Q4 2010

www.businessmonitor.com

VietnaM

freight transport Report
INCLUDES 5-YEAR FORECASTS TO 2014

ISSN 1750-5364
Published by Business Monitor International Ltd.


VIETNAM
FREIGHT TRANSPORT
REPORT Q4 2010
INCLUDES 5-YEAR FORECASTS TO 2014

Part of BMI's Industry Report & Forecasts Series
Published by: Business Monitor International
Copy deadline: July 2010

Business Monitor International
Mermaid House,
2 Puddle Dock,
London, EC4V 3DS,
UK
Tel: +44 (0) 20 7248 0468
Fax: +44 (0) 20 7248 0467
Email:
Web:

© 2010 Business Monitor International.
All rights reserved.
All information contained in this publication is
copyrighted in the name of Business Monitor
International, and as such no part of this publication
may be reproduced, repackaged, redistributed, resold in
whole or in any part, or used in any form or by any
means graphic, electronic or mechanical, including
photocopying, recording, taping, or by information
storage or retrieval, or by any other means, without the
express written consent of the publisher.

DISCLAIMER
All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of
publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor
International accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the
publication. All information is provided without warranty, and Business Monitor International makes no representation of warranty of any kind as
to the accuracy or completeness of any information hereto contained.


Vietnam Freight Transport Report Q4 2010

© Business Monitor International Ltd

Page 2


Vietnam Freight Transport Report Q4 2010


CONTENTS
Executive Summary ......................................................................................................................................... 5
SWOT Analysis ................................................................................................................................................. 7
Vietnam Freight Transport Industry SWOT ........................................................................................................................................................... 7
Vietnam Political SWOT ........................................................................................................................................................................................ 8
Vietnam Economic SWOT ...................................................................................................................................................................................... 8
Vietnam Business Environment SWOT................................................................................................................................................................... 9

Market Overview ............................................................................................................................................. 10
Industry Trends And Developments ............................................................................................................ 12
Multi-Modal/Logistics ......................................................................................................................................................................................... 12
Road .................................................................................................................................................................................................................... 12
Air ........................................................................................................................................................................................................................ 13
Rail ...................................................................................................................................................................................................................... 14
Maritime .............................................................................................................................................................................................................. 14

Global Oil Products Price Outlook ............................................................................................................... 17
Table: Oil Product Price Data And Forecasts, 2010 (US$/bbl)........................................................................................................................... 18
Table: Oil Product Price Data And Forecasts, 2007-2014 (US$/bbl) ................................................................................................................. 19

Industry Forecast ........................................................................................................................................... 20
Air Freight ........................................................................................................................................................................................................... 20
Table: Air Freight, 2007-2014 ............................................................................................................................................................................. 20
Maritime Freight ................................................................................................................................................................................................. 21
Table: Maritime Freight, 2007-2014 (throughput, ‘000 tonnes) .......................................................................................................................... 21
Table: Inland Waterway Freight, 2007-2014 ....................................................................................................................................................... 21
Rail Freight ......................................................................................................................................................................................................... 22
Table: Rail Freight, 2007-2014 ........................................................................................................................................................................... 22
Road Freight ........................................................................................................................................................................................................ 22
Table: Road Freight, 2007-2014.......................................................................................................................................................................... 22

Trade Overview ................................................................................................................................................................................................... 23
Table: Trade Overview, 2007-2014 ..................................................................................................................................................................... 23
Table: Key Trade Idicators .................................................................................................................................................................................. 24
Table: Vietnam’s Main Import Partners, 2002-2008 (US$mn) ............................................................................................................................ 25
Table: Vietnam’s Main Export Partners, 2002-2008 (US$mn) ............................................................................................................................ 25

Company Profiles ........................................................................................................................................... 26
Vietnam Airlines .................................................................................................................................................................................................. 26
Doan Xa Port ....................................................................................................................................................................................................... 28
Vietnam Petroleum Transport Jsc (VIPCO)......................................................................................................................................................... 30

BMI Methodology ........................................................................................................................................... 31
How We Generate Our Industry Forecasts .......................................................................................................................................................... 31
Transport Industry ............................................................................................................................................................................................... 31
Sources ................................................................................................................................................................................................................ 32

© Business Monitor International Ltd

Page 3


Vietnam Freight Transport Report Q4 2010

© Business Monitor International Ltd

Page 4


Vietnam Freight Transport Report Q4 2010


Executive Summary
Vietnam's freight transport sector continues to develop in line with the country's growing consumer base
and strengthening trade links with markets both in Asia and further afield. The country's growing
recognition as a region trade hub has attracted foreign freight transport operators to the market and in
June Damco, the logistics division of Denmark-based shipping group AP Moller Maersk, announced the
introduction of a new cross-border trucking service linking Vietnam with Thailand and Cambodia.
Damco has been building its presence in the South-East Asian market, and in 2009 opened a new
transportation hub in Thailand's Samrong district.
Vietnam's favourable demographics have caught the attention of China, Japan and other major Asian
exporters who are looking increasingly to their own backyards for growth opportunities. China, in
particular, is keen to foster ties with its neighbours, and this year signed a free trade agreement (FTA)
with the ASEAN-5 (Malaysia, Singapore, the Philippines, Thailand and Indonesia) and Brunei, creating
the world's third-largest trade bloc. The agreement eliminates tariffs on 90% of goods traded between the
countries and China. Four other states, Laos, Cambodia, Vietnam and Myanmar, are on course to merge
with the bloc in 2015.
Vietnam's ability to capitalise on new trade opportunities will depend on the provision of new freight
transport infrastructure. The government is securing investment to help develop the country's transport
network with roads one of the main areas targeted. In June Vietnam opened a newly constructed bridge,
which will provide connection between the Cat Lai Port and Hanoi Highway in Ho Chi Minh City's
District Two. The construction work of the three-lane bridge got completed three months ahead of
schedule. The bridge is 413.7m long and 12.5m wide and is part of a city project to broaden interprovincial Road 25B that connects the bridge to the port. In 2011 we see continued growth in freight
carried by road with volumes carried rising by 6.62% to 28.62 billion tonne-km (bntkm) following this
year's expected 4.8% increase.
The expansion of Vietnam's rail freight sector is expected to continue, despite the recent decision of the
Vietnamese National Assembly not to endorse the plan for the construction of a north-south high-speed
railway. In 2011, Rail freight volumes, forecast to enjoy a partial recovery of 3.3% in 2010 are expected
to grow at an accelerated rate, increasing by 4.6% to 4.09bntkm.
Airfreight volumes should follow a similar pattern, growing by 4.7% in 2011 to 294.03bntkm following
on from a predicted 3.3% increase in volumes this year.
Aside from of the much-publicised travails of Vietnam's national shipbuilding company Vinashin,

