Vietnam freight transport report q3 2012

... of any information hereto contained Vietnam Freight Transport Report Q3 2012 © Business Monitor International Ltd Page Vietnam Freight Transport Report Q3 2012 CONTENTS Executive Summary ... International Ltd Page Vietnam Freight Transport Report Q3 2012 SWOT Analysis Vietnam Freight Transport Industry SWOT Strengths ƒ ƒ ƒ Weaknesses ƒ ƒ ƒ Opportunities ƒ ƒ ƒ Threats ƒ ƒ ƒ Vietnam' s strong... for exports would negatively affect Vietnam' s freight transport sector © Business Monitor International Ltd Page Vietnam Freight Transport Report Q3 2012 Vietnam Political SWOT Strengths ƒ ƒ

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FREIGHT TRANSPORT REPORT Q3 2012

INCLUDES 5-YEAR FORECASTS TO 2016

Part of BMI’s Industry Report & Forecasts Series

Published by: Business Monitor International

Copy deadline: May 2012

CONTENTS

Executive Summary 5

SWOT Analysis 7

Vietnam Freight Transport Industry SWOT 7

Vietnam Political SWOT 8

Vietnam Economic SWOT 9

Vietnam Business Environment SWOT 10

Industry Trends And Developments 11

Air 11

Maritime 12

Rail 13

Market Overview 14

Industry Forecast 18

Macroeconomic Outlook 18

Road Freight 18

Table: Road Freight, 2009-2016 18

Rail Freight 19

Table: Rail Freight, 2009-2016 19

Air Freight 19

Table: Air Freight, 2009-2016 19

Maritime And Inland Waterways 20

Table: Maritime Freight - Throughput, 2009-2016 ('000 tonnes) 20

Table: Inland Waterway Freight, 2009-2016 20

Trade 21

Table: Trade Overview, 2009-2016 21

Table: Key Trade Indicators, 2009-2016 (US$mn) 21

Table: Main Import Partners, 2002-2009 (US$mn) 22

Table: Main Export Partners, 2002-2009 (US$mn) 22

Global Oil Products Price Outlook 23

Table: BMI's Refined Products Forecasts, 2010-2016 23

Political Outlook 31

Long-Term Political Outlook 32

Macroeconomic Outlook 35

Table: Vietnam - Economic Activity, 2011-2016 37

Company Profiles 38

Vietnam Airlines Cargo 38

Vinatrans 40

Country Snapshot: Vietnam Demographic Data 42

Table: Vietnam's Population By Age Group, 1990-2020 ('000) 43

Table: Vietnam's Population By Age Group, 1990-2020 (% of total) 44

Table: Vietnam's Key Population Ratios, 1990-2020 45

Table: Vietnam's Rural And Urban Population, 1990-2020 45

BMI Methodology 46

How We Generate Our Industry Forecasts 46

Transport Industry 46

Executive Summary

Despite the fact that the macroeconomic picture across the globe currently looks bleak for this year - Vietnam's main export partners, the US, China and Japan, are all set to suffer slowdowns during 2012 - Vietnam's freight transport industry appears to be heading towards a period of sustained healthy growth in the mid term The country's nickname of the 'factory of Asia' - a reputation based on the country's

booming exports, which have buoyed the freight sector - still stands, although exports are set to be

adversely affected by the predicted 'hard landing' in China this year, as well as a weak eurozone

Leading the way in terms of annual growth in 2012 will be the road sector, which is set for 6.97%

growth Taking second spot by mode will be air freight, with 5.72% growth predicted, while rail freight will also enjoy healthy growth of 5.29% Inland waterways will perform well this year, with annual growth forecast to come in at 5.11% Meanwhile, the maritime sector will be led by the port of Ho Chi Minh City, which is expected to see very healthy tonnage throughput rates not only in 2012 but in the mid term also

However, we caution that in order for the country to fully realise its potential, there must continue to be investment in the sector through to the long term, if Vietnam is to ward off the spectre of overcapacity The country's existing infrastructure is sadly lacking and needs a considerable financial injection if it is to fulfil its potential

Headline Industry Data

ƒ 2012 rail freight tonnage is set to increase by 5.29% to 8.62mn tonnes

ƒ 2012 air freight tonnage is forecast to rise by 5.72% to 206,960 tonnes

ƒ Tonnage handled at the Port of Ho Chi Minh City in 2012 is forecast to grow 7.96% in 2012, whereas tonnage handled at the Port of Da Nang is forecast to increase 3.08%

