Q3 2014
www.businessmonitor.com

VIETNAM
FREIGHT TRANSPORT REPORT
INCLUDES 5-YEAR FORECASTS TO 2018

ISSN 1750-5364
Published by:Business Monitor International


Vietnam Freight Transport Report
Q3 2014
INCLUDES 5-YEAR FORECASTS TO 2018

Part of BMI’s Industry Report & Forecasts Series
Published by: Business Monitor International
Copy deadline: May 2014

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Vietnam Freight Transport Report Q3 2014

CONTENTS
BMI Industry View ............................................................................................................... 7
SWOT .................................................................................................................................... 9
Freight Transport ...................................................................................................................................... 9
Political ................................................................................................................................................. 12
Economic ............................................................................................................................................... 13
Business Environment .............................................................................................................................. 14


Industry Forecast .............................................................................................................. 15
Road Freight ......................................................................................................................................... 17
Table: Road Freight (Vietnam 2011-2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Inland Waterways .................................................................................................................................. 18
Table: Inland Waterway Freight (Vietnam 2011-2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Rail Freight .......................................................................................................................................... 20
Table: Vietnam Transport Network Length (km) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Table: Rail Freight (Vietnam 2011-2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Air Freight ............................................................................................................................................ 22
Table: Air Freight (Vietnam 2011-2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Maritime Freight ................................................................................................................................... 23
Table: Maritime Freight (Vietnam 2011-2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Trade ................................................................................................................................................... 25
Table: Trade Overview (Vietnam 2011-2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Table: Key Trade Indicators (Vietnam 2011-2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Table: Top Import Destinations, 2004-2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Table: Top Export Destinations, 2004-2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Market Overview ............................................................................................................... 29
Industry Trends And Developments ................................................................................ 36
Multimodal ........................................................................................................................................... 36
Maritime .............................................................................................................................................. 36
Air ...................................................................................................................................................... 37


Company Profile ................................................................................................................ 40
Vietnam Airlines Cargo ............................................................................................................................ 40
Vietnam Petroleum Transport Company (VIPCO) .......................................................................................... 43
Vietnam National Shipping Lines (Vinalines) ................................................................................................ 45

Political Outlook ................................................................................................................ 49
Foreign Policy ........................................................................................................................................ 49
Table: Vietnam Political Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Long-Term Political Outlook ..................................................................................................................... 51

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Vietnam Freight Transport Report Q3 2014

Oil Price Outlook ............................................................................................................... 55
Bunker Fuel ............................................................................................................................................ 55
Table: BMI Crude Oil & Bunker Fuel Price Forecast (USD/bbl) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

The Storm Clears For Shipping .................................................................................................................
(Slightly) Better Times For Bunker Prices ...................................................................................................
Long-Term Threats Linger .......................................................................................................................
Pressing Rotterdam & New York Harder ....................................................................................................
Risks To Outlook ....................................................................................................................................
Jet Fuel .................................................................................................................................................

56

58
59
61
61
62

Table: BMI Crude Oil & Jet Fuel Price Forecast, USD/bbl . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

Better Outlook Tames Price Fall ............................................................................................................... 62
Table: Total Air Freight And Passenger Volume Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

Risks To Outlook .................................................................................................................................... 67
Diesel .................................................................................................................................................... 68
Table: BMI Crude Oil And Diesel Price Forecast (USD/bbl) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

New York's One-Off Heat Up .................................................................................................................... 68
NY: Short-Term Diesel Price Support Expected ........................................................................................... 71
Rotterdam: Green Policies Drive Diesel Forward ........................................................................................ 75
Singapore: Diesel Support With Power Risks ............................................................................................... 77
Risks To Outlook .................................................................................................................................... 81

Macroeconomic Forecasts ............................................................................................... 82
Table: Vietnam - Economic Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Demographic Forecast ..................................................................................................... 86
Table: Vietnam's Population By Age Group, 1990-2020 ('000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Table: Vietnam's Population By Age Group, 1990-2020 (% of total) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Table: Vietnam's Key Population Ratios, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Table: Vietnam's Rural And Urban Population, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89


Methodology ...................................................................................................................... 90
Industry Forecast Methodology ................................................................................................................ 90
Sector-Specific Methodology .................................................................................................................... 91
Sources ................................................................................................................................................ 92

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Vietnam Freight Transport Report Q3 2014

BMI Industry View
Latest data released by the General Statistics office of Vietnam (GSO) showed that real GDP accelerated by
5.0% year-on-year (y-o-y) in Q1 2014, slightly faster than the 4.9% print registered in the Q1 2013.
Although it showed a deceleration from 6.0% recorded in Q4 2013, we believe that the economy is still on
track to hit our 2014 growth forecast of 5.9% in 2014. This would mark a slight acceleration from the 5.4%
registered in 2013, and is above estimates by the Asian Development Bank, which forecasts real GDP to
reach 5.6% in 2014.

