1. Trang chủ
  2. » Ngoại Ngữ

Vietnam freight transport report q4 2011

47 321 0

Đang tải... (xem toàn văn)

Tài liệu hạn chế xem trước, để xem đầy đủ mời bạn chọn Tải xuống

THÔNG TIN TÀI LIỆU

Thông tin cơ bản

Định dạng
Số trang 47
Dung lượng 444,63 KB

Nội dung

... of any information hereto contained Vietnam Freight Transport Report Q4 2011 © Business Monitor International Ltd Page Vietnam Freight Transport Report Q4 2011 CONTENTS CONTENTS ... for exports would negatively effect Vietnam' s freight transport sector © Business Monitor International Ltd Page Vietnam Freight Transport Report Q4 2011 Vietnam Political SWOT Strengths ƒ ƒ... of Vietnam © Business Monitor International Ltd Page 22 Vietnam Freight Transport Report Q4 2011 Rail Freight Contraction Consigned To the Recent Past Rail freight is forecast to recover in 2011,

Q4 2011 www.businessmonitor.com VietnaM freight transport Report INCLUDES BMI'S FORECASTS ISSN 1750-5364 Published by Business Monitor International Ltd. VIETNAM FREIGHT TRANSPORT REPORT Q4 2011 INCLUDES 5-YEAR FORECASTS TO 2015 Part of BMI’s Industry Survey & Forecasts Series Published by: Business Monitor International Copy deadline: August 2011 Business Monitor International 85 Queen Victoria Street London, EC4V 4AB UK Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 email: subs@businessmonitor.com web: http://www.businessmonitor.com © 2011 Business Monitor International. All rights reserved. All information contained in this publication is copyrighted in the name of Business Monitor International, and as such no part of this publication may be reproduced, repackaged, redistributed, resold in whole or in any part, or used in any form or by any means graphic, electronic or mechanical, including photocopying, recording, taping, or by information storage or retrieval, or by any other means, without the express written consent of the publisher. DISCLAIMER All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor International accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication. All information is provided without warranty, and Business Monitor International makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained. Vietnam Freight Transport Report Q4 2011 © Business Monitor International Ltd Page 2 Vietnam Freight Transport Report Q4 2011 CONTENTS CONTENTS ........................................................................................................................................................ 3 Executive Summary ......................................................................................................................................... 5 Headline Industry Data.......................................................................................................................................................................................... 5 Key Industry Trends ............................................................................................................................................................................................... 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 .............................................................................................................................................................................................................. 11 Intermodal and Logistics ..................................................................................................................................................................................... 14 Market Overview ............................................................................................................................................. 16 Global Oil Products Price Outlook ............................................................................................................... 18 Table: Oil Product Price Assumptions, 2011 (Us$/Bbl) ...................................................................................................................................... 19 Table: Oil Product Price Forecasts, 2011-2015 (Us$/Bbl).................................................................................................................................. 21 Industry Forecast ........................................................................................................................................... 22 Macroeconomic Outlook...................................................................................................................................................................................... 22 Road Freight ........................................................................................................................................................................................................ 22 Table: Road Freight, 2008-2015.......................................................................................................................................................................... 22 Rail Freight ......................................................................................................................................................................................................... 23 Table: Rail Freight, 2008-2015 ........................................................................................................................................................................... 23 Air Freight ........................................................................................................................................................................................................... 23 Table: Air Freight, 2008-2015 ............................................................................................................................................................................. 23 Maritime and Inland Waterways.......................................................................................................................................................................... 24 Table: Maritime Freight - Throughput, 2008-2015 ('000 tonnes) ........................................................................................................................ 24 Table: Inland Waterway Freight, 2008-2015 ....................................................................................................................................................... 25 Trade ................................................................................................................................................................................................................... 25 Table: Trade Overview, 2008-2015 ..................................................................................................................................................................... 25 Table: Key Trade Indicators, 2008-2015 ............................................................................................................................................................. 26 Table: Vietnam's Main Import Partners, 2002-2009 (US$mn) ............................................................................................................................ 