Vietnam freight transport report q1 2010

... of any information hereto contained Vietnam Freight Transport Report Q1 2010 © Business Monitor International Ltd Page Vietnam Freight Transport Report Q1 2010 CONTENTS Executive Summary ... leave Vietnam a second-rate economy for an indefinite period © Business Monitor International Ltd Page Vietnam Freight Transport Report Q1 2010 Business Environment Ratings The freight transport. .. International Ltd Page 34 Vietnam Freight Transport Report Q1 2010 Road Road transport is the most advanced in terms of freight sector privatisation and is the dominant mode for freight, with a market

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Report Q1 2010

Including 5-year industry forecasts by BMI

Part of BMI’s Industry Survey & Forecasts Series

Published by: Business Monitor International

Publication date: December 2009

CONTENTS

Executive Summary 5

SWOT Analysis 6

Vietnam Road Haulage SWOT 6

Vietnam Political SWOT 6

Vietnam Economics SWOT 7

Vietnam Business Environment SWOT 7

Business Environment Ratings 8

Table: Asia Pacific Freight Business Environment Ratings 8

Freight Industry Ratings 9

Transport Intensity Index 10

Vietnam Logistics Performance Index (LPI) 10

Economic Risk Summary 10

Political Risk Summary 11

Business Environment Risk Summary 12

Legal Code/Corruption 12

Red Tape 12

Labour Force 13

Industry Trends And Developments 14

Road 14

Rail 14

Air 14

Sea 15

Industry Forecast Scenario 17

Global Oil Products Price Outlook 17

Table: Oil Product Price Assumptions, Q108-Q409 (US$/bbl) 19

Table: Oil Product Prices, 2007-2014 (US$/bbl) 20

Macroeconomic Outlook 21

Table: Vietnam – Economic Activity, 2006-2014 23

Transport Outlook 23

Table: Freight Transport Data And Forecasts, 2006-2014 24

Table: Freight Carried, Domestic, 2006-2014 (mn tonnes-km) 25

Trade Environment 26

Table: Total Value Of Imports By Category, 2006-2014 (US$mn) 27

Table: Value Of Exports By Category, 2006-2014 (US$mn) 28

Table: Vietnam’s Top Export Destinations, 2002-2006 (US$mn) 29

Table: Vietnam’s Export Trade, 2003-2006 (% growth y-o-y) 30

Table: Vietnam’s Import Trade, 2003-2005 (% growth y-o-y) 30

Table: Vietnam’s Top Import Sources, 2002-2006 (US$mn) 31

Market Overview 32

Multi-Modal 32

Competitive Landscape 32

Road 35

Infrastructure 35

Competitive Landscape 35

Rail 39

Infrastructure 39

Competitive Landscape 39

Air 42

Infrastructure 42

Competitive Landscape 42

Company Profile: Vietnam Airlines 46

Water 48

Infrastructure 48

Maritime Competitive Landscape 49

Company Profile: Vietnam Petroleum Transport Jsc (VIPCO) 55

Table: Vietnam Petroleum Transport’s Key Financial Data 56

Company Profile: Doan Xa Port 57

Table: Doan Xa Port’s Financial Performance 58

Pipelines 59

Competitive Landscape 59

Country Snapshot: Vietnam Demographic Data 60

Section 1: Population 60

Table: Demographic Indicators, 2005-2030 60

Table: Rural/Urban Breakdown, 2005-2030 61

Section 2: Education And Healthcare 61

Table: Education, 2002-2005 61

Table: Vital Statistics, 2005-2030 61

Section 3: Labour Market And Spending Power 62

Table: Employment Indicators, 1999-2004 more recent?] 62

Table: Consumer Expenditure, 2000-2012 (US$) 62

BMI Methodology 63

How We Generate Our Industry Forecasts 63

Transport Industry 63

Sources 64

Executive Summary

Container shipping line APL said in October 2009 that it was launching a new Japan-Thailand-Vietnam

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

Since our last report we have raised our macroeconomic forecasts for Vietnam After GDP growth in

2008 of 6.2% we have now boosted the estimate for 2009 to 5.1% growth (was 2.0%) Our forecast for 2010-2014 is for an annual average GDP growth rate of 7.3% per annum, on a par with the also 7.8% average rate achieved in the preceding five-year period We maintain some adjustments to mode-specific freight carried forecasts In road haulage, we have trimmed our forecast to take account of the global downturn and lower freight demand We still see road-freight turnover running ahead of the general rate

of economic expansion in Vietnam Air freight is beginning to emerge from a difficult period WTO membership has been supportive of greater freight transport turnover relative to GDP across all modes, but particularly so for shipping On the downside, the 2009 contraction in trade had a particularly strong impact on shipping and Vietnam is expected to export less coal by sea as its domestic power needs rise The net result of this is that we expect freight carried growth across all modes, measured in million tonne kilometres (mntkm), to average 7.6% a year in 2010-2014

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

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

SWOT Analysis

Vietnam Road Haulage SWOT

Strengths ƒ Vietnam’s strong domestic growth rate coupled with its geography; a long country

stretching for thousands of kilometres on a north-south axis creates a need for distance freight haulage

long-Weaknesses ƒ The generally poor state of the road network Despite new highway construction, only

13.5% of the road network is considered to be in good condition, only 26% has two or more lanes and only 29% is tarred Construction of the second north-south highway may be a waste of resources given the pressing need for improvement of secondary roads

Opportunities ƒ The beginnings of local commercial vehicle production, which will help improve the

stock of lorries used by road haulage companies

Threats ƒ The attractiveness of other modes of freight transport, particularly inland waterways

and coastal shipping If progress towards a better-integrated national road network is too slow, freight growth will divert away from the trucking industry