Vietnam's maritime sector should continue on the upward trend established in 2010. The country's largest

© Business Monitor International Ltd

Page 5


Vietnam Freight Transport Report Q4 2010

port Saigon New Port (SNP) finds is expected to experience a 7.5% growth in throughput in 2011 when it
will handle 21.84mn tonnes. This is a slight gain on this year's growth rate when we expect the facility to
be handling 20.33mn tonnes - a y-o-y increase of 6.2%. The Port of Da Nang (PDN), a smaller facility in
central Vietnam, growth is expected to continue to post weaker growth than SNP, with tonnage volumes
forecast to increase by 2.8% y-o-y to 2.69mn tonnes. This year the port is expected to report growth of
2.3%
In recent years, Vietnam has enjoyed strong export led growth but as the internal market gathers pace we
expect overall trade growth to ease down. In real terms, exports and imports combined were growing at
more than 20% per annum earlier this decade, but in the global downturn of 2009 they contracted by
14.5%. In 2011, we expect total trade to grow by 6.2% y-o-y in real term, building on this year's projected
5.4% increase. Imports are expected to grow by 6% with exports increasing by 6.5%.

© Business Monitor International Ltd

Page 6


Vietnam Freight Transport Report Q4 2010

SWOT Analysis
Vietnam Freight Transport Industry SWOT


Strengths

Weaknesses

Opportunities

Threats

ƒ

Strong growth rate coupled with geography (long country stretching for thousands of
kilometres on a north-south axis) creates need for long-distance freight haulage.

ƒ

Recovery at ports in 2010 is expected to continue over the mid-term.

ƒ

Location on the South China Sea gives the country access to main inter-Asian
shipping routes, as well as access to developing land transport links with ASEAN
countries, allowing it scope to develop trade logistics.

ƒ

Generally poor roads. Despite new highway construction, only 13.5% of road network
is considered in good condition, 26% has two or more lanes and 29% is tarred.

ƒ


Traditionally low investment in rail; although attempts are being made to rectify this,
the potential of rail for cost-effective bulk freight is being underutilised.

ƒ

Decades of under-investment have left the country with a port infrastructure system
ranked 99th out of 133 countries by World Economic Forum Competitiveness Report.

ƒ

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

ƒ

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

ƒ

Opening of deepwater container terminal in 2009 set up better shipping links to US.

ƒ

Potential 'stop-go' in economic gowth as the government may be forced to tighten
monetary and fiscal policy in response to overheating.

ƒ

State-owned freight companies may be unprepared to compete as the doors are

gradually opened for international companies to enter the Vietnamese market.

© Business Monitor International Ltd

Page 7


Vietnam Freight Transport Report Q4 2010

Vietnam Political SWOT

Strengths

Weaknesses

Opportunities

Threats

ƒ

The Communist Party appears committed to market-oriented reforms, although
specific economic policies will undoubtedly be discussed at the 2011 National
Congress. 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.


ƒ

Corruption among government officials poses a hreat to legitimacy Communist Party.

ƒ

Increasing (albeit limited) public dissatisfaction with leadership's control over dissent.

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.

ƒ

The slowdown in growth in 2009 and 2010 is likely 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.

ƒ

Although strong domestic control will ensure little change to political scene in the next
few years, over the longer term, the one-party-state will probably be unsustainable.

ƒ


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

Vietnam Economic SWOT

Strengths

Weaknesses

Opportunities

Threats

ƒ

Vietnam has been one of the fastest-growing economies in Asia in recent years, with
GDP growth averaging 7.6% annually between 2000 and 2009.

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.

ƒ

Vietnam still suffers from substantial trade, current account and fiscal deficits, leaving
the economy vulnerable as the global economy continues to suffer in 2010. The fiscal
picture is clouded by considerable 'off-the-books' spending.


ƒ

Heavily managed and weak dong reduces incentives to improve quality of exports,
and also serves to keep import costs high, thus contributing to inflationary pressures.

ƒ

WTO membership has given Vietnam access to both foreign markets and capital,
while making Vietnamese enterprises stronger through increased competition.

ƒ

Government will, despite current macroeconomic woes, continue to move forward with
market reforms, including privatisations and liberalising 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.

ƒ

Inflation and deficit concerns have caused some investors to re-assess hitherto
upbeat view of Vietnam. If the government focuses on stimulating growth and fails to
root out inflationary pressure, it risks prolonging macroeconomic instability.
Prolonged macroeconomic instability could prompt the authorities to put reforms on
hold, as they struggle to stabilise the economy.

ƒ


© Business Monitor International Ltd

Page 8


Vietnam Freight Transport Report Q4 2010

Vietnam Business Environment SWOT

Strengths

Weaknesses

Opportunities

Threats

ƒ

Large, skilled, low-cost workforce has made the country attractive to foreign investors.

ƒ

Vietnam's location (proximity to China and South East Asia) and good sea links
makes it a good base for foreign companies to export to the rest of Asia, and beyond.

ƒ

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 is one of the world's most corrupt countries. Its score in Transparency
International's 2009 Corruption Perceptions Index was 2.7.

ƒ

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

ƒ

Pressing ahead with the privatisation of state-owned enterprises and the liberalisation
of the banking sector. This should offer foreign investors new entry points.

