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Vietnam Infrastructure Report Q3 2009Product Type: Market Research ReportPublished by: Business Monitor International Published: June 2009 Product Code: R302-6576 Description Since our last update, it is the ports sector that has seen the highest level of pledges for new investments,strengthening our view that it potentially remains one of the highest growth infrastructure sectors inVietnam. These investments, however, were not the major news this past quarter. Japan VietnamConsulting, the consultant on the high-speed railway plan, issued a final cost estimate for the project ofclose to US$56bn. The astronomical price tag, almost 65% of the country’s GDP in 2008, raises concernsregarding the project’s financial and economic viability.We have seen little tangible evidence of a rebound in industry yet so in BMI’s Q309 VietnamInfrastructure Report we remain cautious for the short term. In anticipation of much slower growth, wenow see the VND124tn industry value we were forecasting to come in 2009 to materialise insteadbetween 2010 and 2011. New preliminary estimates from the national statistics agency indicate that theconstruction industry value real growth for 2008 was a mere 0.4%. Given that the macroeconomicoutlook is bleaker for 2009, we have revised our real growth forecasts for 2009 down to 0.1%. Fixedcapital formation is forecast to decline from 23% in 2007 to an estimated 16% in 2008 and 2% in 2009respectively. This is the key factor that weighs down our forecasts for 2008 and 2009. Our medium-term view of strong growth remains unchanged, and we have significantly revised ourindustry value growth expectations upwards for 2010 onwards. The county has significant projects in thepipeline (and more pledges were made in Q309) for building and upgrading infrastructure that shouldsustain the industry. We believe that growth will pick up in 2010 and significantly accelerate in 2011onwards. Our optimism for the country is tamed by the weak regulatory environment governing long-term privatesector participation in the sector. Though bits of legislation exist, there is no clear-cut set ofresponsibilities for ministries and authorities involved in infrastructure, making public private partnership(PPP) ventures and procedures more opaque than they need be. This is reflected in the weak score andregional standing the country receives in BMI’s Asia Pacific Infrastructure Project Finance and BusinessEnvironment Ratings. The transport sector has witnessed the largest degree of activity in 2008 and has the largest number ofprojects in the pipeline for 2009. The ports sector has been particularly attractive for private investors,responding to the government’s calls for greater participation in developing Vietnam’s maritime hubs. Inthe roads sector, significant opportunities are opening up for construction and infrastructure players, asthe government’s plans to build expressways and secondary road networks are buttressed by loans andofficial development assistance from multilateral institutions. In an announcement contradicting earlier claims, Electricity of Vietnam said that it will implement amulti-billion dollar capital expenditure programme in 2009, despite having given up projects earlier citingfinancing concerns. The first quarter of 2009 saw greater penetration of the private sector in the utilitiesmarket with new multi-billion dollar power generation (IPP) projects announced by US-based AES andMalaysia’s Janakuasa. BMI has maintained that private sector participation is pivotal for addressingVietnam’s long-term power generation shortfall. Table of Contents
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