Vietnam Political SWOT

Strengths ƒ The Communist Party government appears committed to the market-oriented reforms

necessary to double 2000’s GDP per capita by 2010, as targeted The one-party system is generally conducive to short-term political stability

ƒ Relations with the US are generally improving and Washington sees Hanoi as a potential geopolitical ally in South East Asia

Weaknesses ƒ Corruption among government officials poses a major threat to the legitimacy of the

ruling Communist Party

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

Opportunities ƒ The government recognises the threat that corruption poses to its legitimacy and has

acted to clamp down on graft among party officials

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

Threats ƒ Vietnamese dissidents are seeking external help, especially from the US This could

complicate Vietnam-US relations, with Washington having criticised Hanoi over its restrictions on religious freedom

ƒ Although strong domestic control will ensure little change to Vietnam’s political scene

in the next few years, over the longer term, the one-party state will probably be unsustainable

Vietnam Economics SWOT

Strengths ƒ Vietnam has been one of the fastest-growing economies in Asia in recent years,

averaging growth of 8.0% a year

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

Weaknesses ƒ Vietnam suffers from substantial trade, current account and fiscal deficits, leaving the

economy vulnerable to external shocks The fiscal picture is clouded by considerable

‘off-the-books’ spending

ƒ The heavily managed and weak dong currency reduces incentives to improve the quality of exports, and also serves to keep import costs high, thus contributing to inflationary pressures

Opportunities ƒ WTO membership has given Vietnam access to both foreign markets and capital,

while making Vietnamese enterprises stronger through increased competition

ƒ The government will continue to move forward with market reforms, including privatisation of the state-owned enterprises sector and liberalising the banking sector

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

Threats ƒ Inflation and deficit concerns have caused some investors to re-assess their hitherto

upbeat view of Vietnam If the government fails to curb inflation, it risks prolonging macroeconomic instability, which could lead to a potential crisis

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

Vietnam Business Environment SWOT

Strengths ƒ Vietnam has a large, skilled and low-cost workforce that has made the country

attractive to foreign investors

ƒ Vietnam’s location – its proximity to China and South East Asia, and its good sea links – makes it a good base for foreign companies to export to the rest of Asia and beyond

Weaknesses ƒ Vietnam’s infrastructure is still weak Roads, railways and ports are inadequate to cope

with the country’s economic growth and links with the outside world

ƒ Vietnam remains one of the world’s most corrupt countries Its score in Transparency

International’s 2008 Corruption Perceptions Index was 2.7, lower than the regional

average of 4.6

Opportunities ƒ Vietnam is attracting investment from key Asian economies, such as Japan, South

Korea and Taiwan This offers possibility of transfer of high-tech skills and know-how

ƒ Vietnam is pressing ahead with the privatisation of state-owned enterprises and the liberalisation of the banking sector This should offer foreign investors new entry points

Threats ƒ Ongoing trade disputes with the US and the general threat of American protectionism,

which will remain a concern

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

Business Environment Ratings

The freight transport sector in the Asia Pacific region offers one of the most attractive business

environments for the industry worldwide There are various reasons for this First, the region offers a powerful combination of future growth and economies of scale It contains arguably the two most

significant of the four BRIC (Brazil, Russia, India and China) economies, which, it is argued, are the powerhouses of future global growth China and India combine vast geographical size, large populations, globally competitive labour costs and as yet untapped infrastructure potential To this must be added the

‘third BRIC’, Russia, which, although outside the region, has critically important trade and transport links

to Asia (such as crude oil exports to China) Second, at a ‘big picture’ level, most of the regional power centres are committed to reasonably pragmatic and relatively stable, market-based policies Countries that

in the past were either fervently communist (China, Vietnam) or capitalist (Malaysia, Taiwan) share a much wider non-ideological common ground focused on how to achieve a sustainable rise in living standards This is not to say, of course, that the area is free of tensions and flash points (North Korea, China-Japan, India-Pakistan to name just a few)

Table: Asia Pacific Freight Business Environment Ratings

Limits of potential returns Risks to realisation of returns

Freight transport

market

Country structure Limits

Market risks

Country risk Risks

Overall rating

Regional rank

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

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

Freight Industry Ratings

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

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

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

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

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

Transport Intensity Index

This index is derived by calculating the average annual growth rate for total trade (imports plus exports) over a 10-year period running from 2005 through to 2014 As such, it is a mix of actual performance (the five-year 2005-2009 period) and projected performance (2010-2014) In Vietnam’s case, actual average annual trade growth in 2005-2009 was a strong 17.8%, which in our projections will ease substantially to 10.8% per annum in 2010-2014 The annual average across the 10 years as a whole is 14.3%

Vietnam Logistics Performance Index (LPI)

In 2007, the World Bank launched its Logistics Performance Index (LPI), intended as ‘the first in-depth cross-country assessment of the logistics gap among countries’ The LPI was calculated on a five-point scale and based on survey responses from over 800 logistics professionals Countries were given an aggregate LPI score, which was in turn made up of seven sub-categories, covering criteria such as the quality of customs, infrastructure and international shipments, logistics competence, tracking and tracing, domestic logistics costs, and timeliness

In the 2007 survey, Vietnam was ranked 53rd in the world with an LPI score of 2.9 For comparison with the major OECD economies, the Netherlands was ranked second in the world with an LPI of 4.2;

followed by Germany (third with an LPI of 4.1), the UK (ninth, LPI of 4.0) and the US (14th, LPI of 3.8)