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 skills
levels could leave Vietnam a second-rate economy for an indefinite period.

© Business Monitor International Ltd

Page 9



Vietnam Freight Transport Report Q4 2010

Market Overview
In January 2007, Vietnam officially joined the World Trade Organisation (WTO), an event seen as an
important milestone in the country's closer integration into the global economy. WTO membership has
helped boost Vietnam's international trade and develop its freight transport capabilities.
Road transport is the most advanced in terms of freight sector privatisation and is the dominant mode for
freight, with a market share of around 60% of domestic cargo. There are over 1,050 enterprises registered
in the road transport business, which include 16 state-owned enterprises (SOEs), 233 limited liability
companies, 350 private companies and 450 joint stock companies. Very few foreign-invested companies
are present.
Most road transport companies are of small or medium size, and each company, on average, owns about
50 vehicles. In addition, tens of thousands of individual household businesses exist that operate
informally in the road freight sector, and are thus difficult to account for and monitor.
Vietnam has a national road network of some 222,179km. Of this, only 42,167km, or 19%, is paved. In
addition, recent surveys indicate that approximately 40% of the network is in poor to very poor condition
and will require substantial investment even to reach a maintainable condition. The quality of Vietnam's
road infrastructure was judged by the World Economic Forum (WEF) to be poor and was ranked 102 out
133 nations surveyed in the WEF 2010 Global Competitiveness Report.
Vietnam's railway transport sector has only one operator, the Vietnam Railway Corporation (VRC),
established by law in April 2003 as a state corporation operating railway transport and related services.
The government has announced plans to separate the management of rail infrastructure from passenger
and cargo services. Vietnam's rail network totals 2,600km (excluding sidings). The network is mixedgauge, comprising 2,169km of 1.000m gauge and 178km of 1.435m gauge. The network has 1,790
bridges totalling 45km and 11.5km of tunnels. The principal axis is Hanoi-Ho Chi Minh City (1,726km).
Other lines emanating from Hanoi are to Hai Phong (102km), Lao Cai (296km) and Dong Dang (162km).
Railway infrastructure in Vietnam was ranked 58 out of 114 by the WEF.
There are two principal airlines operating in Vietnam: Vietnam Airlines and Pacific Airlines. Both are
majority state owned, although Australia's Qantas is now a minority shareholder in Pacific Airlines. The

government has announced plans to build the country's largest airport at Long Thanh in the southern
province of Dong Nai, at an estimated cost of US$8bn. The authorities also plan to expand Noi Bai
International airport in Hanoi. The three major airports handling freight are located at Ho Chi Minh City,
Hanoi and Da Nang, each of which have international connecting flights. Minor airports such as Cat Bi at

© Business Monitor International Ltd

Page 10


Vietnam Freight Transport Report Q4 2010

Haiphong are generally used for domestic flights to the three larger hubs. In 2010, Vietnam's air transport
infrastructure was ranked 84/ 133 nations by the WEF.
UNCTAD shipping fleet statistics indicate that by the end of 2007, Vietnam had 387 commerical vessels
with a total capacity of 3.14mn DWT and ranked 28th out of 162 countries around the world (but fourth
in ASEAN after Singapore, Malaysia and Thailand). The average vessel size is 2,650DWT.
Vietnam's fleet structure lacks specialised container vessels, bulk cargo ships, large oil and liquefied
petroleum gas (LPG) tankers. Multi-function ships and bulk cargo ships account for 87% in number and
63% in tonnage, and container ships account for only 2.2% in number and 9% in tonnage. The largest
local operator is the Vietnam National Shipping Lines (Vinalines).
Vietnam's dense river and canal network provides the country with a highly developed inland waterway
system. This is the second-largest sub-sector involved in domestic cargo transport, accounting for 25-30%
of total transport volumes. Currently, the inland waterway transport sub-sector is managed by two state
corporations affiliated to the Ministry of Transport, one SOE affiliated to the Vietnam Inland Waterway
Authority, and some enterprises managed by other ministries, operating in support of the power
generation, cement and paper industries. In addition, there are about 230 co-operatives and hundreds of
inland waterway transport enterprises in the country.
Vietnam's seaport network comprises many small- and medium-sized entities, with inefficient
distribution. Most big ports are located far inside rivers, like Hai Phong and Ho Chi Minh City, with

limited depth at the entrance. Some ports are located in big cities, thus making it difficult to connect with
other modes of transport for cargo transfer from and to ports, due to traffic congestion. Except for several
new ports or upgraded ports, most ports have been operating for many years, lack investment and are
seriously degraded.
The loading and unloading equipment in some ports is obsolete, leading to low productivity. The average
productivity of a Vietnamese port is only 2,500 tonnes/m per wharf, or 40-50% of productivity of other
ports in the region.
Though a series of new port investments are expected to see conditions gradually improve during the next
few years, for the time-being the quality of Vietnam's port infrastructure is judged to be poor and was
ranked 99 out of 133 nations by the WEF.

© Business Monitor International Ltd

Page 11


Vietnam Freight Transport Report Q4 2010

Industry Trends And Developments
Multi-Modal/Logistics
In June, DHL Supply Chain, a division of global express and logistics company DHL Express (DHL),
announced it was planning to spend more than US$1.5mn on the construction a new distribution centre in
the province of Binh Duong.
The facility will include a total area of 60,000 m2, which is scheduled to be developed in three phases.
The distribution centre will also include a custom-built multi-user warehouse covering an area of 15,000
m2. The construction work was started in March 2010 and is scheduled to be completed before Q410.
The announcement foolows new that DHL Express's Vietnamese subsidiary DHL-VNPT Express
registered a 30% year-on-year (y-o-y) surge in parcel volumes in Q110. DHL is expecting continuous
increases in logistics trade in the coming months in Vietnam and is working towards reducing carbon
emissions by nearly 14%.