27 Table: Vietnam's Main Export Partners, 2002-2009 (US$mn) ............................................................................................................................ 27 Political Outlook ............................................................................................................................................. 28 Foreign Policy ..................................................................................................................................................................................................... 28 Domestic Politics ................................................................................................................................................................................................. 29 Long-Term Political Outlook ............................................................................................................................................................................... 31 Macroeconomics Outlook ............................................................................................................................. 34 Table: Vietnam - Economic Activity, 2008-2015.................................................................................................................................................. 36 Company Profiles ........................................................................................................................................... 37 Vietnam Airlines Cargo ....................................................................................................................................................................................... 37 Vinatrans ............................................................................................................................................................................................................. 39 Vietnam National Shipping Lines (Vinalines) ...................................................................................................................................................... 41 Vietnam Petroleum Transport Company (VIPCO)............................................................................................................................................... 43 © Business Monitor International Ltd Page 3 Vietnam Freight Transport Report Q4 2011 BMI Methodology ........................................................................................................................................... 44 How We Generate Our Industry Forecasts .......................................................................................................................................................... 44 Transport Industry ............................................................................................................................................................................................... 44 Sources ..................................................................................................................................................................................................................... 45 © Business Monitor International Ltd Page 4 Vietnam Freight Transport Report Q4 2011 Executive Summary We have maintained our forecast for Vietnam's freight transport sector in 2011 and see this sector performing well over the mid-term to 2015. Our overall view has two major components: a background of high single-digit economic growth on the one hand (albeit at a slower rate than in 2010), while on the other hand there are and some disparities in the pace of expansion of freight capacity by transport mode. The pace of expansion is detrimentally affected by the infrastructure in the country, highlighted by the fact that construction work on the Van Phong International Port has been stalled indefinitely and that BMI believes Vietnam's ports need to begin accommodating mega vessels to maximise opportunities. In terms of year-on-year (y-o-y) growth, road freight will lead the way in Vietnam in 2011 recording a growth rate of 6.88%, equating to 36.84bn tonnes per kilometre (bntkm). Rail freight carried will grow 4.72%, although officials admit that this sector is plagued by insufficient track and signalling. The air freight sector will also perform well this year, recording 5.3% growth in tonnage carried, more than double the rate achieved in 2010. Inland waterways will see 4.34% growth in 2011 in terms of tonnage carried, down slightly on last year. Headline Industry Data ƒ Rail freight carried will increase by 4.72% in 2011 to 3.89bn tonnes/km ƒ Air freight tonnage will grow by 5.3% this year to 147,910 tonnes ƒ The real value of total trade will rise by 11.3% this year, with exports gaining 11.0%, behind import growth of 11.6% ƒ Total volume handled at the Port of Ho Chi Minh City will rise 7.45% to 33.45mn tonnes in 2011, while volumes at the Port of Da Nang will rise 2.76% to 3.39mn tonnes. Key Industry Trends Air France-KLM Cargo's Asia Expansion Strategy Flying High - In June 2011, Air France-KLM Cargo established a new connection between Vietnam and France, underlining the fact that airfreight links between Vietnam and Europe are increasing - a phenomenon we also note in the shipping sector. Van Phong Port Suspension Highlights Weakness In Business Environment - Work at the US$3.6bn Van Phong International Port in the southern central province of Khanh Hoa has been suspended with no indication of a resumption date due to, we believe, the escalating cost of capital in Vietnam, the lack of proper planning for projects which lead to slow execution, and the lack of regulatory maturity in the country's business environment. © Business Monitor International Ltd Page 5 Vietnam Freight Transport Report Q4 2011 Vietnam Needs To Dig Deeper To Accommodate Mega Vessels - The projected increase in trade will require Vietnam's ports to undertake considerable investment going forward. BMI believes that despite recent large-scale foreign investment in the sector, further spending on port modernisation is needed if Vietnam is to take full advantage of increasing trade and a particularly pressing issue, in the age of increasingly large container vessels, is port depth. Key Risks to Outlook On the downside, although Vietnam's real GDP growth figure came in slightly better than expected at 5.7% y-o-y in Q211, we expect economic activity to continue to moderate in H211, and we see this as a positive sign that government efforts to iron out macroeconomic imbalances in the economy remain on track. Despite incipient evidence of a narrowing trade deficit, we warn that global economic headwinds remain a downside risk to external demand. Accordingly, we are projecting real GDP growth to remain subdued at 6.3% for 2011 (below the government's target of 6.5%), but we remain optimistic that we could see a pickup in growth towards 7.2% in 2012. © Business Monitor International Ltd Page 6 Vietnam Freight Transport Report Q4 2011 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 domestic growth rate coupled with its geography: a long country stretching for thousands of kilometres on a north-south axis creates a need for longdistance freight haulage. Recovery of the nation's ports in 2010 is expected to continue over the mid-term to 2015. Vietnam's location on the South China Sea gives the country access to the main interAsian shipping routes, as well as access to the developing land transport links with ASEAN countries, allowing the country scope to develop its trade logistics. 