We believe that the economy will be driven by a strengthening of private consumption, continued foreign
direct investment into key areas of the economy, a more robust external sector, and a rebound in
manufacturing activity over the coming quarters. That said, trend growth for the Vietnamese economy will
average a slower 6.2% over the next decade, compared to 6.5% recorded in the past 10 years.

Growth across the Vietnamese freight mix is set to be healthy in 2014 with the outperformer in terms of yo-y gains in tonnage throughput pencilled in to be the shipping sector where the Port of Da Nang will enjoy
annual growth of 7.00%. Road freight with growth of more than 6% will also perform well, while the air
and rail modes fall behind slightly on 3.00% and 3.12% respectively during 2014.


Headline Industry Data
■

2014 rail freight tonnage is set to increase by 3.12% to 6.73mn tonnes.

■

2014 air freight tonnage is forecast to rise by 3.00% to 189,210 tonnes.

■

Tonnage handled at the Port of Ho Chi Minh City in 2014 is forecast to grow 6.06%, whereas tonnage
handled at the Port of Da Nang is forecast to increase 7.00%.

■

2014 road freight tonnage is forecast to grow by 6.01% to 811.04mn tonnes.

■

2014 total trade is forecast to rise by 6.55%.

Key Industry Trends

World Bank Calls For Better Vietnamese Logistics: The World Bank has declared that enhanced freight
logistics in Vietnam could benefit the country's economy. Between 1990 and 2007, Vietnam's GDP grew by
an average of 7.4%, while between 2008 and 2018, the World Bank forecasts GDP to rise 5.6% per year on
average, something that could improve with more competitive freight logistics. Better transport links would
boost productivity and strengthen competitiveness with the World Bank reporting that a third of all truck
journeys in Vietnam return back empty.


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Vietnam Freight Transport Report Q3 2014

YICT Launches New Direct Weekly Shipping Service SVG: The Chinese Yantian International
Container Terminal (YICT) has initiated a direct shipping service SVG to Vietnam, it was announced in
April 2014. The service will first call at Hong Kong and then will sail to Haiphong, Vietnam. The service,
operated by China United Lines, will be called in Yantian once-weekly, on Fridays. The launch of the new
service will aid the transport growth demand between southern regions of China and Vietnam.

Finnair Cargo Expanding In Vietnam: Finnair Cargo is building on its air freight growth at the
beginning of 2014, by expanding its routes. The company's focus for its most immediate service expansion
is in Vietnam, with the company enticed by the country's growth outlook and expanding air freight demand.
The airline has announced that it will enhance its cargo offerings between Europe and Vietnam, with a third
weekly freighter flight to Hanoi from March 31 2014.

Key Risks To Outlook

The US Agency for International Development (USAID) announced its five-year (2014-18) Country
Development Cooperation Strategy for Vietnam. The strategy has three broad objectives which include
broad-based sustainable growth, the increased provision of healthcare, and the strengthening of relations
between the US and Vietnam. We see this as yet another step in the right direction for Vietnamese foreign
policy, which has continued to build strong relationships with key trading partners in recent months. Indeed,
several Vietnamese officials have been meeting with foreign government officials from around the world to
improve relations and economic ties.


The government has continued to make an active effort to improve the country's business environment in
order to attract foreign investment. The fourth round of negotiations between Vietnam and South Korea for
a bilateral free-trade agreement took place in March, and officials are looking to conclude negotiations by
the end of 2014. Moreover, Vietnam has been forging very strong trade and investment ties with Japan in
order to attract funding and expertise to develop the country's infrastructure as well as invest in the
manufacturing sector.

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Vietnam Freight Transport Report Q3 2014

SWOT
Freight Transport
Vietnam Freight Transport Industry SWOT Analysis

Strengths

■

Vietnam's strong domestic growth rate, coupled with its geography - it stretches for
thousands of kilometres on a north-south axis, creates a need for long-distance
freight haulage.