ƒ 2012 road freight tonnage is forecast to grow by 6.97%

ƒ 2012 total trade is forecast to rise by 8.45%

Key Industry Trends

Saudia Expands Far East Connections As Middle Eastern Air Freight Sees Fastest 2011 Growth

A new service that has been launched by Saudi Airlines Cargo is indicative of a range of trends

emerging, namely the declining reliance of mainland China on the airport hubs of Hong Kong and

Singapore, and the rapid growth of the Middle Eastern air cargo carriers The freight wing of Saudi Airlines, Saudi Airlines Cargo (generally known as Saudia) launched a new dedicated freighter flight between the European hub of Brussels and the Chinese industrial centre of Guangzhou on March 4

Maersk Line And BSNF Announce Asia-US Trade Route

Danish shipper Maersk Line and BSNF Railway, a US subsidiary of Warren Buffett's Berkshire

Hathaway, announced the launch of a sea and rail carrier service connecting the US with Asia in March

2012 The route will carry freight from China via South Korea, Japan, Malaysia and Vietnam and reach Chicago, Dallas, Fort Worth, Houston, Memphis and Ohio before anchoring at the Port of Los Angeles

Cai Mep-Thi Vai Ports Underused, Despite US$7bn Investment

Ports in the Cai Mep-Thi Vai region of the Vietnamese province of Ba Ria-Vung Tau have been

struggling to attract vessels According to the Vietnam Port Association (VPA), the ports have a total container handling capacity of as much as 8mn twenty-foot equivalent units (TEUs); however, the actual demand only comes to around 5mn TEUs This is despite a total investment of over US$7bn by the end of

2011

Key Risks To Outlook

The freight industry in Vietnam is no different to its regional peers in that volumes from the Asia Pacific region are very much reliant on the level of demand from the West in the key markets of the eurozone

and, particularly, the US With BMI forecasting a recession in the eurozone in 2012, and continued

sluggish growth in the US, consumer confidence in purchasing expensive discretionary items has fallen The hard landing expected in China - as one of Vietnam's largest export partners - will also have an impact on Vietnam

We see downside risk in the form of the rate hikes being introduced for imports and exports in the

shipping sphere A report published in March 2012 by VietNamNet Bridge has stressed that 2012 could prove to be a difficult year for Vietnamese shippers due to oversupply of vessel tonnage

The report explained that various shipping lines have made their intentions known that they are to up their rates from the current rate of US$700 per TEU to around US$1,400 per TEU However, Vietnam Ship Owners' Association chairman Do Xuan Quynh moved to assuage any fears, saying that the planned rate hikes would not result in any great change

Furthermore, any drop off in Chinese demand would have negative connotations for the Vietnamese shipping and ports sector If Chinese economic growth slows, as we believe it will, volumes on intra-Asia routes will be hard hit Given the fact that the region was flooded with interest from international lines and terminal operators in the wake of the global economic crisis, this is a cause for concern

SWOT Analysis

Vietnam Freight Transport Industry SWOT

Strengths ƒ Vietnam's strong domestic growth rate, coupled with its geography: it stretches for

thousands of kilometres on a north-south axis, creating a need for long-distance freight haulage

ƒ Recovery of the nation's ports in 2010 is expected to continue over the mid-term to

2016

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

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

13.5% of the network is considered to be in good condition Just 26% of the network has two or more lanes and only 29% is tarred

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

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

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

stock of lorries used by road haulage companies

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

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

Threats ƒ Vietnam risks losing out to neighbouring countries if it is unable to develop its

infrastructure to keep up with the pace of demand

ƒ Vietnam is vulnerable to any slowdown in Chinese investment

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

Vietnam Political SWOT

Strengths ƒ The Communist Party of Vietnam remains committed to market-oriented reforms and

we do not expect major shifts in policy direction over the next five years The party system is generally conducive to short-term political stability

one-ƒ Relations with the US have witnessed a marked improvement, 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 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 Macroeconomic instabilities in 2012 are 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 Vietnam's 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 over recent years due to Beijing's more assertive stance over disputed islands in the South China Sea and domestic criticism

of a large Chinese investment into a bauxite mining project in the central highlands, which could potentially cause wide-scale environmental damage