Road
In June, Vietnam opened a newly constructed bridge, which will provide connection between the Cat Lai
Port and Hanoi Highway in Ho Chi Minh City's District Two. The construction work of the three-lane
bridge got completed three months ahead of schedule. The bridge is 413.7m long and 12.5m wide and is
part of a city project to broaden inter-provincial Road 25B that connects the bridge to the port.
The bridge was funded by the Ho Chi Minh City Infrastructure Investment and was constructed by Civil
Engineering Construction Corporation No 1 (Cienco 1). The new bridge is aimed at reducing traffic
congestion on the road, which is used by thousands of container trucks every day to reach to the port. The
port now receives a total of 12,000 trucks on a daily basis.
In the same month, Damco, the logistics division of Denmark-based shipping group AP Moller Maersk,
announced the introduction of a new cross-border trucking service linking Thailand, Cambodia and
Vietnam. The company believes the service will allow it to capture a share of growing trilateral trade
volumes between the three countries by providing a faster and more cost-efficient alternative to existing
sea and air freight services.
Damco has been building its presence in the South-East Asian market, and in 2009 opened a new
transportation hub in Thailand's Samrong district. BMI believes intra-Asian trade will become a
progressively more important source of revenue for international freight transport operators over the next
few years.

© Business Monitor International Ltd

Page 12


Vietnam Freight Transport Report Q4 2010

With demand in Europe and North America expected to remain sluggish, China, Japan and other major
Asian exporters are expected to look increasingly to their own backyards for growth, encouraged by the
young demographics of many developing Asian states. China, in particular, is keen to foster ties with its

neighbours, and, in January 2010, signed a free trade agreement (FTA) with the ASEAN-5 (Malaysia,
Singapore, the Philippines, Thailand and Indonesia) and Brunei, creating the world's third-largest trade
bloc.
The agreement eliminates tariffs on 90% of goods traded between the countries and China. Four other
states, Laos, Cambodia, Vietnam and Myanmar, are on course to merge with the bloc in 2015.
South-East Asia also offers considerable potential as a re-export base. With domestic income levels
steadily rising, Chinese companies have been quick to make use of Vietnam's low labour costs, and many
firms have started to outsource production to the country.
French construction company VINCI Construction Grands Projects and Vietnamese infrastructure
concessionaire De Ca Investment JSC signed a memorandum of understanding (MoU) for the
US$600mn Ca Pass tunnel and road project in Vietnam. The project will widen a 9km-long stretch of
road, build a new 11km-long stretch including two tunnels (5.5km and 350m), and build three bridges
with a total length of 1.26km and 4km of approach roads.
The deals follows Vietnam's Prime Minister Nguyen Tan Dung approval of VND350trn (US$18.09bn)
for the construction and development of the road system in the country in March 2010. The funds were
approved under a national development scheme of 2020 and long term plan until 2030.
The plans include development of a North-South road with a total length of 3,262km, construction of
seven roads in the north with a total length of 1,099km, construction of three routes with total length of
264km in central and highland areas, and development of seven routes with a total length of 984km in
south area.

Air
In July Kuwait-based logistics company Agility revealed plans to relocate its operations to a new modern
facility in Ho Chi Minh City, Vietnam, which is located near to the Tan Son Nhat International Airport.
The new office will cover an area of 550m2 and will serve as the company's headquarters for Vietnam
and Indochina operations.
The logistics company currently operates three offices in Vietnam in Danang, Hanoi and Vung Tau with a
staff of more than 120 employees. It can be seen as part of the company's strategy to enhance its presence
in rapidly growing emerging markets in Southeast Asia.


© Business Monitor International Ltd

Page 13


Vietnam Freight Transport Report Q4 2010

Rail
In June BMI reported on the decision by the Vietnamese National Assembly not to endorse the plan for
the construction of a north-south high-speed railway which we view as a positive and encouraging move.
Since the project was first announced, BMI expressed concerns regarding the prohibitive price tag, which
prompted further concerns about the possible knock-on effects on the entire infrastructure sector from the
misallocation of resources this project could create. Given the hurdles to its realisation, we did not take it
into account in BMI's Vietnam railway infrastructure forecasts, a move justified by the recent
announcement.
The US$56bn project has been rejected by the National Assembly, following weeks of debate, which
divided the ruling party. According to a report by the Financial Times (FT), of the 493 members of the
National Assembly, only 209 voted for the project, highlighting the opposition to it. The hefty cost and
potential to inflate Vietnam's foreign debt in the coming years were the main grounds for opposition
The decision follows the World Bank's refusal to support the project, which was announcement in June.
Lead economist with the World Bank's Development Research Group, Martin Rama, was cited by
Vietnamese newspaper VN Express, saying that the World Bank is not likely to participate in the project.
This is an indication that the project will do little to address economic development issues. On the
contrary, critics of the high-speed railway (including some from within the government), have noted that
the debt burden, which the project would create, will be felt for many generations to come.

Maritime
One of the most interesting recent trends affecting Vietnam's maritime sector has been growing trade
integration with the US. In June, Mitsui OSK Line (MOL) launched a new container shipping service
calling at the port of Jacksonville (Jaxport) in Florida in partnership with compatriot K-Line that will link

the facility to the Vietnamese port of Cai Mep as well as other Asian terminal. The service will comprise
a weekly sailing by a 5,500 20-foot equivalent unit (TEU) vessel.
Meanwhile, In July the US and Vietnam signed a memorandum of understanding (MoU) that will see
containers destined for the US scanned for nuclear materials before they disembark. BMI believes that
this is evidence of the continued American drive to tackle what it feels is its Achilles' heel, with the belief
that the country's port sector could be a route for a potential terrorist attack. We think that Vietnam had
little choice but to sign the MoU, given the increasing importance of US trade to the country.