■

A recovery of activity levels at the nation's ports in 2010 is expected to continue over
the mid-term to 2018.


■

Vietnam's location on the South China Sea gives the country access to the main interAsian shipping routes, as well as access to the developing land transport links with
ASEAN countries, allowing the country scope to develop its trade logistics.

Weaknesses

■

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

■

Traditionally low investment in rail, with the potential for cost-effective bulk rail freight
being underutilised.

■

Decades of under-investment have left the country with a port infrastructure system
that is poor by international standards. Overcapacity is a growing problem.

■

Unresolved business environment issues and lack of significant improvement in
access to infrastructure financing means that we remain very conservative on the
growth potential of Vietnam's freight sector.


■

A slowdown affecting the US economy has a knock-on effect on Vietnam due to it
being the Asian country's largest export partner.

■

Vietnamese shipping company Vinashinlines has announced that 90% of its vessels,
including Diamond Way and Sea Eagle, have been sold. The firm added that a number

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Vietnam Freight Transport Report Q3 2014

Vietnam Freight Transport Industry SWOT Analysis - Continued

of the carriers had been purchased for prices above their original valuation, Hellenic
Shipping News reported in early October 2013.
Opportunities

■

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

■


Chinese investment could bring about much-needed improvements in the rail sector.

■

Growing international interest in Vietnam as a growth market within the box shipping
sector.

■

The Vietnamese province of Dong Nai is to clear land near the proposed Long Thanh
International Airport in order to develop infrastructure facilities. Under a plan
submitted to the government, 21,000 hectares in three communes in Cam My District
and seven communes in Long Thanh are to be cleared for establishing new residential
and urban areas, industrial zones, research institutes and international service
centres.

■

The president of Russian Railways (RZD) has explained his belief that an investment
in the construction of a new rail line in southern Vietnam will come in at more than US
$2bn. Speaking to IA Prime, Vladimir Yakunin said that 'it is difficult to talk about it
now, because there is no project', but as it stands, an agreement of intent was signed
on March 11 2013 between RZD, Vietnamese Railways and the mineral deposit
company An Vien, also from Vietnam.

■

It was announced in June 2013 that the Laos government is to build a new railway
line between the country and its Asian neighbours, Vietnam and Thailand. The 220km
line will run from Laos's Western border with Thailand to the Lao Bao border gate in

Vietnam. Construction will commence in August 2013 with an expected completion
date of the second half of 2017.

■

The 900,000 twenty-foot equivalent units (TEUs) deepwater Lach Huyen
terminal project will entail a total investment of US$1.2bn and is likely to become
operational in 2015. The terminal, likely to ease port congestion in Haiphong, will be
able to accommodate vessels with a capacity ranging between 8,000TEUs and
9,000TEUs.

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Vietnam Freight Transport Report Q3 2014

Vietnam Freight Transport Industry SWOT Analysis - Continued
■

The Asian Development Bank (ADB) has announced that it will provide a US$410mn
loan for the Vietnamese government, reports KHL Group. The loan will enable the
government to develop a new arterial road between Ho Chi Minh City, the Mekong
Delta and the south of the country.

■

Vietnam-based Rang Dong Group has filed a petition to secure approval for
developing Phan Thiet airport, reported the Daily in August 2013, citing the

company's chairman Nguyen Van Dong.

■

Two berths at Vietnam's first state-built seaport, the Cai Mep-Thi Vai international
port in Ba RiaVung Tau province, are set to be leased for 30 years, according to
official sources.

■

On November 14 2013, Vietnam's Phuong Nam Technology Science Institute and
EDES were scheduled to sign a memorandum of understanding (MoU) for the
construction of the US$3.6bn railway project in Vietnam.

Threats

■

Vietnam risks losing out to neighbouring countries if it is unable to develop its
infrastructure to keep up with the pace of demand.

■

Vietnam is vulnerable to any slowdown in Chinese investment and to political risk in
the sensitive South China Sea, subject to competing sovereignty claims.

■

A drop in international demand for exports would negatively affect Vietnam's freight
transport sector.


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Vietnam Freight Transport Report Q3 2014

Political
SWOT Analysis

Strengths

■

The Communist Party of Vietnam remains committed to market-oriented reforms and
we do not expect major shifts in policy direction over the next five years. The oneparty system is generally conducive to short-term political stability.

■

Relations with the US have witnessed a marked improvement, and Washington sees
Hanoi as a potential geopolitical ally in South East Asia.