Vietnam Economic SWOT

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

GDP growth averaging 7.1% annually between 2000 and 2011

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 14.0% in 2010

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

the economy vulnerable to global economic uncertainties in 2012 The fiscal deficit is dominated by substantial spending on social subsidies that could be difficult to withdraw

ƒ The heavily-managed and weak currency reduces incentives to improve quality of exports, and also keeps import costs high, 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 in spite of the current macroeconomic woes, continue to move forward with market reforms, including privatisation of state-owned enterprises, and liberalising the banking sector

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

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

upbeat view of Vietnam If the government focuses too much on stimulating growth and fails to root out inflationary pressure, it risks prolonging macroeconomic instability, which could lead to a potential crisis

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 According to Transparency International's 2011 Corruption Perceptions Index, Vietnam ranks 112 out of 183 countries

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

Japan, South Korea and Taiwan This offers the possibility of the transfer of high-tech skills and know-how

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

Industry Trends And Developments

Saudi Airlines Cargo, the freight wing of Saudi Airlines, generally known as Saudia, launched a new

dedicated freighter flight between the European hub of Brussels and the Chinese industrial centre of Guangzhou on March 4 An MD11F freighter aircraft will be deployed on the new service, taking the total capacity serving the Chinese city - the largest manufacturing base in south China - to 180 tonnes each week In addition to the new freighter service, Saudia also offers capacity on Saudi Airlines

passenger services to Guangzhou, taking the total number of services to five each week

Vikram Vohra, Saudia's regional sales manager for the Far East, said of the launch: 'This new expansion comes at a fitting time as China's export market fully reopens after Chinese New Year It will enable Saudi Cargo to take a leading position from Guangzhou, offering shippers dedicated capacity and access

to its worldwide global network.'

We believe that this is another instance of how the Chinese mainland is becoming increasingly connected with other regions globally, reducing its reliance on transhipment through Hong Kong and Singapore's

Changi airport This was covered in detail by BMI recently (see our online service, February 28, 'First

Direct Freighter Service From Chinese Mainland To Africa Reflects Global Trends'), following the

launch of a direct route between Guangzhou and Nairobi by a joint venture between Kenya Airways Cargo (KQ Cargo) and KLM Cargo The trend has also been seen in containerised shipping: as the

centres of Chinese production have moved further inland, and mainland China has developed its own facilities, growth at the ports of Hong Kong and Singapore has slowed

BMI notes that the Guangzhou service is not the only new Far East service announced by Saudia of late

The air freight carrier is also to launch a new twice-weekly service linking Vietnam, the Middle East and Frankfurt on March 25 This is aimed at catching the emerging trade out of Vietnam as Chinese labour increases in cost and Vietnam develops into an ever more important exporter

These two new freighter services are yet more instances of aggressive expansion by new Gulf-based

carriers Other companies from the region growing rapidly include Etihad Crystal Cargo and Qatar Airways Cargo Saudia was only established in 2008, but already has 12 dedicated freighters in its fleet

(in addition to offering belly hold capacity on Saudi Airlines' 140 passenger aircraft), and offers services connecting the Middle East with Europe, Asia and the US

It is companies such as Saudia, and the on-the-ground investment being put into new airport facilities, that made the Middle East region the fastest-growing in the world in terms of air freight kilometres in

2011, expanding by 8.2% compared to a global decline of 0.6%

Meanwhile, German freight carrier DHL announced the launch of two new direct flights from Hong

Kong to Vietnam and China, reported transportweekly.com in March The Hong Kong-Ho Chi Minh City service shortens the transit time between Vietnam, the US and Europe by two hours The Hong Kong-Chengdu service will ensure evening pick-up and next-day delivery for shipments to South Western China

Maritime

Cai Mep-Thi Vai Ports Underused, Despite US$7bn Investment

A lack of container traffic at the beginning of 2012 poses problems for Vietnam's ports According to the Vietnam Port Association (VPA), ports in the province of Ba Ria-Vung Tau have a total container handling capacity of as much as 8mn twenty-foot equivalent units (TEUs); however, the actual demand only comes to around 5mn TEUs

Ports in the Cai Mep-Thi Vai region of Ba Ria-Vung Tau have been failing to attract a significant number

of vessels, despite a total investment of over US$7bn by the end of 2011, according

to transportweekly.com The region contains several modern container ports and is set to open several more facilities in 2012 and 2013 Industry analysts attributed the failure to a lack of infrastructure, which has caused capacity to remain largely underutilised Only 62.5% of overall port capacity in the province

of Ba Ria-Vung Tau is currently used

To underline the point, route 956, which connects route 51 with a number of seaports, is yet to be

completed Discussing the situation, Luong Anh Tuan, deputy director of the provincial department of transport, said: 'This is because we have failed to finish the site clearance and compensation tasks due to a capital shortage.'