© Business Monitor International Ltd

Page 14


Vietnam Freight Transport Report Q4 2010

The agreement was signed by the US and Vietnam on July 2 and paves the way for the US Department of
Energy's National Nuclear Security Administration (NNSA) to work with Vietnamese ministries to install
radiation-detection equipment in Vietnamese ports. The agency will provide, install, maintain and train
Vietnamese staff in the operation of container scanners.
Kenneth Baker, NNSA's principal assistant deputy administrator for NNSA's Office of Defense Nuclear
Nonproliferation stated in the agency's press release: 'Our partnership with Vietnam will greatly
strengthen our capability to prevent nuclear and radiological smuggling through the maritime system in a
key, strategic region of the world. We appreciate Vietnam's efforts and commitment to keeping these
dangerous materials out of the hands of terrorists, smugglers and proliferators.'
The MoU between the two countries is part of a wider US programme that ultimately aims to scan 100%
of US-bound containers at foreign ports on the basis that they constitute a potential threat to national
security. Increasingly wary of asymmetric attacks on its own soil since 9/11, this is part of a raft of
legislation passed in recent years that aims to prevent another such attack.
In July 2007 the US government passed a bill requiring foreign ports to have scanning procedures for USbound cargo in place within the next five years. BMI has noted that these plans have met with some
dissent, however, and have been labelled by Christopher Koch, president and CEO of the World Shipping

Council, in an address to the US Senate Committee on Commerce, Science and Transportation as
'unworkable'. We believe that these extra security measures have the potential to cause significant delays
and congestion in ports.
Given how import an export partner the US has become for Vietnam, it is unlikely that the South-East
Asian nation could have done anything but sign the agreement. The two countries signed a bilateral trade
agreement in 2001, and since 2002 the value of Vietnamese exports to the US has grown by more than
five times. Vietnamese exports to the US are now worth 50% more than the country's second-placed
export partner, Japan.
In a separate development, the government of Vietnam is reportedly considering revising the scope and
scale of the Cai Mep-Thi Vai Port, including the level of official development assistance (ODA) it will
receive from Japan for it.
The Saigon Times cited a press statement by the government's website announcing that the Transport
Ministry is going to review which parts of the project need to be adjusted (presumably in terms of cost
and scale), to fit the latest regulations and policies, though the report does not mention which regulations
in particular. The ODA with Japan was agreed in 2004, but construction has faced several delays mainly
due to soaring raw material prices, which keeps pushing up the cost of construction.

© Business Monitor International Ltd

Page 15


Vietnam Freight Transport Report Q4 2010

When construction began in October 2008, overall construction cost was estimated at US$700mn,
financed via state and ODA funds. The project is already in the construction phase and due to be
completed in 2012. Since it is solely being funded by the ODA and the state budget, it is likely that the
government will seek to increase ODA allocations and ease the cost burden on the state budget.
A more disappointing development during Q310 was the ongoing demise of Vietnamese state shipbuilder
Vietnam Shipbuilding Industry Group (Vinashin) which, in July was forced to hand over control of its

Dung Quat to PetroVietnam as part of a forced restructuring effort following a government inquiry into
the company's affairs. Vinashin has reported debts of US$4.3bn, and, as part of the restructuring process,
will be forced to offload a number of assets, including Dung Quat shipyard, to state energy company
PetroVietnam and national shipping line Vinalines.
The blame for the company's financial problems has been pinned on Vinashin's secretary, Pham Than
Binh, who is among several employees expected to be disciplined for 'irresponsible' use of state capital.
During 2005-2006 Binh and other leading employees reportedly failed to heed the advice of observers
who warned that Vietnam was investing too much in its shipbuilding industry.
Though Vinashin was successful in winning new-build orders from overseas during 2005-2007, holding
166 shipbuilding contracts at the start of 2008, it was hit hard by the global financial crisis, which led to
its losing up to US$6bn in orders. A lack of adequate supervision has also been cited as one of the reasons
behind Vinashin's mismanagement, with the company reportedly having been under no obligation to
report its activities to the Ministry of Transport or the government.
Vietnam's nascent shipbuilding industry has enjoyed some success in recent years as cheap labour and
manufacturing costs have helped yards to challenge more established nations for orders from Europe and
other markets. According to the Japan Shipbuilders' association, Vietnam's share of global new-build
orders grew from just 0.1% in 2002 to 1.6% in 2008.
BMI's suspicions surrounding Vinashin's financial stability began in July 2009 when we reported the
company had been forced to delay the delivery of three aframax oil tankers because of a funding shortfall.
At a time when more seasoned shipbuilding powers, including Japan and South Korea, were investigating
plans to downsize their shipyard capacity because of the effects of the global economic downturn, the
lack of a similar response from Vietnamese authorities was worrying.

© Business Monitor International Ltd

Page 16


Vietnam Freight Transport Report Q4 2010


Global Oil Products Price Outlook
Stuck In Low Gear
There is no sign that the US gasoline season is going to be the salvation of the global oil products market.
There has been more activity on the part of US motorists but the demand trend remains relatively weak.
With product values tracking crude and pump prices remaining lower than expected, it is still possible
that a late upturn in consumption will deliver a decent result. Also, if improved equity market sentiment
feeds through to oil then product prices are likely to stage a summer rally.
Refiners continue to be faced with an uncertain outlook as crude could start to move higher while demand
trends appear fragile. Overall, margins have been a little better than feared in recent months but there is
no confidence that downstream profitability can be maintained at an acceptable level. Plant introductions
in Asia and the Middle East are not helping, while changes to the pricing systems in countries such as
China and India could have a major impact on fuels markets.
Given the generous stocks of distillates and gasoline, there is little risk of supply shortages in Q310,
unless US hurricane activity causes problems for Gulf Coast refiners.
The US Energy Information Administration (EIA) forecasts that regular-grade gasoline retail prices will
average US$2.80 per gallon during the summer driving season, up from US$2.44/gallon in the equivalent
period in 2009. This is a more benign scenario than previously projected, although the nearly 15%
increase will no doubt anger most motorists and dampen enthusiasm for long journeys.
Projected regular‐grade gasoline retail prices rise from an average US$2.35/gallon in 2009 to an average
US$2.77 in 2010 and to US$2.90 in 2011. On‐highway diesel fuel retail prices, which averaged
US$2.46/gallon in 2009, are forecast by the EIA to average US$2.98 in 2010 and US$3.13 in 2011.
US refining margins widened in June 2010, with those on the Gulf Coast more mixed than those realised
on the West Coast. All light crude cracking margins in the Gulf Coast improved, but margins for heavier
crudes processed in more complex refineries narrowed. Refining margins for West Texas Intermediate
(WTI) on the Gulf Coast fell by about eight cents to US$7.10 per barrel (bbl) in June. West Coast margins
were supported by stronger crack spreads for light products, particularly gasoline.
In North West Europe and the Mediterranean, June 2010 refining economics generally deteriorated
compared with earlier months. Wider differentials for gasoil/diesel and jet fuel/kerosene were more than
offset by lower crack spreads for other products. However, margins for Brent crude in Rotterdam widened
to US$3.83/bbl in June. In Singapore, relative changes in feedstock values allowed Dubai margins to