In comparison with other Asian economies, Singapore was the world number one with an LPI score of 4.2, followed by Australia (17th, LPI of 3.8) and Taiwan (21st, LPI of 3.6) Then came South Korea (25th, LPI of 3.5), Malaysia (27th, LPI of 3.5), China (30th, LPI of 3.3), Thailand (31st, LPI of 3.3) and Indonesia (43rd, LPI of 3.0) Vietnam was therefore close to the bottom end of the regional LPI ranking, ahead of Papua New Guinea (95th, LPI of 2.4) and Laos (117th, LPI of 2.3) In terms of the different components of the index, Vietnam’s best performing areas, ranked in order, were domestic logistics costs, timeliness, international shipments, and tracking and tracing Weaker areas in descending order were customs, logistics competence, and infrastructure

Economic Risk Summary

Vietnam Borrows Dollars

Japan will lend Vietnam US$1bn annually between 2010 and 2012, allowing Vietnam to bolster its

foreign exchange reserves The State Bank of Vietnam (SBV) also announced on October 21 that it will borrow US$1bn from the World Bank for the same purpose The Asian Development Bank has

estimated that Vietnam's foreign exchange reserves fell from US$23.0bn to US$17.6bn between January and June, as Vietnamese authorities supported the value of the dong High inflation and a wide trade deficit have already forced the government to depreciate the currency by 7.2% since August 2008 We believe that further devaluations will be necessary in 2010 to rein in the trade deficit

Long-Term Risk

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

by the state has put a spanner in the wheels of Hanoi's efforts to improve relations with the Vatican and the US

We have revised up our 2009 GDP growth forecast from 2.9% to 4.5% on the back of

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

stimulus-Political Risk Summary

US Attacks Lack of Political Freedom

The US House of Representatives approved a resolution on October 21 calling for the release of all political prisoners in Vietnam The resolution named 18 internet bloggers who have been jailed for criticising the communist regime and demanded that Vietnam 'become a responsible member state of the international community by respecting individuals' freedom of speech' Earlier in the month the US embassy in Vietnam had criticised the jailing of nine activists for displaying pro-democracy banners Congressman Joseph Cao demanded the US return Vietnam to its 2006 status as a 'country of particular concern', which could bring economic repercussions

Long-Term Risk

Tension between China and Vietnam remains high as the conflict over the disputed Paracel and Spratly Islands in the South China Sea has intensified This has paved the way for a further rapprochement between Hanoi and Washington to check the expanding military might of Beijing However, these

tentative efforts are being undermined by Hanoi's repression of Catholic activists seeking to expand religious rights in the nominally atheist republic With Vietnam becoming an increasingly important potential ally, we believe the Obama administration will turn a blind eye to these human rights

transgressions

Business Environment Risk Summary

Vietnam is making headway in improving its dilapidated infrastructure with construction on a number of ports, power plants and road projects being commenced in 2009 Nonetheless, it will take a number of years, if not decades, until Vietnam's infrastructure rating of 37.2 comes anywhere near the 68.0 China scores in the same area On the legislative front, the government's privatisation process is gaining pace

again with an initial public offering of state-owned Bank for Investment and Development (BIDV), the

country's second-largest bank, scheduled for H110 We also foresee improvements in the business

environment from the Vietnam-Japan Economic Partnership agreement and a free trade agreement

currently under negotiation with the European Union (EU)

Port Enhances Trade Opportunities

Dubai's DP World announced on October 18 that the first vessel had been handled at the newly built

Saigon Premier Container Terminal, a US$230mn joint venture (JV) between the company and the

Vietnamese-state owned Tan Thuan Industrial Promotion Company The new terminal, located on the

western bank of the Soai Rap River, will have a capacity of 1.5mn TEU per year and serve Ho Chi Minh City In our view, this additional trade capacity is a positive development that will help prevent potential bottlenecks as planned closures of outdated facilities along the Saigon River proceed over the next 10 to

Vietnam has a bad record on transparency The state was ranked 121st (out of 180) in Transparency

International’s Corruption Perceptions Index in 2008, with a score of 2.7

Red Tape

Vietnam compares favourably with its regional peers in terms of bureaucracy, and about the same as developed states According to World Bank data, 28 separate procedures are required to enforce a

contract, which takes an average of 120 days The East Asia and Pacific average is 24 and 193,

respectively, while the process involves 18 procedures and 213 days in high-income OECD states

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

Labour Force

Size

Reliable data on the labour force in Vietnam are difficult to find However, it is estimated that the

working age population in the country is 42.1mn, approximately 61% of the total An estimated 10.2mn live in urban areas, with the remaining 31.9mn in rural areas ‘Technically skilled workers’ form an estimated force of 8.84mn, accounting for 20.99% of the total The south-east region has the highest rate

of skilled workers (30.13%), followed by the Red River delta (27.99%) and Coastal South Central

(20.85%) The lowest rate was reported in the north-west region

unemployment in the cities by laying off surplus labour has prevented meaningful reform As a result, the SOEs continue to crowd out the more productive private sector, while adding to the government’s fiscal woes by forcing the state to absorb their losses

Industry Trends And Developments

Road

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

Rail

In late October 2009 it was reported that the cost of building an 191km express rail link between Ho Chi Minh City and the Mekong Delta city of Can Tho had risen to an estimated US$9.63bn, up from an initial

estimate of US$4bn Lao Dong newspaper said the initial lower cost estimate had been made by

Chungsuk Co of South Korea The ministry of transport had appointed the Vietnam Railway

Administration as the main investor for the project

Air

Starting in late October, Korean Air Cargo said it had launched a regular B747-400F twice-weekly

freighter service between Incheon and Hanoi, with a stop-over in Singapore The Korean airline said the service would take advantage of growing trade with Hanoi; it had already been operating a regular

airfreight service to Ho chi Minch City since 1998

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

the first quarter of 2010 Trai Thien AirCargo said it would specialise in cargo operations on domestic