Weaknesses

■

Corruption among government officials poses a major threat to the legitimacy of the
ruling Communist Party.


■

There is increasing (albeit still limited) public dissatisfaction with the leadership's tight
control over political dissent.

Opportunities

■

The government recognises the threat corruption poses to its legitimacy, and has
acted to clamp down on graft among party officials.

■

Vietnam has allowed legislators to become more vocal in criticising government
policies. This is opening up opportunities for more checks and balances within the
one-party system.

Threats

■

Macroeconomic instabilities continue to weigh on public acceptance of the one-party
system, and street demonstrations to protest economic conditions could develop into
a full-on challenge of undemocractic rule.

■

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.

■

Relations with China have deteriorated over recent years due to Beijing's more
assertive stance over disputed islands in the South China Sea and domestic criticism
of a large Chinese investment into a bauxite mining project in the central highlands,
which could potentially cause wide-scale environmental damage.

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Vietnam Freight Transport Report Q3 2014

Economic
SWOT Analysis

Strengths

■

Vietnam has been one of the fastest-growing economies in Asia in recent years, with
GDP growth averaging 7.1% annually between 2000 and 2012.

■

The economic boom has lifted many Vietnamese out of poverty, with the official
poverty rate in the country falling from 58% in 1993 to 20.7% in 2012.


Weaknesses

■

Vietnam still suffers from substantial trade and fiscal deficits, leaving the economy
vulnerable to global economic uncertainties. The fiscal deficit is dominated by
substantial spending on social subsidies that could be difficult to withdraw.

■

The heavily-managed and weak currency reduces incentives to improve quality of
exports, and also keeps import costs high, contributing to inflationary pressures.

Opportunities

■

WTO membership and the upcoming ASEAN AEC in 2015 should give Vietnam
greater access to both foreign markets and capital, while making Vietnamese
enterprises stronger through increased competition.

■

The government will in spite of the current macroeconomic woes, continue to move
forward with market reforms, including privatisation of state-owned enterprises, and
liberalising the banking sector.

■


Urbanisation will continue to be a long-term growth driver. The UN forecasts the
urban population rising from 29% of the population to more than 50% by the early
2040s.

Threats

■

Inflation and deficit concerns have caused some investors to re-assess their hitherto
upbeat view of Vietnam. If the government focuses too much on stimulating growth
and fails to root out inflationary pressure, it risks prolonging macroeconomic
instability, which could lead to a potential crisis.

■

Prolonged macroeconomic instability could prompt the authorities to put reforms on
hold as they struggle to stabilise the economy.

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Vietnam Freight Transport Report Q3 2014

Business Environment
SWOT Analysis

Strengths


■

Vietnam has a large, skilled and low-cost workforce, which has made the country
attractive to foreign investors.

■

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

■

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.

■

Vietnam remains one of the world's most corrupt countries. According to
Transparency International's 2012 Corruption Perceptions Index, Vietnam ranks 123
out of 176 countries.

Opportunities

■

Vietnam is increasingly attracting investment from key Asian economies, such as
Japan, South Korea and Taiwan. This offers the possibility of the transfer of high-tech

skills and know-how.

■

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

■

Ongoing trade disputes with the US, and the general threat of American
protectionism, which will remain a concern.

■

Labour unrest remains a lingering threat. A failure by the authorities to boost skills
levels could leave Vietnam a second-rate economy for an indefinite period.

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Vietnam Freight Transport Report Q3 2014

Industry Forecast
Latest GDP figures show that the Vietnamese economy grew by 5.0% year-on-year (y-o-y) in Q1 2014, and
we believe that our 2014 real GDP growth forecast of 5.9% remains in sight. Indeed, we believe that

increased macroeconomic stability, combined with pro-growth policies will help the economy accelerate
from 2013 levels. Key downside risks to this view include a faster-than-anticipated slowdown in China as
well as the stalling of the country's reform drive.

A breakdown of the data show that all sectors of the economy witnessed an acceleration in growth over the
quarter: agriculture, forestry and fisheries, which accounts for approximately 13% of GDP grew by 2.4% yo-y in Q1 2014, while the industrial and construction sectors, which account for 40% of GDP expanded by
4.7% y-o-y. Importantly, the services sector which accounts for the lion's share of the economy at 47% of
GDP, accelerated by a stellar 6.0% in Q1 2014, contributing a whopping 2.8 percentage points of the overall
growth figure. Going forward, we expect that the manufacturing, construction and service sectors will
continue to do well on the back of policy driven efforts to stimulate growth.