© Business Monitor International Ltd

Page 17


Vietnam Freight Transport Report Q4 2010

widen, while Tapis margins contracted. Refining margins for Dubai crude oil in Singapore were around
US$3.97/bbl in June.
Revised Forecasts
BMI estimates that in Q210 the global wholesale price for premium unleaded gasoline was
US$87.95/bbl, compared with US$87.61 in Q110. Gasoline prices were up by 26% y-o-y from US$69.89
in Q209. For the whole of 2010, the BMI assumption for gasoline is an average US$95.45/bbl, with the
price expecting to peak in August at more than US$105/bbl. The overall y-o-y rise in 2010 gasoline prices
is forecast at 36%.
Gasoil averaged US$89.27/bbl in Q210, based on a composite global price. This was a y-o-y rise of
almost 37%. For 2010 as a whole we forecast is for an average price of US$93.23/bbl, probably peaking
in December 2010 at more than US$109/bbl. The full-year outturn represents a 35% increase from 2009.

Table: Oil Product Price Data And Forecasts, 2010 (US$/bbl)

Gasoline

Q110

Q210e

Q310f


Q410f

2010f

Rotterdam Premium Unleaded

87.78

89.20

100.21

107.52

96.18

NY Harbour Unleaded

86.59

87.15

101.15

111.34

96.56

Singapore Premium Unleaded


88.45

87.48

97.86

100.62

93.6

Global average

87.61

87.95

99.74

106.49

95.45

Rotterdam

83.77

89.07

95.16


106.03

93.51

Mediterranean

83.81

89.28

94.39

105.42

93.22

Singapore

84.77

89.45

95.40

102.16

92.95

Global average


84.12

89.27

94.98

104.54

93.23

Rotterdam

86.01

90.85

97.41

109.27

95.88

NY Harbour

87.90

90.39

100.34


114.42

98.26

Singapore

85.20

89.86

95.73

103.41

93.55

Global average

86.37

90.37

97.83

109.03

95.90

Gasoil


Jet/kerosene

e/f = estimate/forecast. Source: BMI

Jet prices averaged US$90.37/bbl in Q210, using the composite for New York, Singapore and Rotterdam.
The y-o-y increase was just over 35%, with jet lagging behind the gain in gasoil prices. Quarter-on-

© Business Monitor International Ltd

Page 18


Vietnam Freight Transport Report Q4 2010

quarter, the increase was just 4.6% from Q110. For 2010, the annual level is forecast to be US$95.90/bbl,
compared with US$70.66/bbl in 2009.
In 2009, naphtha was a surprisingly robust performer among the major refined products, gaining 92%
between January and December. In Q210, naphtha averaged US$76.80, compared with US$78.30/bbl in
Q110 and US$54.70 in Q209. The 2010 average naphtha price is put by BMI at US$83.53/bbl, up 41%
from 2009. Thanks to the stirring of petrochemicals demand in Asia, naphtha looks set to be the star
performer in 2010.
Looking further ahead, we forecast gasoline prices rising further to US$97.75/bbl in 2011 and stabilising
around US$103.50 from 2012. Gasoil is expected to climb to US$95.48 in 2011, reaching a plateau of
just over US$101 from 2012. The price of jet is forecast to average US$98.21/bbl in 2011 before levelling
out at just under US$104 from 2012.

Table: Oil Product Price Data And Forecasts, 2007-2014 (US$/bbl)

Gasoline


2007

2008

2009

2010f

2011f

2012f

2013f

2014f

Rotterdam Premium Unleaded

75.75

100.12

70.60

96.18

98.50

104.29


104.29

104.29

NY Harbour Unleaded

78.75

102.54

69.70

96.56

98.89

104.71

104.71

104.71

Singapore Premium Unleaded

74.98

102.64

70.21


93.60

95.86

101.50

101.50

101.50

Global average

76.49

101.77

70.17

95.45

97.75

103.50

103.50

103.50

Rotterdam


77.02

122.62

68.74

93.51

95.76

101.40

101.40

101.40

Mediterranean

77.69

121.75

69.13

93.22

95.47

101.09


101.09

101.09

Singapore

77.03

119.53

69.01

92.95

95.19

100.79

100.79

100.79

Global average

77.24

121.3

68.96


93.23

95.48

101.09

101.09

101.09

Rotterdam

81.13

126.61

70.81

95.88

98.20

103.97

103.97

103.97

NY Harbour


82.48

127.13

71.18

98.26

100.63

106.55

106.55

106.55

Singapore

79.17

121.11

69.99

93.55

95.81

101.44


101.44

101.44

Global average

80.93

124.95

70.66

95.90

98.21

103.99

103.99

103.99

Gasoil

Jet/kerosene

f = BMI forecast. Source: International Energy Agency (historical data), BMI

© Business Monitor International Ltd


Page 19


Vietnam Freight Transport Report Q4 2010

Industry Forecast
Vietnam's economic outperformance relative to many of its regional peers continues to support the
growth of the country's trade and freight transport sectors. Following the recent decision taken by the
State Bank of Vietnam not to raise interests, BMI has recently decided to revise our real GDP forecast for
Vietnam upwards from 4.4% to 6.0% for 2010.
However, with the economy at a growing risk of overheating, we believe the Bank is likely to succumb to
pressure to raise rates in early 2011 with the effect of lowering the rate of growth to 5.5% next year. Over
the medium-term, BMI nevertheless forecast the rate of economic expansion to remain high, providing a
stable platform for the freight transport sector and for trade.
We are forecasting average annual growth of 6.3% between 2011 and 2014. The macro downside is the
danger of policy 'stop-go' and political risk in advance of the 11th National Congress of the Communist
Party, due to be held in January 2011.