Meanwhile, in March 2012 it was reported that increases in container shipping fees are creating

difficulties for Vietnamese exporters, according to a report in Vietnam News Several overseas shipping

lines, including CMA, Hapag-Lloyd, Maersk Line, NYK and OOCL, have raised their rates for routes

between Vietnam and a variety of other countries Exporters are affected because many exports are charged under cost and freight delivery conditions, meaning that it is the sellers who bear the

transportation costs

China Issues South China Sea Warning

The Chinese government issued a warning to foreign shipping companies operating in the South China

Sea in April 2012 Tensions rose following an incident which saw the Philippine navy frigate Gregorio

del Pilar involved in a stand-off with two Chinese surveillance vessels after it had intercepted Chinese

fishing vessels traversing the region

The Chinese government subsequently declared that it hoped 'irrelevant parties' would stay out of the South China Sea in the future The dispute centres upon lucrative oil and gas reserves located around the Spratly Islands, an area claimed by a variety of countries including Brunei, China, Malaysia, the

Philippines, Taiwan and Vietnam

In other bad news for Vietnam, a Vietnamese container vessel, the Truon Hai Star, reportedly sank off

the south of the country following a collision with a vessel from Thailand in April, according to the Journal of Commerce All 16 crew members were rescued and 30 of the 60 containers, most of which contained vehicles and vehicle parts, were salvaged It is thought that the vessel itself was worth about US$2mn

Rail

Maersk Line And BSNF Announce Asia-US Trade Route

Danish shipper Maersk Line and BSNF Railway, a US subsidiary of Warren Buffett's Berkshire

Hathaway, announced in March the launch of a sea and rail carrier service connecting Asia with the US,

reports DC Velocity The route will carry freight from China via South Korea, Japan, Malaysia and Vietnam and reach Chicago, Dallas, Fort Worth, Houston, Memphis and Ohio before anchoring at the Port of Los Angeles The pair promised that cargo carried on the Flagship line would reach its delivery target on schedule 95% of the time

Market Overview

Growth Rate Cools In 2012

As of April 12 2012, Vietnam was the most improved sovereign in our ratings league table - up four points to 58 (D+) - given that the latest print showed real GDP growth slowing to 4.0% year-on-year (y-o-y), the worst quarterly outturn since the height of the global recession in Q109 However, slower growth has been steered by much more sensible monetary and fiscal policies, which have in turn helped to ease the country's macroeconomic imbalances (such as a persistent trade deficit and double-digit inflation)

State-owned companies remain cash-strapped and awash with bad debt, which may have to be

backstopped by the government Moreover, as we have seen elsewhere, the recent spike higher in global oil prices is a concern for the region's energy importers Vietnam is in the somewhat strange position of being a large crude oil producer, but major importer of petroleum products, due to the lack of refining capabilities

Vietnam To Ride Out The Global Economic Storm

Vietnam Real GDP Growth, 2000-2016 (%)

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

Economic headwinds that have hit in 2012 in the US and eurozone should continue to act as a dampener

on external demand throughout the year Also, Vietnam's largest export partner, China, is set to see a cooling of GDP growth in both 2012 and 2013 This suggests that production activity in the

manufacturing sector and other export-based industries could face difficulties, with a negative effect on the freight transport industry expected

Retail sales have moderated considerably since November 2010, when the State Bank of Vietnam (SBV) initiated its monetary tightening cycle Retail sales growth slowed from 32.5% in November 2010 to 22.6% in June 2011, indicating that the measures have dampened private consumption growth