GDP To Enjoy Healthy Medium Term
Vietnam Real GDP Growth, % change y-o-y (2010-2018)
7

6.5

6

5.5

2018f

2017f

2016f

2015f

2014f


2013e

2012

2011

2010

5

Vietnam - Real GDP growth, % y-o-y

e/f = BMI estimate/forecast. Source: Asian Development Bank, General Statistics Office

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Vietnam Freight Transport Report Q3 2014

To keep pace with growth, Vietnam will need to invest in its logistics sector, but BMI expects a lot of this
investment to come from outside logistic and freight transport companies which will be keen to enter and
expand into this high growth market. We believe that rapid urbanisation, driven by a healthy pipeline of
government-led infrastructure projects over the next five years, will continue to spur rural-urban migration
and foreign direct investment (FDI) into developed cities such as Ho Chi Minh and Hanoi. We have also
already witnessed this to some extent in Vietnam's port sector, with considerable investment being made by
container shipping lines and global port operators in the development of modern box terminals at Vietnam's
ports.


This investment in the country's maritime sector has ensured that Vietnam's manufacturing growth can be
achieved with greater links between the country and its main export partner the US. Direct container
shipping links between Vietnam and the US have been in operation since 2009, which have cut both time
and cost, as previously Vietnamese shipments had to be transhipped via Singapore.

Demand from the US for Vietnam's manufactured goods looks set to continue growing, with Vietnam's
exports set to benefit from the slow but steady recovery in the US economy.

Vietnam's export outlook will also continue to be bolstered by China's growth outlook. Although we project
China's economic growth to slow over the medium term, the country's real GDP growth outlook remains
robust.

Vietnam plays a key role in China's coal supply chain. Vietnam is China's fifth-largest coal supplier
providing the country with the thermal coal it requires for its power stations. Vietnam's role in this supply
chain looks set to continue, although BMI highlights that China is trying to decrease its power sectors'
reliance on coal. While we believe that the percentage supplied by coal fired power plants within China's
overall energy mix will slip over the medium term, it will nevertheless remain above 70%.

However, we note that China's fake data is expected to distort more export numbers until at least June,
making it difficult for the analysts to assess the strength of the country's trade. Despite the crackdown in
May 2013 on the practice of inflated invoices, which were used to disguise capital inflows, over-invoicing
is still prevalent. This implies that the export data then was artificially boosted, making the recent data look
weak by comparison. According to Royal Bank of Scotland, the government data that revealed the March
exports had unexpectedly declined 6.6% y-o-y marked the height of distortions (Bloomberg). China is
hesitant to revise figures that it acknowledged were inflated, but this leaves the analysts to do a lot of
explanation on why the trade numbers are better than they appear.

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Vietnam Freight Transport Report Q3 2014

BMI believes that Vietnam's textile sector will also benefit from the development of China's middle class,
as the country starts to import more from abroad.

Road Freight
Road Dominates And Offers Best Links Into China

Despite its low standing in road infrastructure, with the Global Economic Forum's Competitiveness Report
2013/14 ranking Vietnam's roads at 102 out of 142 globally, and placing it last in comparison with 13 of its
Asia peers, the country's logistics needs are primarily met by road. In 2014 and beyond, we predict that road
freight volumes in Vietnam will account for the majority of freight carried in the country.

Road Reliant
Vietnam Freight Mode Breakdown (% Of Total), 2013

Source: BMI

We forecast that growth in road freight volume will continue to impress, albeit not at the double-digit rate of
growth seen in 2012 and the years preceding it. In 2014, we expect the sector to register y-o-y growth of
6.01%, up slightly on 2013's estimated 5.94%, to reach 811.037mn tonnes. Over the medium term, we
forecast road freight volume growth will average 7.59% per annum reaching a projected 1.10bn tonnes by
the end of 2018.

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Vietnam Freight Transport Report Q3 2014

There is, however, upside risk to this forecast as more foreign logistics companies, with considerable road
freight expertise, expand in Vietnam. Both FedEx and DHL have expanded their role in Vietnam in recent
times. While some companies are breaking into Vietnam by developing their own operations in the country,
others are getting a head start by acquiring and joining up with domestic freight operators. This is the route
CEVA Logistics has taken entering into a joint venture with its long-term business partner Indo Trans
Logistics Group.