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

The Civil Aviation Administration of Vietnam said it was reducing take-off and landing fees charged to international airlines by 5%, effective until March 1 2010 The decision was said to be a response to a

proposal made by the Air Operator’s Commission (AOC) and Vietnam Airlines Vietnam now hosts a

total of 44 airlines, of which 33 are mainly passenger operators, and 11 are cargo-only

Container shipping line APL said in October it was launching a new Japan-Thailand-Vietnam (JTV) service to strength its regional short sea network and to better service local manufacturing and

consumption markets Starting from October 30 the service would link Japan, South China, Hong Kong, Thailand and Vietnam The JTV would be operated by three ships, each with a 1,200 TEUS capacity Jason Wong, APL vice-president for Inter-Asia was quoted in the media saying ‘the new service will support a trading circle encompassing key origins and destinations ranging from South East and East Asia

to North Asia’ The port rotation was listed as Tokyo, Yokohama, Kobe, Chiwan, Hong Kong, Laem Chabang, Ho Chi Minch City, Kaohsiung, and back to Tokyo

The US$360mn Saigon Premier Container Terminal (SPCT) was officially opened in October with the

Asta Rickmers, operated by French shipping company CMA CGM, the first container vessel to use the

facility SPCT, with the capacity to handles 1.5mn TEUS per annum, is a JV between the Vietnamese

state-owned Tan Thuan Industrial Promotion Co., and Dubai Ports World (DPW)

Taiwan's Formosa Plastics Group is rapidly emerging as one of the largest, if not the largest, foreign

investors in Vietnam The group has disclosed that it will live up to its commitment to the government to build a deep-sea port in Son Duong, next to the Vung Ang Economic Zone, where it is investing

US$19.2bn in petrochemical, steel and oil refinery projects A spokesperson for the group said that the firm is hoping Son Duong will become the largest deep-sea port in Southeast Asia The estimated cost of building the port is US$1.2bn, and it is designed to accommodate vessels with a capacity of between 200,000 and 400,000 deadweight tonnes (dwt) The other port in the region, the Vung Ang Port, has the capacity to accommodate ships of around 45,000DWT The company did not give a timeframe for the construction The new port will significantly bolster Formosa Group's transport capabilities to and from the Vung Ang Economic Zone The economic zone is designed to house the steel industry, shipbuilding, mechanical manufacturing and local industrial production The group is currently building a steel

manufacturing unit and has received the government's approval to build a petrochemical complex and an oil refinery The Vietnamese government has been keen to develop surrounding infrastructure for the economic zone to attract a greater number of companies, hence committing Formosa Group to the Son Duong project In March 2009, the government awarded a contract for the construction and operation of the Vung Ang 2 thermal power plant to supply the economic zone The plant will be operational in 2013,

eventually reaching a capacity of 1.2 gigawatts (GW), and has an estimated cost of US$1.2bn In terms of road and rail links, the economic zone is near the national highways 8 and 9, which link the zone to Laos Major investments have been pledged for the port sector in Vietnam as port operators, shipping

companies and manufacturers seek to capture the growth of Vietnam's export market With investments taking place, the slow yet steady improvement of Vietnam's port infrastructure is reflected in the better score it has received in 2009 in the Global Competitiveness Report In 2009-2010, Vietnam placed 99th out of 133 countries, up from 112th place in the 2008-2009 report, which assessed 134 countries

In late August the vice-chair of the southern Vietnamese province of Ba Ria-Vung approved a plan for the construction of a major road artery that will link the ports and industrial zones in the area Ports in the region include those of the Cai Mep district, one of the maritime hubs of Vietnam This is a welcome development for Vietnam's infrastructure, where investments have been funneling into ports, but

surrounding infrastructure poses constraints to trade According to the plan, the road will be built in two phases The first phase pertains to the construction of an 8.3km road and five bridges, but no specific route has been announced Construction will start during the fourth quarter of 2009 and be completed by

2012 The second phase will start construction in 2012 and be completed in 2015 and pertains to the construction of a 3.2km road and a bridge The total estimated cost of the project is VND6.3trillion (US$350mn) The Department of Transport will own the new road Initial plans called for the

construction of an inter-port road system to begin from the lower Cai Mep container port, pass through

the Tan Thanh District and finish at the Phuoc An Port, the Saigon Times reports Activity has mainly

been concentrated on boosting the capacity of the southern economic zone, especially in the Thi Vai

River area Major global port operators with interests in the region include Hutchison Port Holdings, Singapore's PSA International, Saigon Port, Denmark's Maersk and France's CMA CGM, all of which

have been involved in the operations and development of major Vietnamese ports in the Thi Vai River in

an effort to enter one of Asia's most promising markets American Shipper estimates the amount invested

in Vietnamese ports is close to US$4.5bn, and that up to eight new terminals are under development at Vung Tau along an 'S-shaped channel' Most of these new builds are expected to open in 2011 However, investors have expressed concern that the infrastructure surrounding the ports, such as roads and railways

will not be able to handle the rising trade volumes that are expected to pass through the new ports Saigon Times cites data from the Vietnam Maritime Administration that estimates that the throughput at the ports

of Ho Chi Minh City, Dong Nai and Ba- RIA Vung Tai will be 100mn tonnes in 2010 and double to 222mn tonnes by 2020

Industry Forecast Scenario

Global Oil Products Price Outlook

Tanks Still Brimming

Global product markets lost more ground in September, thanks to continuing distillate stock building and the narrowing of the gasoline crack spread Refiners were again obliged to trim operating levels as

margins contracted Margins for West Texas Intermediate (WTI) crude at the US Gulf Coast halved in September European refinery performance improved as a result of precautionary run cuts The Rotterdam Brent margin widened in September by almost 50% to US$3.92 per barrel (bbl) Sadly, Singapore

refinery profitability came under increased pressure and a continuation of Asia Pacific’s margin weakness bodes ill for downstream investment