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. Traditionally low investment in rail; although attempts are being made to rectify this, the potential of rail for cost-effective bulk freight is being under-utilised. Decades of under-investment have left the country with a port infrastructure system that is poor by international standards. The beginnings of local commercial vehicle production, which will help improve the stock of lorries used by road haulage companies. Chinese investment could bring about much needed improvements in the rail sector. Growing international interest in Vietnam as a growth market within the box shipping sector. Vietnam risks losing out to neighbouring countries if it can't develop its infrastructure to keep up with the pace of demand. Vietnam is vulnerable to any slowdown in Chinese investment. A drop in international demand for exports would negatively effect Vietnam's freight transport sector. © Business Monitor International Ltd Page 7 Vietnam Freight Transport Report Q4 2011 Vietnam Political SWOT Strengths ƒ ƒ Weaknesses ƒ ƒ Opportunities ƒ ƒ Threats ƒ ƒ 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 oneparty system is generally conducive to short-term political stability. Relations with the US have witnessed a marked improvement, and Washington sees Hanoi as a potential geopolitical ally in South East Asia. Corruption among government officials poses a major threat to the legitimacy of the ruling Communist Party. There is increasing (albeit still limited) public dissatisfaction with the leadership's tight control over political dissent. The government recognises the threat that corruption poses to its legitimacy, and has acted to clamp down on graft among party officials. Vietnam has allowed legislators to become more vocal in criticising government policies. This is opening up opportunities for more checks and balances within the one-party system. Macroeconomic instabilities in 2010 and 2011 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. Although strong domestic control will ensure little change to Vietnam's political scene in the next few years, over the longer term, the one-party-state will probably be unsustainable. Relations with China have deteriorated over recent years due to Beijing's more assertive stance over disputed islands in the South China Sea and domestic criticism of a large Chinese investment into a bauxite mining project in the central highlands, which could potentially cause widescale environmental damage. © Business Monitor International Ltd Page 8 Vietnam Freight Transport Report Q4 2011 Vietnam Economic SWOT Strengths ƒ ƒ Weaknesses ƒ ƒ Opportunities ƒ ƒ ƒ Threats ƒ ƒ Vietnam has been one of the fastest-growing economies in Asia in recent years, with GDP growth averaging 7.2% annually between 2000 and 2010. 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. Vietnam still suffers from substantial trade, current account and fiscal deficits, leaving the economy vulnerable to global economic uncertainties in 2011. The fiscal deficit is dominated by substantial spending on social subsidies that could be difficult to withdraw. The heavily-managed and weak dong currency reduces incentives to improve quality of exports, and also serves to keep import costs high, thus contributing to inflationary pressures. WTO membership has given Vietnam access to both foreign markets and capital, while making Vietnamese enterprises stronger through increased competition. The government will in spite of the current macroeconomic woes, continue to move forward with market reforms, including privatisation of state-owned enterprises, and liberalising the banking sector. Urbanisation will continue to be a long-term growth driver. The UN forecasts the urban population to rise from 29% of the population to more than 50% by the early 2040s. Inflation and deficit concerns have caused some investors to re-assess their hitherto upbeat view of Vietnam. If the government focuses too much on stimulating growth and fails to root out inflationary pressure, it risks prolonging macroeconomic instability, which could lead to a potential crisis. Prolonged macroeconomic instability could prompt the authorities to put reforms on hold, as they struggle to stabilise the economy. © Business Monitor International Ltd Page 9 Vietnam Freight Transport Report Q4 2011 Vietnam Business Environment SWOT Strengths ƒ ƒ Weaknesses ƒ ƒ Opportunities ƒ ƒ Threats ƒ ƒ Vietnam has a large, skilled and low-cost workforce, that has made the country attractive to foreign investors. Vietnam's location - its proximity to China and South East Asia, and its good sea links - makes it a good base for foreign companies to export to the rest of Asia, and beyond. Vietnam's infrastructure is still weak. Roads, railways and ports are inadequate to cope with the country's economic growth and links with the outside world. Vietnam remains one of the world's most corrupt countries. Its score in Transparency International's 2010 Corruption Perceptions Index was 2.7, placing it in 22nd place in the Asia-Pacific region. 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 knowhow. 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. Ongoing trade disputes with the US, and the general threat of American protectionism, which will remain a concern. Labour unrest remains a lingering threat. A failure by the authorities to boost skills levels could leave Vietnam a second-rate economy for an indefinite period. © Business Monitor International Ltd Page 10 Vietnam Freight Transport Report Q4 2011 Industry Trends and Developments Air Air France-KLM Cargo's Asia Expansion Strategy Flying High Air France-KLM Cargo continued its Asia expansion drive by launching a new connection between Vietnam and France in June 2011. Airfreight links between Vietnam and Europe are increasing - a phenomenon we also note in the shipping sector - with ports of call in Vietnam becoming a regular occurrence on Asia-Europe routes. Air France-KLM Cargo will operate a twice-weekly freighter flight between Paris and Hanoi from June 12 2011. Boeing 777 Freighters will operate on the route. The new route marks a continuation of Air France-KLM Cargo's Asia-focused strategy. Earlier this year the company launched a thrice-weekly service to Phnom Penh in Cambodia via Bangkok and a thrice-weekly service connecting Amsterdam with China's Xiamen. The Hanoi connection marks Air France-KLM Cargo's second Vietnam freighter route, with the air carrier already offering thrice-weekly flights from Paris to Ho Chi Minh City. The company's interest in linking France and Vietnam is understandable. Trade levels between the states have increased by 151.8% in 1999-2009. French exports to Vietnam even weathered the global decline in 2009, increasing