Air Freight
The outlook for Vietnam's air freight sector is encouraging. In 2011 we forecast airfreight tonne-km (tkm)
volumes to grow by a healthy 4.7% y-o-y to 294.03mntkm, up from an expected 3.3% increase this year.
In tonnage terms, next year's growth is projected at 5.1% (compared with 3.7% this year) with a total of
131,730 tonnes being flown. We expect growth to consolidate over our mid-term (2011-2014) forecast
period where we see an average annual increase of 5.2% in tkm terms and 5.6% in tonnage terms. In 2014
we project 343.74mntkm being flown and 156.15mn tonnes being carried.

Table: Air Freight, 2007-2014

Air freight, ‘000 tonnes
– % change y-o-y

Air freight, mn tonnes/km
– % change y-o-y

2007

2008

2009e

2010f

2011f

2012f

2013f

2014f

129.60

129.70

120.90

125.32

131.73

139.11


147.33

156.15

7.28

0.08

-6.78

3.65

5.12

5.60

5.91

5.98

279.90

290.00

271.98

280.96

294.03


309.06

325.79

343.74

3.90

3.61

-6.21

3.30

4.65

5.11

5.42

5.51

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

© Business Monitor International Ltd

Page 20



Vietnam Freight Transport Report Q4 2010

Maritime Freight
Vietnam's port sector continues to outperform other sub-divisions of freight due to extensive funding for
new facilities from both the public and private sectors. In 2011, Saigon New Port (SNP) will continue to
build on this year's recovery in tonnage throughput when total handling volumes are expected to show
and increased of 6.2% over the full-year. The port is forecast to register a 7.5% growth next year and to
handle 21.84mn tonnes of cargo.
Growth is expected to accelerate thereafter with an annual average increase of 8% projected between
2011 and 2014. At the port of Da Nang, the growth trend, though steady, is forecast to be less impressive,
owing to the port's distance from Vietnam's main industrial and most important trade regions.
In 2011 total throughput at Da Nang is expected to increase 2.8% y-o-y to 2.69mn tonnes, a marginal
improvement on 2009’s 2.3%. Mid-term growth should be slightly higher on average, at about 3% y-o-y
in 2011-2014. In 2014 we forecast SNP and Da Nang to be handling 27.69mn and 2.97mn tonnes.

Table: Maritime Freight, 2007-2014 (throughput, ‘000 tonnes)

Port of Ho Chi Minh City
(Saigon New)
– % change y-o-y
Port of Da Nang
– % change y-o-y

2007

2008

2009e

2010f


2011f

2012f

2013f

2014f

25,600.0

20,180.0

19,140.0

20,329.6

21,843.7

23,581.4

25,564.5

27,691.8

28.00

-21.17

-5.15


6.22

7.45

7.96

8.41

8.32

2,736.94

2,742.26

2,556.42

2,615.48

2,687.72

2,770.63

2,865.24

2,966.73

15.43

0.19


-6.78

2.31

2.76

3.08

3.41

3.54

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

Table: Inland Waterway Freight, 2007-2014

Inland waterway freight,
‘000 tonnes
– % change y-o-y
Inland waterway freight,
mn tonnes/km
– % change y-o-y

2007

2008

2009e


2010f

2011f

2012f

2013f

2014f

135,283

137,177

128,189

132,905

139,767

147,659

156,447

165,871

10.00

1.40


-6.55

3.68

5.16

5.65

5.95

6.02

22,235.6

22,680.3

21,500.9

22,097.8

22,966.1

23,964.8

25,076.8

26,269.5

18.00


2.00

-5.20

2.78

3.93

4.35

4.64

4.76

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

© Business Monitor International Ltd

Page 21


Vietnam Freight Transport Report Q4 2010

Rail Freight
After some volatility in the period up to and during the global economic downturn, we believe Vietnam's
rail freight sector is now on a steady path. In 2011 Freight carried will grow by 4.6% to 4.09bntkm, a
notable expansion on 2010's expected 3.3% increase. Total tonnage volumes meanwhile will rise by 5.6%
to 7.43mn tonnes, up from 4% this year. Looking to the mid-term, BMI is forecasting average annual
growth of 5.2% and 6.2% in tkm and total tonnage terms respectively with relatively minimal standard
deviation from year to year. By 2014, Vietnam's rail freight network is expected to be carrying 8.95mn

tonnes and travelling 4.78bntkm.

Table: Rail Freight, 2007-2014

Rail freight, ‘000 tonnes
– % change y-o-y
Rail freight, mn tonnes/km
– % change y-o-y

2007

2008

2009e

2010f

2011f

2012f

2013f

2014f

9,050.00

8,426.90

6,769.01


7,041.51

7,437.93

7,893.85

8,401.53

8,946.00

-1.13

-6.89

-19.67

4.03

5.63

6.13

6.43

6.48

3,882.50

4,027.60


3,783.57

3,907.83

4,088.61

4,296.52

4,528.04

4,776.33

12.65

3.74

-6.06

3.28

4.63

5.09

5.39

5.48

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


Road Freight
Road haulage is also well placed to profit from Vietnam's upturn in economic activity and trade. Next
year, the sector is expected to register a 6.6% growth in tkm terms with 28.62bntkm expected to be
travelled. This is almost a 2% rise on 2010's growth rate which is expected to come in at 4.8% y-o-y. In
tonnage terms, BMI forecasts volumes to grow by 6.1% in 2011 to 45.07mn tonnes, after this year's
projected 4.4% increase. Over the mid-term, growth is expected to average 7.2% and 6.6% y-o-y
respectively.