Casting a long shadow over the oil market is the excessive stock position, with refined product

inventories in particular forming a barrier capable of blocking further price appreciation Early October saw US stockpiles of distillate fuel, including heating oil and diesel, climb to their highest level since January 1983, according to US Energy Department data Gasoline inventories also jumped to 214.4mn bbl as refiners boosted output While there are indications that gasoline consumption trends have

stabilised in the US, there is no evidence of such an improvement in distillate demand

US refiners such as Valero Energy and Sunoco have been cutting throughputs more aggressively than at

any time since the early 1980s, even though a cold winter is being predicted Temporary plant closures appear to be spreading, and maintenance activity either brought forward or extended Refiners fear that even low temperatures will not provide a sufficiently large demand boost to drain overflowing storage tanks The margin for producing heating oil and diesel may decline by more than one-third by January

2010, according to Energy Security Analysis

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

An El Niño weather system in the Pacific Ocean may push down temperatures in the US north east in

Q110, predicted independent weather forecaster Commodity Weather Group in a late September 2009

report Without an unusually cold US winter, distillate stocks are more than ample and could provide a constant drain on market strength Having said that, US heating oil futures reached a seven-week high in early October on speculation that colder weather predicted for the rest of the month would boost demand for home-heating fuel

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

average

Gasoil stockpiles in Europe’s Amsterdam-Rotterdam-Antwerp (ARA) area are also plentiful, amounting

to almost 22mn bbl as of October 8, according to Netherlands-based consultant PJK International The

preceding four weeks had seen a welcome 4.6% decline from the previous record level However, diesel and fuel oil demand remains extremely weak

The volume of refined products in floating storage, largely distillates, off north west Europe and the Mediterranean had grown to about 50mn bbl as of the end of September, up from the end-August level of

around 40mn bbl, the International Energy Agency (IEA) said in its October Oil Market Report (OMR)

In spite of better economic conditions, the trends towards higher fuels taxation and the overhaul of

subsidies in some developing countries mean that a sustainable recovery in demand is far from certain In spite of evidence that US drivers may be migrating back to less fuel-efficient vehicles, the major shifts in patterns of consumption resulting from vehicle ownership changes are unlikely to be reversed simply because pump prices are temporarily lower The move in Europe away from gasoline and towards diesel

is expected to continue for a while longer, in spite of steep price differentials However, advances in small petrol engine technology may mean these more economical units bring to an end the love affair with diesel

Over the longer term, expansion of the oil refining system is still needed, particularly as market growth is likely to accelerate as the world pulls clear of recession/depression However, refining margins look set to remain under pressure Coupled with weaker upstream economics and modest profits in fuels retailing, the downturn in refining profitability means that both international and national oil companies may re-examine investment plans The downstream oils market needs to see continued high level spending in new crude distillation capacity, improved plant upgrading capability and better storage/distribution logistics There will inevitably be reduced capital expenditure if industry earnings and cash flow remain under pressure This can only result in the market tightening once again as demand picks up – with a return to extreme price volatility and generally higher fuel prices

Revised Forecasts

During Q309, BMI estimates that the global wholesale price for premium unleaded gasoline will have

been US$76.56/bbl This compares with US$69.89 in the second quarter of 2009 During the three

quarters to September the price has ranged from a monthly low of US$49.33 in January 2009 to the June

2009 level of US$79.87/bbl Gasoline prices in Q309 are down 40.2% from US$127.92 Q308

For Q409 we now forecast an average global gasoline price of US$71.19/bbl, a decline of 7.0% from the previous quarter, but a y-o-y decline of almost 41% from the US$120.63/bbl seen a year earlier For the

whole of 2009, the BMI assumption for gasoline is an average US$67.46/bbl, with the price having

peaked in June The overall y-o-y fall in 2009 gasoline prices will be 33.7%

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

e/f = estimate/forecast Source: BMI

Jet prices averaged US$74.90/bbl in Q309, using the composite for New York, Singapore and Rotterdam The annual decrease was 48.6%, with jet exceeding the decline in gasoil prices The monthly low during the previous six months was US$53.75 in February 2009, with the price reaching US$77.19/bbl in June

2009 For Q409 we assume an average global jet price of US$75.26, a quarter-on-quarter (q-o-q) rise of 0.5% and a y-o-y fall of 4.5% For 2009 the annual level is forecast to be US$68.45/bbl This compares with US$124.95/bbl in 2008

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

and likely rise in year-end crude prices are set to have limited impact on gasoil prices as a result of the

unusually large inventory position For 2009 as a whole, the BMI forecast is for an average price of

US$70.59/bbl, assuming a monthly high of US$94.09/bbl in December The full-year outturn is a 41.8% fall from the 2008 level

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

Gasoline 2007 2008 2009f 2010f 2011f 2012f 2013f 2014f

Rotterdam Premium Unleaded 75.75 100.12 67.71 96.11 98.43 104.22 104.22 104.22

NY Harbour Unleaded 78.75 102.54 67.12 97.51 99.87 105.74 105.74 105.74 Singapore Premium Unleaded 74.98 102.64 67.56 93.81 96.08 101.73 101.73 101.73 Global average 76.49 101.77 67.46 95.81 98.12 103.90 103.90 103.90

Jet/kerosene

Rotterdam 81.13 126.61 69.87 99.16 101.56 107.53 107.53 107.53

NY Harbour 82.48 127.13 68.75 99.88 102.29 108.31 108.31 108.31 Singapore 79.17 121.11 66.75 92.69 94.93 100.51 100.51 100.51 Global average 80.93 124.95 68.45 97.24 99.59 105.45 105.45 105.45