Road freight plays a key role not only in Vietnam's domestic logistics sector, but also in the country's export
supply chain. Road is the main form of transport linking Vietnam's factories to the country's ports and also
plays a key role in linking Vietnam with its second-largest export partner China.

Vietnam's northern border links the country's with the south of China. Road links continue to be developed
between the two and with them trucking services. Kerry Asia Road Transport (Kart), for example, offers
a twice-weekly trucking link connecting Shenzhen and Hanoi.

Table: Road Freight (Vietnam 2011-2018)

2011

2012

2013e

2014f

2015f


2016f

2017f

2018f

Road Freight
Tonnes (000)

654127.10

722156.40

765070.40

811036.61

878167.51

949432.46

1024120.02

1102546.65

Road freight
tonnes, % yo-y

11.43


10.40

5.94

6.01

8.28

8.12

7.87

7.66

Road freight
tonnes-km
(mn ton km)

40130.10

43902.40

46790.70

50070.85

54324.79

58840.69


63573.48

68543.21

Road freight
tonnes-km,
% y-o-y

10.92

9.40

6.58

7.01

8.50

8.31

8.04

7.82

e/f = BMI estimate/forecast. Source: General Statistics Office of Vietnam

Inland Waterways
Mekong Offers Trade Links With Neighbours


Vietnam's inland waterways play a considerable role in the country's freight transport sector, making it the
second-largest freight transport mode in the country. In 2014, we forecast the inland waterways sector to
grow by 6.64% to reach 192.821mn tonnes, which will be slightly down on 2013's estimated 7.31% annual
growth figure. Over our forecast period, we anticipate average y-o-y growth of 6.34%.

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Vietnam Freight Transport Report Q3 2014

Mekong Offers Trade Connections
Map Of The Mekong River

Source: BMI

Vietnam's inland waterways stretch for 47,130km and the country's dense network of waterways ranks its
seventh in the world in terms of length. The country's inland waterways include the Mekong River, which
enables freight connections with Vietnam's neighbours. Although we highlight that the River's full potential
has not been reached and so development in the River is an area for potential investment.

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Vietnam Freight Transport Report Q3 2014

Table: Inland Waterway Freight (Vietnam 2011-2018)


2011

2012

2013e

2014f

2015f

2016f

2017f

2018f

Inland Waterway
Freight Tonnes
(000)

160164.50

168493.00

180812.70

192821.44

205047.81


218027.10

231629.74

245913.37

Inland waterway
freight tonnes,
% y-o-y

11.05

5.20

7.31

6.64

6.34

6.33

6.24

6.17

Inland Waterway
freight tonneskm (mn ton km)


34371.70

37018.30

39344.40

42347.78

45596.91

49046.13

52661.00

56456.84

Inland Waterway
freight tonneskm % y-o-y

8.50

7.70

6.28

7.63

7.67

7.56


7.37

7.21

e/f = BMI estimate/forecast. Source: General Statistics Office of Vietnam

Rail Freight
Network Lacking And No Impetus To Develop It

Despite rail's potential as an overland trade link for Vietnam with its three neighbours, the mode's role in the
country's freight transport sector remains small. In 2013, we estimate that Vietnam's rail freight volumes
accounted for a negligible percentage of the total with the country's rail network transporting just 6.73mn
tonnes of freight.

In 2014, the rail freight sector is set for steady, if uninspiring, annual growth of 3.12%, which will at least
provide something of a tonic from 2013's contraction of 6.82%. Indeed, positive growth has been lacking
from this sector over recent years but is set to return at least over the medium term, with an average annual
growth of 4.62% pencilled in between 2014 and 2018.

There are two key factors that we believe have held back Vietnam's rail freight development and will
continue to do so.

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Vietnam Freight Transport Report Q3 2014


Table: Vietnam Transport Network Length (km)

Vietnam Transport Network

Length (km)

Road

206,633

Railway

2,632

Inland Waterway

47,130

Source: CIA World Factbook (accessed January 21 2014)

The first is the quality of Vietnam's railway infrastructure. The World Economic Forum's Global
Competitiveness Report 2013/14 gives Vietnam's rail infrastructure a low ranking, placing it 58th globally
out of 123 countries measured. A major problem for Vietnam's rail freight development is the relative
shortness of the country's rail network. Vietnam's railway lines extend for just 2,632km; this compares with
the country's 206,633km network of roads and 47,130km network of inland waterways.

