2010-2014.

According to our latest estimates, transport and communications GDP will have risen by 6.3% in 2009,
1.2 percentage points (pps) faster than overall GDP, which we estimate to have increased 5.1%. For the
2010-2014 forecast period, we expect the transport and communications sector to continue outpacing the
economy as a whole in value terms. It will achieve average annual growth of 8.3%, versus 7.3% for
overall GDP. The value of transport and communications GDP will rise to US$7.6bn in nominal terms by

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Vietnam Freight Transport Report Q1 2010

2014, of 4.5% of Vietnam’s GDP. By modes, we project that air freight to be the fastest growing, rising
by 9.5% per annum, followed by rod haulage at 9.3%, pipelines (8.4%), rail (8.0%), and shipping (7.2%).

Table: Freight Transport Data And Forecasts, 2006-2014

2006

2007

2008

2009f

2010f


2011f

2012f

2013f

2014

8.2

8.5

6.2

5.1

5.9

6.8

7.7

8.0

8.0

217.5

236.0


250.6

263.4

279.0

297.9

320.9

346.6

374.3

5-year average annual GDP
growth, %

7.8

8.0

7.8

7.3

6.8

6.5


6.3

6.7

7.3

Annual transport and communications sector growth,
%

9.5

9.8

7.5

6.3

7.1

8.0

8.9

9.2

8.0

224.9

246.9


265.4

282.2

302.3

326.6

355.7

388.5

419.5

5-year average annual
transport GDP growth, %

9.0

9.6

9.1

8.6

8.1

7.8


7.6

7.9

8.3

Transport and communications sector, % of GDP

4.2

4.2

4.3

4.3

4.4

4.4

4.5

4.5

4.5

Annual import growth, %

22.1


38.3

28.1

-10.8

11.1

10.5

10.0

10.0

10.0

Imports index, 1995=100

565.0

781.4

1000.9

893.1

992.3

1096.6


1206.1

1326.8

1459.4

5-year average annual
import growth, %

24.9

22.7

27.4

18.5

17.8

15.4

9.8

6.2

10.3

Annual export growth, %

22.7


21.9

29.1

-10.7

9.8

11.0

12.0

12.0

12.0

Exports index, 1995=100

766.0

933.8

1205.6

1076.9

1182.5

1312.5


1470.0

1646.3

1844.0

21.7

23.8

25.5

17.1

14.6

12.2

10.2

6.8

11.4

2.5

3.0

3.8


3.9

4.5

5.0

6.0

6.8

7.6

1,074

1,099

1,123

1,148

1,173

1,198

1,224

1,250

1,278


82,430

107,480

138,160

123,340

136,310

150,930

167,380

185,650

205,930

– % change y-o-y

22.4

30.4

28.5

-10.7

10.5


10.7

10.9

10.9

10.9

– 5-year annual average %

22.3

27.7

26.5

17.8

16.2

13.9

10.0

6.5

10.8

Total trade as % of nominal

GDP

135.3

151.1

153.8

134.4

132.9

132.6

124.5

122.9

121.8

Annual GDP growth, %
GDP index, 1995=100

Transport sector GDP index,
1995=100

5-year average annual
export growth, %
Transport and communications sector value, US$bn
nominal

Employment
Total transport sector
employment, '000
Trade
Total trade (imports +
exports), US$bn

f = forecast. Source: BMI

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