Gasoil

Rotterdam 77.02 122.62 71.16 101.01 103.44 109.53 109.53 109.53 Mediterranean 77.69 121.75 71.65 104.10 106.62 112.89 112.89 112.89 Singapore 77.03 119.53 68.95 95.75 98.06 103.83 103.83 103.83 Global average 77.24 121.30 70.59 100.29 102.71 108.75 108.75 108.75

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

In 2008 naphtha was the weakest performer of the major refined products, gaining 31% to US$87.40/bbl during the year In Q309 naphtha averaged an estimated US$64.80, compared with US$110.80/bbl in

Q308 and US$54.70 in Q209 BMI puts the average naphtha price in 2009 at US$52.66/bbl, down 39.7%

from the previous year’s level

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

Macroeconomic Outlook

Double Dip Now Our Core Scenario

With Vietnam's balance of payments yet again approaching breaking point, we expect a sharp tightening

of fiscal and monetary policy in 2010, which will see real GDP growth dip to 4.4% from an expected 5.1% in 2009 This will raise criticism of economic policy at the 11th National Congress in January 2011, but we expect the market reform agenda to be maintained

We have shifted our Vietnam growth outlook from expecting a gradual economic recovery in 2010 to a double-dip scenario with real GDP expansion dipping from an expected 5.1% in 2009 to 4.4% in 2010 This is based on our expectations that fiscal and monetary policy will have to be tightened sharply in early 2010 in order to rein in the widening trade deficit and halt inflationary pressures Our outlook for Vietnam has much in common with that for China However, while the policy aims of the respective governments are similar, we view the macroeconomic concerns in Vietnam as more alarming, at least in the short term, as Hanoi’s fiscal and monetary resources are considerably more limited

As a consequence, we find it likely that the inevitable shift towards tighter monetary and fiscal policy will come earlier in Vietnam than in China Indeed, while Hanoi’s fiscal and monetary stimulus has helped economic growth recover from a low of 3.1% y-o-y in Q109 to 5.2% in Q309, it has also been a key factor, in our view, behind a considerable widening of the trade deficit over the same period to US$1.9bn

in October 2009 While the return to positive growth in G3 markets in H209 and 2010 should give some support to Vietnamese exports, we believe a continuation of the current accommodative policy would lead to a further widening of the trade deficit

With Vietnam’s foreign exchange reserves in Q409 estimated to be below the three months of imports seen as a minimum, we believe drastic policy action will be needed to avoid a balance-of-payments crisis This will include:

ƒ A downward adjustment of the dong towards our VND19,000/US$ end-2009 forecast, from

VND17,862/US$, to stem the outflow of US dollars through the trade channel

ƒ A hiking of policy rates to uphold public confidence in the dong, stem capital outflows, and contain upward pressure on inflation through higher import prices We are expect 500 base point (bps) of hikes in 2010, bringing the Vietnam base rate from 7.00% in November 2009 to 12.00%

ƒ A reduction of the fiscal deficit from VND118trn (US$6.6bn), or 7.2% of GDP, to VND105trn

(US$5.9bn), or 5.7% of GDP, in 2010 on the back of reductions in current and capital expenditure growth

Implications For Growth

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

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

On the other hand, we expect an increase in the contribution from gross fixed capital formation from 0.4pp to 1.1pp as foreign direct investment (FDI) disbursements, down 12.1% y-o-y to US$8bn in

January-October 2009, recover and state-and aid-financed projects gather pace However, the precarious state of the property market, where activity and prices have been supported by the loan-subsidy

programme, is a risk to this forecast While only a minority of property purchases are financed through bank lending, higher interest rates should still have an impact on the market and on commercial and residential construction

Policy Rebalancing Needed At 2011 Party Congress

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

However, we expect measures to be taken to achieve greater macroeconomic stability, including a

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

Table: Vietnam – Economic Activity, 2006-2014

% change y-o-y 1 8.2 8.5 6.2 5.1 4.4 5.5 6.0 6.8 6.9 GDP per capita,

US$ 1 724 835 1,035 974 1,077 1,195 1,350 1,492 1,640 Population, mn 2 84.4 85.6 86.8 88.0 89.2 90.4 91.6 92.8 94.1 Industrial product-

ion index, % y-o-y,

average 3 16.8 16.7 14.9 6.8 10.0 12.0 14.0 14.0 14.0 Unemployment, %

of labour force,

f = BMI forecast Source: 1 IMF (General Statistics Office); 2 IMF; 3 General Statistics Office

Transport Outlook

Since our last report we have raised our macroeconomic forecasts for Vietnam After GDP growth in

2008 of 6.2% we have now boosted the estimate for 2009 to 5.1% growth (was 2.0%) Our forecast for 2010-2014 is for an annual average GDP growth rate of 7.3% per annum, on a par with the also 7.8% average rate achieved in the preceding five-year period We maintain some adjustments to mode-specific freight carried forecasts In road haulage, we have trimmed our forecast to take account of the global downturn and lower freight demand We still see road-freight turnover running ahead of the general rate

of economic expansion in Vietnam Air freight is beginning to emerge from a difficult period WTO membership has been supportive of greater freight transport turnover relative to GDP across all modes, but particularly so for shipping On the downside, the 2009 contraction in trade had a particularly strong impact on shipping and Vietnam is expected to export less coal by sea as its domestic power needs rise The net result of this is that we expect freight carried growth across all modes, measured in mntkm, to average 7.6% a year in 2010-2014

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

2014, of 4.5% of Vietnam’s GDP By modes, we project that air freight to be the fastest growing, rising

by 9.5% per annum, followed by rod haulage at 9.3%, pipelines (8.4%), rail (8.0%), and shipping (7.2%)

Table: Freight Transport Data And Forecasts, 2006-2014

2006 2007 2008 2009f 2010f 2011f 2012f 2013f 2014

Annual GDP growth, % 8.2 8.5 6.2 5.1 5.9 6.8 7.7 8.0 8.0 GDP index, 1995=100 217.5 236.0 250.6 263.4 279.0 297.9 320.9 346.6 374.3 5-year average annual GDP