by 4.2% year-on-year (y-o-y). BMI notes a trend of airfreight operators launching links between Vietnam and Europe, which in our view is connected to Vietnam's development into the factory of Asia. In March 2011 Jade Cargo launched an airfreight link between Vietnam and Amsterdam. Lufthansa Cargo has been operating a Frankfurt Hanoi freighter flight for two years and Vietnam Airlines is looking into linking Hanoi with Paris, Moscow and Frankfurt from late June 2011. The increase in routes to Vietnam is great news for the country's airfreight volumes, and indicates that BMI's predications are on course to be realised. We project that Vietnam's airfreight levels will increase by 5.25% y-o-y in 2011 to 147,910mn tonnes. Over the mid term (2011-2015), we project air cargo levels to increase by 33.5% to 187,560 tonnes. The trend of increasing connection between Vietnam and Europe is not confined to the airfreight sector. BMI has been highlighting the growing inclusion of Vietnamese ports on Asia-Europe container services, as the country takes on a greater role in global trade. Maritime Van Phong Port Suspension Highlights Weakness In Business Environment Construction work on the US$3.6bn Van Phong International Port in Vietnam's southern central province of Khanh Hoa has been suspended with no indication of a resumption date. BMI believes this delay is due © Business Monitor International Ltd Page 11 Vietnam Freight Transport Report Q4 2011 to the escalating cost of capital in Vietnam, the lack of proper planning for projects which lead to slow execution, and the lack of regulatory maturity in the country's business environment. The Van Phong port project, which is primarily constructed by state-owned Vietnam National Shipping Lines (Vinalines), was suspended because of a reassessment of the geological conditions at the project site. Initial explorative drilling did not sufficiently study the site's geology, resulting in inconsistencies in pile design during the construction phase. According to Tran Huu Chieu, deputy general director of Vinalines, there are only 114 steel columns driven in the project site - 6% of the total number of columns needed - and many of them are higher than the required five to eight metres. At present, Vinalines has asked the project designer - a joint venture (JV) between Japan-based Nippon Koei and Vietnam-based Portcoast - to conduct the reassessment and resolve the issue. However, Chieu added that the Portcoast is delaying the revision for the project because Vinalines refused to pay an advance to Portcoast. In addition to the geological reassessment, Vinalines has been ordered by the Ministry of Transport to report on the project delay and identify the responsible parties. The port will only resume construction once the government has made a decision, which is likely to be based on the report and the outcome of the geological study. BMI believes that there are three reasons for the project's current predicament. Firstly, based on media reports, it appears that Vinalines is suggesting that the delay in revising the project is due to the designer ie, Portcoast. However, according to Portcoast, the company believes that the height of the steel columns is not a major problem, as the excess length can be sawed off. Whether or not there is a delay in payment or a demand for an advance, we believe that Vinalines' unwillingness to provide capital could be because of the escalating cost of financing infrastructure projects in Vietnam. According to Reuters, lending rates for businesses in Vietnam are as high as 22-27%, the highest since 2008. This has made it exceedingly costly for large-scale projects to raise capital, which has led to potential delays in project implementation. Secondly, we believe that this exposure to the current high cost of financing is a result of a lack of proper planning for the Van Phong project. Since the start of construction in October 2009, the design for the port project has seen constant changes. The port was originally designed to handle container ships of 6,000 twenty-foot equivalent units (TEU), but this changed to 8,000TEU. The current plan for the project is now 9,000TEU, but Vinalines has received government approval to change the port design to handle 12,000TEU and 15,000TEU container ships. This lack of proper planning appears to be a systematic problem in Vietnam's business environment. According to a Khanh Hoa People's Committee report, the Van Phong Economic Zone, which the port is expected to service, has attracted 101 projects, but only 16 of these projects have come into full operation. © Business Monitor International Ltd Page 12 Vietnam Freight Transport Report Q4 2011 Lastly, we believe that there is a lack of regulatory maturity in Vietnam's business environment. This error at the feasibility study stage highlights a lack of checks and balances to even ensure that large-scale projects - the Van Phong port is estimated to cost US$3.6bn - are scrutinised carefully before implementation. It further reinforces our view that Vietnam is one of the more risky markets in the Asia Pacific region for infrastructure investment, due to its weak legal framework. Regardless of the outcome, we believe that this delay is a negative signal to investors and highlights the greater risks involved when investing in Vietnam's infrastructure as compared with other countries in the Asia Pacific region. BMI's business environment ratings show that risks in Vietnam's infrastructure sector are higher than the regional average, where a lower score indicates greater risks. Furthermore, given the scale of the Van Phong project, this could have a negative impact on Vietnam's economy given the importance of sustained investment into Vietnam's port infrastructure towards economic growth (see 'Japanese Investment In Lach Hyuen Port Highlights Sector's Importance', April 6 2011). Vietnam Needs to Dig Deeper to Accommodate Mega Vessels BMI maintains the view that Vietnam's ports need considerable investment if they are to handle a projected increase in trade. Despite recent large-scale foreign investment in the sector, further spending on port modernisation is needed if Vietnam is to take full advantage of increasing trade. A particularly pressing issue, in the age of increasingly large container vessels, is port depth. Recognising the need to cater for bigger vessels, Vietnam's prime minister has directed the country's ministry of transport and its Maritime Administration to focus on developing deep water ports. A channel depth of about 14m is required for non-tide restricted access for vessels with capacity of up to 8,000TEUs. Many of Vietnam's ports have depths of just 12m. To remedy this Vietnam is to develop more deep water ports to allow the country to ship goods directly to destination markets instead of transshipping through Singapore, Malaysia and South Korea. Priority will be given to the Lach Huyen port complex in the northern city of Hai Phong, and to Cai Mep and Ben Dinh port complexes in the southern province of Ba Ria-Vung Tau in the next five years. In mid-March 2011 the country's first deep-water container port, Tan Cang Cai Mep, in Ba Ria-Vung