Nonetheless, retail sales remain at double-digit growth rates, indicating that private consumption growth remains resilient This supports our view that private consumption would remain resilient on the back of robust labour market conditions and rising wages in Vietnam, boding well for containerised imports However, public spending cuts and a subdued outlook on gross fixed capital formation (GFCF)

growth due to high lending rates would lead to continued moderation in domestic demand throughout the year

Road Freight Remains The Dominant Force

Road transport is the most advanced in terms of freight sector privatisation and is by far the dominant mode for freight in Vietnam, with a market share of around 75% of domestic cargo Few foreign

companies are present in the market, and there are many small, family owned road freight companies operating informally

Road Dominates Proceedings

Vietnam Freight Transport Mode Breakdown, 2008 (% of total)

Source: General Statistics Office of Vietnam

Vietnam has a national road network of 180,549 kilometres (km), according to the latest data provided by

the CIA's World Factbook BMI believes the sector requires substantial investment as the quality of

Vietnam's road infrastructure was judged by the World Economic Forum (WEF) to be very poor, ranking 123rd out of 142 countries surveyed in its Global Competitiveness Report 2011-2012

Vietnam's railway transport sector has just one operator, the Vietnam Railway Corporation (VRC),

established in April 2003 as a state corporation operating railway transport and related services

Vietnam's rail network totals 2,632km The network is of mixed-gauge, comprising 2,105km of 1.000m gauge and 527km of 1.435m gauge Railway infrastructure in Vietnam was ranked 101 out of 123 by the WEF

Latest data puts the total amount of airports in Vietnam with paved runways at 37, with seven unpaved This total, puts the country in a poor 97th place in comparison with other countries

Vietnam's dense river and canal network provides the country with a highly developed inland waterway system of 17,702km This is the second largest sub-sector involved in domestic cargo transport,

accounting for 25-30% of total transport volumes

Vietnam's seaport network comprises of many small and medium-sized entities, with inefficient

distribution Most large ports are located on 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 due to traffic congestion

Room For Improvement Across The Board

Vietnam Transport Infrastructure Rankings

* Rail infrastructure is measured out of 123 Source: World Economic Forum's Global Competitiveness Index

Vietnam's port infrastructure is poor by international standards The WEF's 2011 Global Competitiveness Report ranks it 111th out of 142 countries, placing it 12th in the region, just one place ahead of the Philippines, the regional underperformer

Investment And Development Outlook

According to our key infrastructure projects database, there are US$171bn-worth of infrastructure

projects planned, or currently under way, in Vietnam's transport sector One of the most expensive of these is a US$3.6bn plan to build the Van Phong International Entrepot The project will begin with the construction of two deep water ports in Dam Mon that will be able to accommodate container ships with tonnage of 9,000 twenty-foot equivalent units (TEUs) and the capacity to handle 0.5mn TEUs per year The project is currently suspended, however, due to an ongoing review of geological conditions at the site

The air freight sector will undoubtedly benefit from the planned construction work on a new passenger terminal at Long Thanh international airport Costing an estimated US$6.7bn, the work would also incorporate a new runway, providing capacity for 100mn passengers a year A tender for investment consultancy work was under development as of December 2011

Industry Forecast

Macroeconomic Outlook

Vietnam Will Not Escape Global Headwinds

The real GDP growth rate in Vietnam slowed to 4.0% year-on-year (y-o-y) in Q112 and we may be looking to revise down our already-weak full-year forecast of 5.8% (also below the government's target of 6.0%) in the coming days There is some good news on the horizon, however, in that the World Bank has announced that it will grant a US$522mn loan to Vietnam to develop its urban, energy and forest sectors Some of the sectors that will benefit from the funds include the Mekong Delta Region Urban Upgrade Project, the Second Power Sector Reform Development Policy Operation, and the Forest Sector

Development Project

The Mekong Delta Region project will utilise the funds to enhance infrastructure and services for

residents in the Mekong delta city of Can Tho as well as those living in the Mekong delta provinces of

My Tho, Dong Thap, Kien Giang, Ca Mau and Tra Vinh The move demonstrates the continued strong relationship between the World Bank and Vietnam, according to World Bank Country Director for Vietnam Victoria Kwakwa

Meanwhile, Vietnam's two biggest export partners, China and Japan, are expected to encounter differing growth patterns in 2012 China's rapid growth will cool somewhat to 8.1% in 2012, down from 9.2% in