Annual transport and

com-munications sector growth,

Transport sector GDP index,

1995=100 224.9 246.9 265.4 282.2 302.3 326.6 355.7 388.5 419.5 5-year average annual

transport GDP growth, % 9.0 9.6 9.1 8.6 8.1 7.8 7.6 7.9 8.3 Transport and communicat-

ions sector, % of GDP 4.2 4.2 4.3 4.3 4.4 4.4 4.5 4.5 4.5 Annual import growth, % 22.1 38.3 28.1 -10.8 11.1 10.5 10.0 10.0 10.0 Imports index, 1995=100 565.0 781.4 1000.9 893.1 992.3 1096.6 1206.1 1326.8 1459.4 5-year average annual

import growth, % 24.9 22.7 27.4 18.5 17.8 15.4 9.8 6.2 10.3 Annual export growth, % 22.7 21.9 29.1 -10.7 9.8 11.0 12.0 12.0 12.0 Exports index, 1995=100 766.0 933.8 1205.6 1076.9 1182.5 1312.5 1470.0 1646.3 1844.0 5-year average annual

export growth, % 21.7 23.8 25.5 17.1 14.6 12.2 10.2 6.8 11.4 Transport and communica-

tions sector value, US$bn

GDP 135.3 151.1 153.8 134.4 132.9 132.6 124.5 122.9 121.8

f = forecast Source: BMI

Table: Freight Carried, Domestic, 2006-2014 (mn tonnes-km)

2006 2007 2008e 2009f 2010f 2011f 2012f 2013f 2014f

Road 20,537 22,457 23,989 25,090 26,866 29,150 32,068 35,403 39,085 – % change y-o-y 16.2 9.3 6.8 4.6 7.1 8.5 10.0 10.4 10.4 – 5-year average % change 17.5 16.1 14.4 11.1 8.8 7.3 7.4 8.1 9.3 – % share of total 17.4 16.4 15.4 16.7 16.8 17.0 17.3 17.7 18.0 Rail 3,447 3,769 4,026 4,211 4,484 4,819 5,228 5,688 6,188 – % change y-o-y 16.9 9.3 6.8 4.6 6.5 7.5 8.5 8.8 8.8 – 5-year average % change 11.1 9.7 8.2 9.0 8.8 6.9 6.8 7.2 8.0 – % share of total 2.8 2.9 2.8 2.6 2.8 2.8 2.8 2.8 2.8 Inland waterways 4,081 4,463 4,767 5,010 5,335 5,734 6,220 6,767 7,363 – % change y-o-y 8.8 9.3 6.8 5.1 6.5 7.5 8.5 8.8 8.8 – 5-year average % change 7.5 8.5 8.4 7.8 7.3 7.0 6.9 7.3 8.0 – % share of total 3.6 3.5 3.3 3.1 3.3 3.3 3.3 3.4 3.4 Maritime 89,297 105,579 122,155 115,603 122,897 131,465 140,778 151,842 163,785 – % change y-o-y 11.8 18.2 15.7 -5.4 6.3 7.0 7.1 7.9 7.9 – 5-year average % change 11.5 13.5 13.6 10.1 9.3 8.4 6.1 4.6 7.2 – % share of total 75.8 77.2 78.6 76.8 76.7 76.5 76.1 75.7 75.4

– % change y-o-y 12.6 12.8 6.8 4.1 5.3 8.8 10.8 11.2 11.2 – 5-year average % change 11.4 12.3 9.1 7.5 8.3 7.6 7.2 8.0 9.5 – % share of total 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2

– % change y-o-y 9.0 9.8 7.1 5.9 6.8 7.8 8.9 9.2 9.2 – 5-year average % change 8.2 8.7 8.6 8.1 7.7 7.5 7.3 7.7 8.4 – % share total 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 Total 117,842 136,803 155,509 150,514 160,218 171,858 185,052 200,536 217,343 – % change y-o-y 12.6 16.1 13.7 -3.2 6.4 7.3 7.7 8.4 8.4 – 5-year average % change 12.3 13.5 13.3 10.1 9.1 8.1 6.4 5.3 7.6

e/f = estimate/forecast Source: BMI

Trade Environment

Although high tariffs, customs bureaucracy and legal inadequacies have provided significant trade

barriers, the opening up of Vietnam’s economy has been accompanied by concrete measures to meet the requirements of the WTO and other international trade organisations This means tariffs are falling in many sectors and the customs regime is being overhauled

Trade Agreements

Vietnam became a member of the WTO in 2007 It is also a member of the Association of South East Asian Nations (ASEAN) – with Brunei, Philippines, Indonesia, Laos, Myanmar, Malaysia, Singapore, Thailand and Cambodia – as well as the linked ASEAN Free Trade Area (AFTA)

A bilateral trade agreement with the US came into effect in December 2001 Vietnam is also in, or

preparing for, talks over free trade agreements (FTAs) with Japan, South Korea, Australia and New Zealand The country is also party to FTA negotiations being conducted by ASEAN, such as talks with the EU and China

Tariffs And Non-Tariff Barriers

Import tariffs are high, averaging around 18% in 2004 However, Vietnam is reducing tariffs to meet ASEAN and WTO goals, although some key sectors remain protected Vietnam has agreed to comply with ASEAN’s Common Effective Preferential Tariff (CEPT) scheme on manufactured goods within the ASEAN region, which calls for rates to be brought down to the 0-5% range

The legislation providing the framework for the trade regime is 1998’s Law to Amend the Import and Export Tariffs Law However, given the ASEAN and WTO requirements, the tariff structure is in a constant state of flux at present After a May 2005 meeting with Vietnamese officials, the WTO praised the country for speeding up the passage of legislation