The second drawback for freight rail development in Vietnam is its gauge incompatibility with China.
Vietnam's network is dominated by narrow gauge, which accounts for 80% of the total. While the country
has some standard gauge track, this system only accounts for 20% of the total.


This means that rail freight trade between Vietnam and China is slowed by gauge changes, making road
freight a more cost- and time-effective alternative; this stymies potential rail-freight projects between the
two nations.

BMI highlights that developments in Vietnam's rail network are taking place, but these have been focused
on expanding the country's passenger network (eg, a planned high-speed railway link between Vietnam and
Laos).

Table: Rail Freight (Vietnam 2011-2018)

2011
Rail freight tonnes ('000)
Rail freight tonnes, % y-o-y
Rail freight tonnes-km (mn ton km)
Rail freight tonnes-km, % y-o-y

2017f

2018f

7285.10 7003.50 6525.90 6729.53 6958.33 7306.25 7715.40

8178.32

-7.33

2012

4576.92


2.60

3.40

2016f

4162.00 4024.60 3804.10 3903.01 4020.10 4160.80 4343.88
-5.48

3.12

2015f

6.00

-3.30

-6.82

2014f

5.60

5.08

-3.87

2013e

3.00


5.00

3.50

4.40

5.37

e/f = BMI estimate/forecast. Source: General Statistics Office of Vietnam

© Business Monitor International

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Vietnam Freight Transport Report Q3 2014

Air Freight
On Growth Trajectory As Vietnam Gets Better Connected

Vietnam's air freight sector may only account for a small percentage of the country's freight transport sector;
although this is not expected to change, there is a lot of growth potential in this sector. The government has
ambitious plans to modernise and expand the country's airport infrastructure over the long term.

Since early 2012, Vietnam has announced that it was in the search for foreign investors to help construct
two international airports: the USD1.2bn Van Don International airport in the northern province of Quang
Ninh and the USD10bn Long Thanh International airport in the southern province of Dong Nai.

For 2014, we are sticking to last quarter's forecast. We anticipate that the Vietnamese air freight sector will

grow by 3.00%, up from 2013's 2.80%, to reach 189,210 tonnes. Over the forecast period, we
predict Vietnam's air freight levels to grow on average per annum by 3.96% to reach 223,040 tonnes.

Taking Off
Vietnam Air Freight Tonnage, 000 tonnes
250
200
150
100
50

2018f

2017f

2016f

2015f

2014f

2013

2012

2011

2010

0


Vietnam - Air Freight Tonnes (000)

e/f = BMI estimate/forecast. Source: General Statistics Office of Vietnam

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Vietnam Freight Transport Report Q3 2014

BMI expects the increase of air freight connections for Vietnam will come through the development of
intra-Asia air freight routes. In 2012, Air China Cargo and Malaysia's MASKargo added services to Ho
Chi Minh City. Vietnam is also becoming globally better connected by air. In 2012, Emirates added a link
with the country and Dubai, and in 2013, Finnair announced that it planned to launch new cargo routes to
Hanoi.

While still at the development stage, Vietnam is seeking to play a greater role in the electronics supply
chain, a key source of demand for air freight transport options. One example has been the impact the local
production of iPhones has had on China's air freight sector. Plans are in place for Vietnam-based facilities to
produce Nokia phones, iPods, PlayStations and Sony laptops, which will all drive up air freight demand.

Vietnam's pharmaceutical sector exports much of its output, but the country also imports a lot. Vietnam's
trade in pharmaceuticals is forecast to grow in the double digits in percentage terms over the medium term.
The global pharmaceutical sector is increasingly turning to the aviation sector to meet its freight needs, with
the sector offering savings in transport time, along with environment controlled options, which are vital for
the transport of some medicines and vaccinations.

Table: Air Freight (Vietnam 2011-2018)


Air freight tonnes (000)
Air freight tonnes % y-o-y
Air freight tonnes-km (mn ton km)
Air freight tonnes-km % y-o-y

2011

2012

2013e

2014f

2015f

2016f

2017f

2018f

200.30

178.70

183.70

189.21


195.64

203.27

212.42

223.04

5.37

-10.78

2.80

3.00

3.40

3.90

4.50

5.00

426.70

480.90

469.80


477.79

489.73

504.42

522.08

542.96

-0.02

12.70

-2.31

1.70

2.50

3.00

3.50

4.00

e/f = BMI estimate/forecast. Source: General Statistics Office of Vietnam

Maritime Freight
Vietnam Catching The Eye Of Shippers


Taiwan-based Evergreen Line and South Korea-based Hanjin Shipping announced a new intra-Asia service
at the end of 2013, which should provide upside risk for the sector going forward. The new intra-Asia
service, which calls at the port of Ho Chi Minh, will boost both companies' intra-Asia operations and we
have long highlighted intra-Asia trade as a region of strong growth and we note the port of Ho Chi Minh to
be a specific beneficiary of the new route - with the launch of the service offering upside risk to our forecast
for the port.