2011, and this is set to slip again in 2013 Although Japan will avoid the contraction it saw in 2011, it will still only post 1.8% growth in 2012, which we also forecast will fall in 2013 This will impinge on

Vietnam's freight industry, due to its exposure to these economies

Road Freight Continues To Dominate

We are predicting average growth over our forecast period of 7.14%, seeing tonnage reach 846.83mn tonnes by 2016 For 2012, we expect year-on-year (y-o-y) growth of a slightly slower than the mid-term average - 6.97%, which is up from an estimated 6.47% in 2011, but down on 2010's double digit growth

The rail freight sector will perform steadily over the mid term to 2016, putting the four years of

contractions between 2007 and 2010 firmly behind it In 2012, we expect growth of 5.29% to reach 8.62mn tonnes, with the average annual growth over the forecast period edging just past this figure, at 5.33%, to reach 10.61mn tonnes in 2016

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

Growth Steady, But Work To Be Done

Just as is the case with both the road and rail freight sectors, air freight is set to enjoy steady growth rates

with tonnage throughput increasing from 206,960 tonnes in 2012 to 264,780 tonnes by the end of 2016 In

2012, BMI forecasts y-o-y growth of 5.72%, up slightly on 2011's 5.25% The huge double-digit growth

of 2010 will be a thing of the past though

Maritime And Inland Waterways

Table: Maritime Freight - Throughput, 2009-2016 ('000 tonnes)

Port of Ho Chi Minh

City (Saigon New) 19,140.00 31,132.00 33,450.71 36,111.78 39,148.54 42,406.25 45,902.18 49,652.56

Port of Da Nang 3,132.00 3,303.04 3,394.27 3,498.97 3,618.45 3,746.62 3,915.76 4,097.21

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

The Port of Ho Chi Minh will lead the way in tonnage growth rate terms over the mid term, while also dwarfing the Port of Da Nang in actual tonnage handled We are sticking to Q212's tonnage throughput growth forecast of 7.96%, to reach 36.11mn tonnes Over the forecast period, we expect to witness an average annual growth figure of 8.22%, reaching 49.65mn tonnes by the end of 2016 Da Nang port will see slower growth in 2012 (3.08%) when compared to Ho Chi Minh, but this figure represents a slight improvement on 2011 Between 2012 and 2016, average y-o-y growth will be 3.83%

Meanwhile, inland waterways will also enjoy healthy growth of 5.73% over the medium term, coming in slightly better than our forecast growth of 5.11% for 2012

Table: Inland Waterway Freight, 2009-2016

Trade

Table: Trade Overview, 2009-2016

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

Table: Key Trade Indicators, 2009-2016 (US$mn)

Table: Key Trade Indicators, 2009-2016 (US$mn)

e/f = BMI estimate/forecast Source: UNCTAD, BMI

Table: Main Import Partners, 2002-2009 (US$mn)

Source: IMF's Direction of Trade Statistics

Table: Main Export Partners, 2002-2009 (US$mn)

Global Oil Products Price Outlook

BMI View: Refined products prices remained at record levels in Q112, with many ticking higher than in

2011 For this reason, we have decided to upwardly revise our forecasts for all fuels prices for 2012 and beyond The adjustment is in part a result of the March revision of our benchmark crude forecasts, but it

is also a more fundamental reassessment which addresses the most recent developments in the supply and demand dynamics in different fuels markets We have also seized this opportunity to introduce a new set

of forecasts for bunker fuels

When we last published our Global Oil Products Outlook markets were hoping that crude prices would fall as Libyan output recovered at a faster rate than expected and problems caused by political disruption and outages around the world receded However, supply issues have continued to dominate, with

significant outages persisting in Syria, Yemen and South Sudan Non-OPEC production also continued to disappoint in March, with unplanned maintenance in the North Sea and Canada hitting output

Furthermore, uncertainty with regard to the sanctions imposed on Iran has led to very volatile price movements

In light of these developments, we revised our West Texas Intermediate (WTI) and Brent forecasts in February 2012 before extending this revision to our OPEC basket, Urals and Dubai benchmarks This has also prompted a reassessment of our refined products forecasts, which are calculated by estimating the future spreads between each product and its regional benchmark – WTI for New York, Brent for

Rotterdam and Dubai for Singapore

Table: BMI's Refined Products Forecasts, 2010-2016