Tau, was commissioned, allowing direct shipments of goods to US and Europe and cutting journey times by between seven and 10 days. Malcolm Gregory, Cai Mep International Terminal (CMIT)'s chief commercial officer, concurs with our view that vessel sizes have been increasing at a rate that has outpaced even recent port developments. He told delegates at the Fourth Annual Vietnam Ports and Logistics Conference that 'sufficient access channel depth will be one of the primary determining factors of which facilities cater to which segments of Vietnam's container trade'. He said: 'long-haul transpacific and Europe trades... will continue to migrate to the new deepwater terminals as newer, larger vessels come into service, so there is a very real need for capacity and capability expansion.' © Business Monitor International Ltd Page 13 Vietnam Freight Transport Report Q4 2011 BMI notes that Cai Mep's volumes have been increasing rapidly. The port, which was barely dented by the global downturn, currently has 14 direct calls, up from zero two years ago, with further growth expected as European direct services migrate from transshipment services via Singapore and Malaysia to direct services from Cai Mep. Vietnam's growing importance in the global container shipping sector is shown by the growth in box throughput at the country's ports over the last decade. In 2009 (latest available data), total container throughput at the country's ports reached 5.4mn TEUs, up 487% from 919,264TEUs in 1999. Year-onyear (y-o-y) container throughput growth averaged 20% over this period, with the port sector still posting y-o-y volume increases in 2009, despite the global downturn in trade. This rapid growth has highlighted the failings in the country's infrastructure. BMI welcomes the government's push for deeper ports as the country's exports continue to increase. With a rating of 3.56 in the World Economic Forum's 2010 Global Competitiveness Report, Vietnam's infrastructure trails well behind regional leaders Singapore and Hong Kong. It comes just ahead of the Philippines, with a rating of 2.92. BMI expects box throughput to continue its rapid growth, buoyed by a favourable economic climate. In 2009 Vietnam's real GDP continued to grow, despite the downturn, and in 2010 GDP increased by 6.8% y-o-y. BMI predicts continued growth in Vietnam's imports and exports, averaging 16.2% and 16.5% over our forecast period to 2015. DHL Global Forwarding Rolls Out New LCL Service In July 2011 DHL Global Forwarding, a division of German logistics company DHL, rolled out its new direct less-than-container-load (LCL) service between Ho Chi Minh City in Vietnam and Hong Kong. The weekly service will be operated by DHL's in-house carrier Danmar Lines, and will cut down on transit time and allow Vietnamese companies to access 12 major trading ports in North America and 11 in North Asia. Vietnam is projected to become the fastest growing emerging economy by 2025, with a potential annual growth rate of almost 10%. Intermodal and Logistics New Warehouse Opens In Binh Duong In June 2011, Damco strengthened its Vietnamese network with the opening of a new 26,000km2 distribution centre in Binh Duong, some 30km from the capital Ho Chi Minh City. Designed to make the most of growing national and international volumes, the facility is strategically located to make the most of road transport links and it also serves the Cat Lai and Cai Mep ports. Speaking on the development, Narin Phol, country manager for Damco in Vietnam and Cambodia, said: 'With this new facility, our customers will have greater flexibility in managing fluctuations in demand for warehousing. The distribution centre will operate as an integrated logistics centre offering multipurpose warehousing, a humidity-controlled environment, access to inland container depots and barge connectivity. © Business Monitor International Ltd Page 14 Vietnam Freight Transport Report Q4 2011 'It is also our vision to develop this facility into an international consolidation hub, linking the Indochina region through our cross-border solutions.' © Business Monitor International Ltd Page 15 Vietnam Freight Transport Report Q4 2011 Market Overview In January 2007 Vietnam officially joined the WTO, an event seen as an important milestone in the country's closer integration into the global economy. WTO membership has helped boost Vietnam's international trade and develop its freight transport capabilities. Road transport is the most advanced in terms of freight sector privatisation and is the dominant mode for freight, with a market share of around 60% of domestic cargo. There are over 1,050 enterprises registered in the road transport business, which include 16 state-owned enterprises (SOEs), 233 limited liability companies, 350 private companies and 450 joint stock companies. Very few foreign-backed companies are present. Most road transport companies are of small or medium size, and each company, on average, owns about 50 vehicles. In addition, tens of thousands of individual household businesses exist that operate informally in the road freight sector, and are thus difficult to account for and monitor. Vietnam has a national road network of 222,179km. Of this, only 42,167km, or 19%, is paved. In addition, recent surveys indicate that approximately 40% of the network is in poor to very poor condition and will require substantial investment even to reach a maintainable condition. The quality of Vietnam's road infrastructure was judged by the World Economic Forum (WEF) to be poor and was ranked 102 out 133 nations surveyed in the WEF 2010 Global Competitiveness Report. Vietnam's railway transport sector has only one operator, the Vietnam Railway Corporation (VRC), established in April 2003 as a state corporation operating railway transport and related services. The government has announced plans to separate the management of rail infrastructure from passenger and cargo services. Vietnam's rail network totals 2,600km (excluding sidings). The network is mixed-gauge, comprising 2,169km of 1.000m gauge and 178km of 1.435m gauge. The network has 1,790 bridges totalling 45km and 11.5km of tunnels. The principal axis is Hanoi-Ho Chi Minh City (1,726km). Other lines emanating from Hanoi are to Hai Phong (102km), Lao Cai (296km) and Dong Dang (162km). Railway infrastructure in Vietnam was ranked 58 out of 114 by the WEF. There are two principal airlines operating in Vietnam: Vietnam Airlines and Pacific Airlines. Both are majority state owned, although Australia's Qantas is now a minority shareholder in Pacific Airlines. The government has announced plans to build the country's largest airport at Long Thanh in the southern province of Dong Nai, at an estimated cost of US$8bn. The authorities also plan to expand Noi Bai International airport in Hanoi. The three major airports handling freight are located at Ho Chi Minh City, Hanoi and Da Nang, each of which have international connecting flights. Minor airports such as Cat Bi at Haiphong are generally used for domestic flights to the three larger hubs. In 2010, Vietnam's air transport infrastructure was ranked 84/ 133 nations by the WEF. © Business Monitor International Ltd Page 