At the WTO meeting, Vietnam unveiled its latest round of commitments and changes These are: a proposed revision of excise duties to end discrimination against imported motor vehicles; a similar proposal for excise duty on beer; the elimination of export subsidies that depend on export performance; a commitment to require supported products made in free zones to be subject to normal customs formalities when entering the rest of Vietnam; enquiry points on technical barriers and sanitary/phytosanitary

measures to trade to be set up; and the reduction of restrictions on trading rights to some sensitive

products such as oil, pharmaceuticals, sugar, tobacco, salt, fertilisers, rice and cultural products

Table: Total Value Of Imports By Category, 2006-2014 (US$mn)

2006 2007 2008 2009f 2010f 2011f 2012f 2013f 2014f

Total imports 42,600 58,920 75,470 67,340 74,820 82,680 90,940 100,040 110,040

– % change y-o-y 22.1 38.3 28.1 -10.8 11.1 10.5 10.0 10.0 10.0 Food, live animals, 1,235 1,709 2,189 1,953 2,170 2,398 2,637 2,901 3,191

Beverages and tobacco 43 59 75 67 75 83 91 100 110 – % of total 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 Crude materials, excl

fuels 767 1,061 1,358 1,212 1,347 1,488 1,637 1,801 1,981

Mineral fuels, lubricants

and related materials 5,708 7,895 7,895 7,895 7,895 7,895 7,895 7,895 7,895 – % of total 13.4 13.4 13.4 13.4 13.4 13.4 13.4 13.4 13.4 Animal and vegetable

oils, fats and wax 128 177 177 177 177 177 177 177 177

Chemicals and related

products 5,666 7,836 7,836 7,836 7,836 7,836 7,836 7,836 7,836 – % of total 13.3 13.3 13.3 13.3 13.3 13.3 13.3 13.3 13.3 Basic manufactures 9,329 12,903 12,903 12,903 12,903 12,903 12,903 12,903 12,903 – % of total 21.9 21.9 21.9 21.9 21.9 21.9 21.9 21.9 21.9 Machines, transport

equipment 11,417 15,791 15,791 15,791 15,791 15,791 15,791 15,791 15,791 – % of total 26.8 26.8 26.8 26.8 26.8 26.8 26.8 26.8 26.8 Misc products 2,769 3,830 3,830 3,830 3,830 3,830 3,830 3,830 3,830

Unclassified goods 5,581 7,719 9,887 8,822 9,801 10,831 11,913 13,105 14,415 – % of total 13.1 13.1 13.1 13.1 13.1 13.1 13.1 13.1 13.1

f = forecast Source: UN Comtrade, BMI

Table: Value Of Exports By Category, 2006-2014 (US$mn)

2006 2007 2008 2009f 2010f 2011f 2012f 2013f 2014f

Total exports 39,830 48,560 62,690 56,000 61,490 68,250 76,440 85,610 95,890 – % change y-o-y 22.7 21.9 29.1 -10.7 9.8 11.0 12.0 12.0 12.0 Food, live animals, 9,480 11,557 11,557 11,557 11,557 11,557 11,557 11,557 11,557 – % of total 23.8 23.8 23.8 23.8 23.8 23.8 23.8 23.8 23.8

Crude materials, excl

fuels 916 1,117 1,117 1,117 1,117 1,117 1,117 1,117 1,117

Mineral fuels, lubricants

and related materials 10,515 12,820 16,550 14,784 16,233 18,018 20,180 22,601 25,315 – % of total 26.4 26.4 26.4 26.4 26.4 26.4 26.4 26.4 26.4 Animal and vegetable

oils, fats and wax 159 194 251 224 246 273 306 342 384

f = forecast Source: UN Comtrade, BMI

Table: Vietnam’s Top Export Destinations, 2002-2006 (US$mn)

NB Total exports is from the IMF’s Direction of Trade Statistics Consequently there may be some discrepancy with data used elsewhere in this report Source: IMF

Table: Vietnam’s Export Trade, 2003-2006 (% growth y-o-y)

NB Total exports is from the IMF’s Direction of Trade Statistics Consequently there may be some discrepancy with data used elsewhere in this report Source: IMF

Table: Vietnam’s Import Trade, 2003-2005 (% growth y-o-y)

NB Total imports is from the IMF’s Direction of Trade Statistics Consequently there may be some discrepancy with data used elsewhere in this report Source: IMF

Table: Vietnam’s Top Import Sources, 2002-2006 (US$mn)

NB Total imports is from the IMF’s Direction of Trade Statistics Consequently there may be some discrepancy with data used elsewhere in this report Source: IMF

Vietnam added to its growing status as a major international trading power after announcing it would cut import tariffs on a variety of goods in order to meet World Trade Organisation (WTO) regulations According to the Journal of Commerce (JOC), the East Asian country will reduce tariffs on a number of imported items until the end of 2009

Q109

According to a report by Bloomberg news agency in March, the Asian Development Bank (ADB)’s

country director for Vietnam, Ayumi Konishi, has stated that the country needed to focus more on

infrastructure projects to ensure that its plan to build power plants, ports, roads and railways during the current tight economic period stayed on path He stated that funds were available from governments, international agencies and the private sector

Vietnam’s Ministry of Planning and Investments released a list of 60 urban infrastructure projects to be implemented between 2009 and 2016 The total estimated investment required for the projects is

US$12bn The projects range from new water and sanitation infrastructure to new roads and traffic systems, and will take place in 15 provinces around the country

Construction of an urban railway project in Hanoi was due to start in early 2009 At the same time, Ho Chi Minh announced plans for a US$2bn injection into transport projects in the same year in order to stimulate the construction industry and in turn boost economic growth