Table: Road Freight, 2007-2014

Road freight, ‘000 tonnes
– % change y-o-y
Road freight, mn tonnes/
km
– % change y-o-y

2007

2008

2009e

2010f

2011f

2012f

2013f


2014f

403,362

443,294

406,894

424,740

450,702

480,560

513,809

549,466

19.12

9.90

-8.21

4.39

6.11

6.62


6.92

6.94

24,646.9

28,023.5

25,622.4

26,844.8

28,623.1

30,668.2

32,945.6

35,388.0

20.01

13.70

-8.57

4.77

6.62


7.15

7.43

7.41

Source: General Statistics Office of Vietnam

© Business Monitor International Ltd

Page 22


Vietnam Freight Transport Report Q4 2010

Trade Overview
Vietnam is well placed to take advantage of increasing intra-Asia trade as well as improved trade
integration with Western markets such as the US, factors which lead us to look favourably towards the
next few years, particularly from an export perspective, though a return to the pre-downturn boom period
is unlikely.
In 2011 we see total trade growing broadly in-line with economic output, rising by 6.2% y-o-y in real
terms and with imports and exports expected to increase by 6% and 6.5% respectively. This is a slight
increase on 2010 when total trade growth is expected to come in at around 5.4% y-o-y. In value terms,
imports will increase by 9.9% next year to US$81.5bn while exports should rise 10.4% to US$68.6bn.
Over the mid-term we see total trade growth averaging 6.8% per annum in the four tears to 2014 with
imports and exports growing by 6.4% and 7.4% y-o-y respectively.
Vietnam's principal export commodities are crude oil and manufactured goods. The country's main
imports are machinery and equipment.
Vietnam's main export partners are the US, Japan, Australia, China and Germany. The country's main

sources for imports are China, Singapore, Japan, South Korea and Thailand. Vietnam's geographic
position on the South China Sea allows the country access to the main transpacific and intra-Asian
shipping routes, enabling the country to meet its trading needs.

Table: Trade Overview, 2007-2014

2007

2008

2009e

2010f

2011f

2012f

2013f

2014f

Imports, real growth, % y-o-y

28.32

11.92

-14.00


4.00

6.00

6.50

6.50

6.50

Exports, real growth, % y-o-y

15.58

10.85

-15.00

7.00

6.50

7.00

8.00

8.00

Total Trade, real growth, % y-o-y


22.11

11.42

-14.46

5.37

6.23

6.73

7.20

7.20

Imports, US$bn

65.99

85.21

71.73

74.15

81.48

91.24


104.56

119.19

– % change y-o-y

38.52

29.14

-15.82

3.37

9.89

11.98

14.59

13.99

Exports, US$bn

54.71

70.33

58.56


62.16

68.61

77.17

89.62

103.54

– % change y-o-y

21.97

28.57

-16.74

6.15

10.37

12.48

16.13

15.53

120.69


155.55

130.29

136.32

150.09

168.41

194.18

222.73

30.49

28.88

-16.23

4.62

10.11

12.20

15.30

14.70


Total trade, US$bn
– % change y-o-y

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

© Business Monitor International Ltd

Page 23


Vietnam Freight Transport Report Q4 2010

Table: Key Trade Idicators

2007

2008

2009f

2010f

2011f

2012f

2013f

2014f


1,856.85

2,416.63

1,686.66

1,865.36

2,117.93

2,340.19

2,663.44

3,024.91

14.63

30.15

-30.21

10.60

13.54

10.49

13.81


13.57

1,941.22

2,415.93

1,679.96

1,733.19

1,894.43

2,109.07

2,401.93

2,723.77

13.16

24.45

-30.46

3.17

9.30

11.33


13.89

13.40

Exports, US$mn

374.58

553.33

434.16

449.31

489.17

555.80

652.70

761.06

– % change y-o-y

36.82

47.72

-21.54


3.49

8.87

13.62

17.43

16.60

2,654.19

2,824.71

2,230.20

2,314.49

2,569.83

2,909.74

3,373.52

3,883.18

41.81

6.42


-21.05

3.78

11.03

13.23

15.94

15.11

Exports, US$mn

519.10

411.02

324.28

344.09

379.54

426.61

495.06

571.61


– % change y-o-y

63.96

-20.82

-21.10

6.11

10.30

12.40

16.05

15.46

5,808.50

4,946.04

3,894.54

4,010.40

4,361.34

4,828.53


5,465.98

6,166.47

69.05

-14.85

-21.26

2.97

8.75

10.71

13.20

12.82

26,416.4

32,534.8

26,281.0

27,769.0

30,432.0


33,967.6

39,109.5

44,859.7

29.75

23.16

-19.22

5.66

9.59

11.62

15.14

14.70

43,862.3

54,527.3

46,486.5

48,023.5


52,679.6

58,877.8

67,334.8

76,628.3

47.33

24.31

-14.75

3.31

9.70

11.77

14.36

13.80

10,061.0

14,833.7

8,158.38


11,233.7

12,357.4

13,849.2

16,018.8

18,445.1

3.62

47.44

-45.00

37.70

10.00

12.07

15.67

15.15

8,744.21

13,811.1


6,821.14

9,432.53

10,286.0

11,522.8

12,915.8

14,446.6

30.53

57.95

-50.61

38.28

9.05

12.02

12.09

11.85

Agricultural raw materials
Exports, US$mn

– % change y-o-y
Imports, US$mn
– % change y-o-y
Ores and metals

Imports, US$mn
– % change y-o-y
Iron and steel

Imports, US$mn
– % change y-o-y
Manufactured goods
Exports, US$mn
– % change y-o-y
Imports, US$mn
– % change y-o-y
Fuel
Exports, US$mn
– % change y-o-y
Imports, US$mn
– % change y-o-y

Source: BMI

© Business Monitor International Ltd

Page 24