16 Vietnam Freight Transport Report Q4 2011 Vietnam's dense river and canal network provides the country with a highly developed inland waterway system. This is the second-largest sub-sector involved in domestic cargo transport, accounting for 25-30% of total transport volumes. The inland waterway transport sub-sector is managed by two state corporations affiliated to the Ministry of Transport, one SOE affiliated to the Vietnam Inland Waterway Authority, and some enterprises managed by other ministries, operating in support of the power generation, cement and paper industries. In addition, there are about 230 co-operatives and hundreds of inland waterway transport enterprises in the country. Vietnam's seaport network comprises of many small- and medium-sized entities, with inefficient distribution. Most big ports are located far inside rivers, like Hai Phong and Ho Chi Minh City, with limited depth at the entrance. Some ports are located in big cities, thus making it difficult to connect with other modes of transport for cargo transfer to and from ports, due to traffic congestion. Except for several new or upgraded ports, most have been operating for many years and lack investment and are seriously degraded. The loading and unloading equipment in some ports is obsolete, leading to low productivity. The average productivity of a Vietnamese port is only 2,500 tonnes/m per wharf, or 40-50% of productivity of other ports in the region. Vietnam's port infrastructure is poor by international standards. The World Economic Forum's 2010 Global Competitiveness Report gives it a score of 3.56, putting it just ahead of the regional underperformer, the Philippines, which scores 2.92, and well behind regional leaders Singapore and Hong Kong. Increasing international interest in Vietnam's port sector on the back of growing intra-Asia trade should help to close the gaps in infrastructure investment. © Business Monitor International Ltd Page 17 Vietnam Freight Transport Report Q4 2011 Global Oil Products Price Outlook After The Party The oil market has seen few more turbulent periods than the first half of 2011. With the oil price buffeted into the air by the outbreak of military conflict in Libya, and the bulls on the rampage over fears of contagion to the rest of the Middle East, H111 saw oil product prices hitting two-year highs. Like any party, however, nagging feelings that such excess was unhealthy kept on recurring, with the signs of demand destruction becoming clear by the end of Q1. As the year wore on, the euphoric optimism about prices began to wear off as demand remained weak, prompting a sudden slip in product prices in early May. Lightening Doesn't Strike Twice Singapore Oil Product Prices, August 2004-August 2011 (US$/bbl) Source: Bloomberg These first signs of a hangover emerging were crystallised by the International Energy Agency (IEA)'s May 2011 Oil Market Report, in which the Paris-based club slashed its oil consumption forecasts due to weak economic data and the persistent high prices. At the time, end-user prices in IEA member states had risen for the fifth successive month. Year-on-year (y-o-y), gasoline prices were up 35% while diesel had risen by 40%. Heating oil and low-sulphur fuel oil had climbed by 40% and 41% respectively. Month-onmonth prices also soared, with Germany witnessing the biggest increase in gasoline prices of 12% and the UK's diesel prices growing by 6.2%. US gasoline prices also rose steadily throughout the early part of 2011, from US$109.83 per barrel (bbl) in January to US$140/bbl in April. Prices were supported by lower inventories and refining outages which reduced supply, while gasoline imports from Europe fell as European refiners cut volumes on © Business Monitor International Ltd Page 18 Vietnam Freight Transport Report Q4 2011 sustained high Brent crude prices. Prices were also supported by a build-up in demand towards the start of the peak summer driving season, starting at the end of May. Despite a slight retreat from the peak of around US$170/bbl, these prices have proved too high for many motorists, with clear signs of demand destruction emerging during driving season. Table: Oil Product Price Assumptions, 2011 (Us$/Bbl) Q111 Q211e Q311f Q411f Rotterdam Premium Unleaded 110.58 130.33 123.11 103.83 NY Harbour Unleaded 115.13 129.96 119.35 115.37 Singapore Premium Unleaded 113.06 127.40 119.88 108.01 Global average 112.92 129.23 120.78 109.07 Rotterdam 122.09 134.76 127.57 108.97 NY Harbour 123.89 135.91 122.28 107.61 Singapore 120.66 133.23 123.80 110.97 Global average 122.21 134.63 124.55 109.19 Rotterdam 117.13 129.87 122.04 102.46 Singapore 118.69 133.23 128.51 107.46 Global average 117.91 131.55 125.27 104.96 Rotterdam 100.15 112.76 113.70 98.50 Singapore 104.67 111.86 106.28 95.38 Global average 102.41 112.31 109.99 96.94 Gasoline Jet/kerosene Gasoil/diesel Naphtha e/f = estimate/forecast. Source: BMI Motorists were not the only oil product consumers unhappy with the higher prices of H111. Year-on-year air freight traffic growth slowed throughout the first half of 2011, turning negative in May on weak demand in Asia, Africa, and most OECD countries. The International Air Transport Association (IATA) estimates that fuel had already increased from 13% of airline operating costs in 2001 to 30% by 2010. With European jet/kerosene prices in Rotterdam averaging US$140/bbl in April, further pain was piled on the airline industry, although the sharp drop off in May prices brought some relief. At present, the EIA is forecasting an increase in regular-grade gasoline retail prices from US$2.78 per gallon in 2010 to US$3.60 in 2011 (+29%), with a further increase to US$3.67 in 2012. On-highway diesel fuel retail prices, which averaged US$2.99/gallon in 2010, are predicted to be US$3.87 in 2011 and © Business Monitor International Ltd Page 19 Vietnam Freight Transport Report Q4 2011 US$3.95 in 2012. As well as the impact of sustained high crude oil prices on these price projections, the EIA also expects refining margins to widen in 2011, from US$0.34/gallon on gasoline in 2010 to US$0.47/gallon in 2011, with diesel margins rising from US$0.38/gallon to US$0.44/gallon. Revised Forecasts During Q211, BMI estimates that the global wholesale price for premium unleaded gasoline was US$129.23/bbl. This compares with US$112.92 in the previous quarter of 2011. Gasoline prices in Q211 were up 16.4% from US$87.95/bbl in the equivalent period of 2010. For Q311, we are currently assuming a global unleaded price of US$120.78/bbl, representing a 6.5% drop from the estimated Q2 level and a y-o-y rise of 42.2%. For the whole of 2011, the BMI calculation for gasoline is an average US$116.19/bbl. The overall y-o-y rise in 2011 gasoline prices is put at 31.5%. Still Uncomfortable Levels Product Price Forecasts, Q111-Q411 (US$/bbl) e/f = estimate/forecast. Historical data source: IEA; forecasts: BMI Gasoil in Q211 averaged an estimated US$131.55/bbl, based on a BMI-calculated composite global price. This represents a y-o-y rise of 46.6% over Q210. For 2011 as a whole we are currently assuming a global gasoil price of US$121.34/bbl, based on weaker prices in H211 counteracting the bullish trend