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Vietnam Freight Transport Report Q3 2014

Vietnam's ports and shipping sectors play a role in the global dry, liquid and container sector. As
highlighted earlier Vietnam plays a considerable role in China's coal supply chain, with the dry bulk
commodity being shipped out of Vietnam and into China's main coal port of Qinhuangdao. Vietnam is an
oil-producing nation, but its consumption needs have come to outweigh its supply and so the country is
making use of the liquid bulk shipping sector to import oil.

Getting Better Connected
UNCTADstat Liner Connectivity Index For Asia, 2004 & 2013

Source: UNCTADstat

The development of Vietnam's liner connections has been highlighted by data from UNCTAD's liner
connectivity index. In 2004, Vietnam was ranked lowest out of its 14 Asian peers in terms of container line
connectivity, but by 2013, it had jumped up the rankings to ninth place out of its 14 Asian neighbours.


Vietnam's growing role in the global container shipping sector is also in evidence in the port of Ho Chi
Minh's box throughput. In 2014, we forecast container volumes to increase by 6.06% and over the medium
term by an annual average of 6.88%.

For more information on data and analysis of Vietnam's shipping sector, please see BMI's Vietnam
Shipping Report.

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Vietnam Freight Transport Report Q3 2014

Table: Maritime Freight (Vietnam 2011-2018)

2011
Port of Ho Chi Minh City (Saigon New)
throughput, tonnes '000

2017f

2018f

33450.7 36029.4 38866.7 41222.6 43986.4 47175.8 50747.6

54212.2

Port of Ho Chi Minh City (Saigon New)
throughput, tonnes, % y-o-y

Port of Da Nang throughput, tonnes
'000

2012

2013e

2014f

2015f

2016f

7.4

7.7

7.9

6.1

6.7

7.3

7.6

6.8

3868.0


4423.0

5010.2

5360.9

5709.4

6043.2

6406.8

6794.9

17.1

14.3

13.3

7.0

6.5

5.8

6.0

6.1


Port of Da Nang throughput, tonnes, %
y-o-y

e/f = BMI estimate/forecast. Source: Port authorities

Trade

Table: Trade Overview (Vietnam 2011-2018)

2011

2012

2013e

2014f

2015f

2016f

2017f

2018f

Imports, real growth, % y-o-y

4.10


9.09

7.90

7.50

7.50

7.30

7.20

7.00

Exports, real growth, % y-o-y

10.78

15.71

6.00

5.60

5.80

6.20

6.60


6.80

7.44

12.40

6.95

6.55

6.65

6.75

6.90

6.90

112.40

118.98

133.50

155.21

177.64

201.28


228.77

259.38

24.17

5.86

12.20

16.26

14.45

13.31

13.66

13.38

106.84

124.43

137.15

156.64

176.44


197.87

223.64

253.08

31.49

16.46

10.22

14.21

12.64

12.14

13.03

13.16

219.24

243.41

270.65

311.85


354.08

399.15

452.42

512.46

27.63

11.03

11.19

15.22

13.54

12.73

13.35

13.27

Total Trade, real growth, % y-o-y
Imports, USDbn
Import growth, % y-o-y
Exports, USDbn
Export growth, % y-o-y
Total trade, USDbn

Total trade growth, % y-o-y

e/f = BMI estimate/forecast. Source: General Statistics Office of Vietnam, BMI

Table: Key Trade Indicators (Vietnam 2011-2018)

2011

2012

2013e

2014f

2015f

2016f

2017f

2018f

Agricultural raw
materials, exports,
USDmn

3394.24

3608.58


4081.28

4788.31

5518.77

6395.90

7220.46

8316.09

Agricultural raw
materials, exports,
% y-o-y

-1.23

6.31

13.10

17.32

15.26

15.89

12.89


15.17

© Business Monitor International

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