earlier in the year. The full-year outturn nevertheless represents a 35.8% increase on 2010 levels. Jet prices also saw significant increases in Q211 on the back of higher oil prices, rising from an average of US$122.21/bbl in Q111 to US$134.63. Prices in Q211 were significantly higher than a year earlier, increasing by 48.2%. BMI is currently forecasting a 2011 average global price of US$119.62. © Business Monitor International Ltd Page 20 Vietnam Freight Transport Report Q4 2011 BMI currently expects naphtha to average US$105.41/bbl over the course of 2011, due to a dip back below US$100/bbl in Q4. After a rapid run up in prices from US$102.41/bbl in Q1 to an estimated US$112.31/bbl in Q2, we see a gradual fall-back to US$109.99 in Q3. Looking further ahead, we see gasoline prices falling to US$109.99/bbl in 2012, before dropping to a more stable level of US$105.48/bbl in 2012. Gasoil prices will recover somewhat from Q411 levels of US$104.96/bbl to average US$112.16/bbl in 2012, with longer-term prices likely to average US$106.32/bbl. Jet/Kerosene should witness a gentler landing, dropping from US$107.79/bbl in 2012 to US$106.99/bbl in 2013, while naphtha should fall from US$105.90/bbl in 2012 to US$100.39/bbl in 2013. Table: Oil Product Price Forecasts, 2011-2015 (Us$/Bbl) 2011 2012 2013 2014 2015 Rotterdam Premium Unleaded 116.96 113.70 107.77 107.77 107.77 NY Harbour Unleaded 114.53 105.25 103.42 103.42 103.42 Singapore Premium Unleaded 117.09 111.02 105.26 105.26 105.26 Global average 116.19 109.99 105.48 105.48 105.48 Rotterdam 114.27 100.47 105.99 105.99 105.99 NY Harbour 122.42 109.88 107.81 107.81 107.81 Singapore 122.17 113.03 107.16 107.16 107.16 Global average 119.62 107.79 106.99 106.99 106.99 Rotterdam 117.88 112.02 106.18 106.18 106.18 Singapore 124.80 112.30 106.47 106.47 106.47 Global average 121.34 112.16 106.32 106.32 106.32 Rotterdam 106.28 112.44 106.57 106.57 106.57 Singapore 104.55 99.36 94.21 94.21 94.21 Global average 105.41 105.90 100.39 100.39 100.39 Gasoline Jet/kerosene Gasoil/diesel Naphtha e/f = estimate/forecast. Historical data source: IEA; forecasts: BMI © Business Monitor International Ltd Page 21 Vietnam Freight Transport Report Q4 2011 Industry Forecast Macroeconomic Outlook Slightly Slower Growth In 2011 The real GDP growth figure for Vietnam came in slightly better than expected at 5.7% year-on-year (y-oy) in Q211. However, we expect economic activity to continue to moderate in H211, and we see this as a positive sign that government efforts to iron out macroeconomic imbalances in the economy remain on track. Despite incipient evidence of a narrowing trade deficit, we warn that global economic headwinds remain a downside risk to external demand. Accordingly, we are projecting real GDP growth to remain subdued at 6.3% for 2011 (below the government's target of 6.5%), but we remain optimistic that we could see a pickup in growth towards 7.2% in 2012. As far as political risk is concerned, territorial disputes in the South China Sea between Vietnam and China sparked anti-China demonstrations in Vietnam in June 2011, and we see increasing risks that Hanoi may be pressured to take a tougher stance against Beijing in an attempt to ease public unrest. Meanwhile, the lack of a credible third party to facilitate a compromise between both parties in order to agree on a resolution means that bilateral relations should remain heated in the medium term. Road Freight High Single Digit Growth In the Mid Term BMI is maintaining its forecasts for road haulage over the medium term, to 2015. The year 2011 will see slower growth than 12 months previous, at 6.88%, equating to 36.84bn tonnes per kilometre (bntkm). In terms of tonnage, 2011 will see growth of 6.47%, to 599.86mn tonnes, rising to 789.14mn tonnes at the end of our forecast period, in 2015. Road freight growth will continue expanding vigorously, averaging 7.37% a year in the five years to 2015. This rate will exceed the average for GDP growth, a pattern consistent with this stage of Vietnam's industrialisation process. Table: Road Freight, 2008-2015 2008 2009 2010 2011f 2012f 2013f 2014f 2015f 455,898. 40 494,649. 80 563,406. 12 599,863. 21 641,689. 03 688,531. 87 738,564. 31 789,140. 46 - % change y-o-y 13.02 8.50 13.90 6.47 6.97 7.30 7.27 6.85 Road freight, mn tonnes/km 27,968.0 0 30,261.4 0 34,467.7 3 36,840.4 7 39,562.6 2 42,611.2 9 45,867.5 6 49,182.1 0 - % change y-o-y 13.47 8.20 13.90 6.88 7.39 7.71 7.64 7.23 Road freight, '000 tonnes f = BMI forecast. Source: General Statistics Office of Vietnam © Business Monitor International Ltd Page 22 Vietnam Freight Transport Report Q4 2011 Rail Freight Contraction Consigned To the Recent Past Rail freight is forecast to recover in 2011, with year-on-year (y-o-y) tonnes/km growth of 4.7% to 3.893bntkms, following a contraction of 2.30% in 2010. Average annual growth over the next five years will be 5.2%, below overall economic growth, suggesting that Vietnam's poor track infrastructure and signalling systems are limiting the potential for this freight transport mode. In terms of tonnage volume carried by rail, BMI predicts that 2011 will see a recovery of 4.8%, to 8.187mn tonnes, compared with a contraction of 3.20% in 2010. Table: Rail Freight, 2008-2015 Rail freight, '000 tonnes - % change y-o-y Rail freight, mn tonnes/km - % change y-o-y 2008 2009 2010 2011f 2012f 2013f 2014f 2015f 8,481.10 8,068.10 7,809.92 8,187.28 8,620.20 9,105.06 9,622.93 10,199.0 6 -6.29 -4.87 -3.20 4.83 5.29 5.62 5.69 5.99 4,170.90 3,805.10 3,717.58 3,893.05 4,094.36 4,319.82 4,560.63 4,799.43 7.43 -8.77 -2.30 4.72 5.17 5.51 5.57 5.24 f = BMI forecast. Source: General Statistics Office of Vietnam Air Freight Growth Soars To Approach Pre-Slowdown Levels In terms of air cargo volume, BMI forecasts growth of 5.3% to 147,910 tonnes in 2011, the best y-o-y figure since 2007. Over our forecast period to 2015 we expect tonnage growth to average 5.9% a year, just below the general rate of economic expansion. In terms of freight carried (volume x distance), we expect growth of 4.9% in 2011 to 327.73mntkms, compared with 2010's contraction of 1.3%. Table: Air Freight, 2008-2015 Air freight, '000 tonnes - % change y-o-y Air freight, mn tonnes/km - % change y-o-y 2008 2009 2010e 2011f 2012f 2013f 2014f 2015f 131.40 137.60 140.54 147.91 156.38 165.85 175.98 187.56 1.39 4.72 2.13 5.25 5.72 6.06 6.10 6.58 295.60 316.60 312.48 327.73 345.23 364.83 385.76 408.23 5.61 7.10 -1.30 4.88 5.34 5.68 5.74 5.82 e/f = BMI estimate/forecast. Source: General Statistics Office of Vietnam © Business Monitor International Ltd Page 23 Vietnam Freight Transport Report Q4 2011 Maritime and Inland Waterways Total Tonnage: Saigon New Port To See Strong Volume Growth The huge tonnage throughput growth at the Port of Ho Chi Minh City (Saigon New Port, SNP) in 2010 will not be matched in 2011, but healthy growth is still predicted over the medium term. In 2011 we expect 7.45% y-o-y growth, to 33.45mn tonnes, down considerably on the mammoth 62.65% growth estimated in 2010. We believe medium-term growth will be vigorous, with the annual average between 2011 and 2015 coming in at 8.06%. We forecast that volumes at the Port of Da Nang (PDN) will increase by 2.76% in 2011, to 3.39mn tonnes, down on 2010's 5.46% growth. Average volume growth at PDN across the forecast period to 2015 will be 3.44%, below the general GDP growth rate (reflecting capacity limitations at the port). Container Throughput: Da Nang Leads The Way PDN is set to see 7.09% container handling growth to 95,520 twenty-foot equivalent units (TEUs) in 2011, after achieving an estimated 27.94% jump a year earlier. At SNP, container handling growth is forecast to increase 4.35% to reach 2.974mn TEUs. Over the forecast period, PDN will see average y-o-y growth of 8.1%, while SNP will lag slightly behind this on 5.64%. Table: Maritime Freight - Throughput, 2008-2015 ('000 tonnes) Port of Ho Chi Minh City (Saigon New) - % change y-o-y Port of Da Nang - % change y-o-y 2008 2009 2010 2011f 2012f 2013f 2014f 2015f 20,180.0 0 19,140.0 0 31,132.0 0e 33,450.7 1 36,111.7 8 39,148.5 4 42,406.2 5 45,959.9 4 -21.17 -5.15 62.65e 7.45 7.96 8.41 8.32 8.38 2,742.26 3,132.00 3,303.04 3,394.27 3,498.97 3,618.45 3,746.62 3,911.86 0.19 14.21 5.46 2.76 3.08 3.41 3.54 4.41 e = estimate; f = BMI forecast. Source: Port authorities © Business Monitor International Ltd Page 24 Vietnam Freight Transport Report Q4 2011 Table: Inland Waterway Freight, 2008-2015 Inland waterway freight, '000 tonnes - % change y-o-y Inland waterway freight, mn tonnes/km - % change y-o-y 2008 2009 2010 2011f 2012f 2013f 2014f 2015f 133,028. 00 135,688. 40 142,201. 44 148,378. 09 155,960. 44 164,659. 38 174,401. 76 184,807. 51 -1.67 2.00 4.80 4.34 5.11 5.58 5.92 5.97 24,869.0 0 25,365.2 0 25,593.4 9 26,752.0 9 28,084.6 0 29,568.4 0 31,159.7 0 32,622.0 2 11.84 2.00 0.90 4.53 4.98 5.28 5.38 4.69 f = BMI forecast. Source: General Statistics Office of Vietnam Trade Forecast Remains At 11.3% Growth In Real Terms Although 2011's total trade (imports + exports) will grow at a slower speed than 2010 (11.3% in 2011 contrasted with 19.45% in 2010) the forecast appears healthy over the medium term. Over our forecast period exports will grow at an average annual rate of 8.6%, ahead of imports at 7.5%. In real terms we expect imports to grow by 11.6% and exports to grow by 11% in 2011. Table: Trade Overview, 2008-2015 Real 2008 2009e 2010e 2011f 2012f 2013f 2014f 2015f Imports, real growth, % yo-y 11.92 -13.81 17.90 11.60 6.50 6.50 6.50 6.50 Exports, real growth, % y-o-y 10.85 -15.00 21.00 11.00 8.00 8.00 8.00 8.00 Total trade, real growth, % y-o-y 11.38 -14.40 19.45 11.30 7.25 7.25 7.25 7.25 Imports, US$bn 83.60 73.00 87.57 101.43 116.31 135.12 156.16 179.28 - % change y-o-y 26.71 -12.68 19.97 15.82 14.68 16.17 15.57 14.81 Exports, US$bn 69.95 63.39 78.05 89.91 104.56 123.17 144.35 168.06 - % change y-o-y 27.88 -9.38 23.12 15.20 16.29 17.80 17.20 16.42 153.55 136.39 165.62 191.34 220.87 258.29 300.51 347.34 27.24 -11.18 21.43 15.53 15.43 16.94 16.34 15.58 Nominal Total trade, US$bn - % change y-o-y e/f = BMI estimate/forecast. Source: General Statistics Office of Vietnam, BMI © Business Monitor International Ltd Page 25 Vietnam Freight Transport Report Q4 2011 Table: Key Trade Indicators, 2008-2015 Agricultural raw materials 2008 2009e 2010e 2011f 2012f 2013f 2014f 2015f 2,415.93 2,215.20 2,720.81 3,130.03 3,635.25 4,277.40 5,008.00 5,825.82 - % change y-o-y 24.45 -8.31 22.82 15.04 16.14 17.66 17.08 16.33 Exports, US$mn 2,416.63 2,099.17 2,563.83 3,005.54 3,480.04 4,079.54 4,750.09 5,487.17 - % change y-o-y 30.15 -13.14 22.14 17.23 15.79 17.23 16.44 15.52 Exports, US$mn 553.33 437.13 546.13 634.35 743.27 881.71 1,039.21 1,215.52 - % change y-o-y 47.72 -21.00 24.94 16.15 17.17 18.63 17.86 16.97 2,824.71 2,649.93 3,247.65 3,815.85 4,426.22 5,197.38 6,059.95 7,008.09 6.42 -6.19 22.56 17.50 16.00 17.42 16.60 15.65 Exports, US$mn 411.02 442.56 558.23 651.85 767.44 914.36 1,081.51 1,268.61 - % change y-o-y -20.82 7.67 26.14 16.77 17.73 19.14 18.28 17.30 4,946.04 5,304.42 6,418.02 7,476.63 8,613.80 10,050.5 5 11,657.6 0 13,424.0 8 -14.85 7.25 20.99 16.49 15.21 16.68 15.99 15.15 Exports, US$mn 32,534.7 8 28,748.0 3 35,341.4 7 40,677.9 7 47,266.5 1 55,640.6 0 65,168.1 7 75,833.1 1 - % change y-o-y 23.16 -11.64 22.94 15.10 16.20 17.72 17.12 16.37 54,527.2 7 47,929.5 4 57,491.3 6 66,581.0 2 76,345.2 5 88,681.8 1 102,480. 59 117,648. 28 24.31 -12.10 19.95 15.81 14.67 16.16 15.56 14.80 Exports, US$mn 14,833.6 9 12,788.7 8 15,696.5 3 18,049.9 6 20,955.5 5 24,648.5 8 28,850.2 9 33,553.6 0 - % change y-o-y 47.44 -13.79 22.74 14.99 16.10 17.62 17.05 16.30 13,811.0 7 11,047.4 6 13,527.9 5 15,885.9 7 18,418.9 7 21,619.2 8 25,198.9 2 29,133.6 7 57.95 -20.01 22.45 17.43 15.94 17.38 16.56 15.61 Imports, US$mn Ores and metals Imports, US$mn - % change y-o-y Iron and steel Imports, US$mn - % change y-o-y Manufactured goods Imports, US$mn - % change y-o-y Fuel Imports, US$mn - % change y-o-y e/f = BMI estimate/forecast. Source: UNCTAD, BMI © Business Monitor International Ltd Page 26 Vietnam Freight Transport Report Q4 2011 Vietnam's principal export commodities are crude oil and manufactured goods. The country's main imports are machinery and equipment. Vietnam's main export partners are the US, Japan, China, Switzerland and Australia. The country's main sources for imports are China, Japan, South Korea, Thailand and Singapore. Vietnam's position on the South China Sea allows it access to the main transpacific and intra-Asian shipping routes, enabling the country to meet its trading needs. Table: Vietnam's Main Import Partners, 2002-2009 (US$mn) 2002 2003 2004 2005 2006 2007 2008 2009 Mainland China 2,158.84 3,138.55 4,595.10 5,899.70 7,391.30 12,710.0 0 15,652.1 0 16,441.0 0 Japan 2,504.65 2,982.06 3,552.60 4,074.10 4,702.10 6,188.90 0.00 7,468.09 South Korea 2,279.60 2,625.44 3,359.40 3,594.10 3,908.40 5,340.40 7,066.30 6,976.36 955.24 1,282.19 1,858.60 2,374.10 3,034.40 3,744.20 4,905.60 4,514.07 2,533.49 2,875.82 3,618.40 4,482.30 6,273.90 7,613.70 9,392.50 4,248.36 Thailand Singapore Source: IMF's Direction of Trade Statistics Table: Vietnam's Main Export Partners, 2002-2009 (US$mn) 2002 2003 2004 2005 2006 2007 2008 2009 United States 2,453.15 3,939.56 5,024.80 5,924.00 7,845.10 10,104.5 0 11,868.5 0 11,355.8 0 Japan 2,436.96 2,908.60 3,542.10 4,340.30 5,240.10 6,090.00 8,537.90 6,291.81 Mainland China 1,518.33 1,883.12 2,899.10 3,228.10 3,242.80 3,646.10 4,535.70 4,909.03 66.67 74.67 120.20 103.90 155.70 236.90 516.90 2,486.49 1,328.33 1,420.86 1,884.70 2,722.80 3,744.70 3,802.20 4,225.20 2,276.72 Switzerland Australia Source: IMF's Direction of Trade Statistics © Business Monitor International Ltd Page 27 Vietnam Freight Transport Report Q4 2011 Political Outlook Foreign Policy International Rights Groups Threaten Politburo's Grip On Power BMI View: International human rights organisations are calling for Vietnam to be reinstated on the US government's list of Countries of Particular Concern in 2011, pressuring Hanoi to release religious and political detainees. We believe the politburo is unlikely to submit to pressures from human rights groups and allow for democratic reforms. However, we are beginning to see evidence that public dissent and growing pressure from international rights groups are becoming a threat that could eventually undermine the Communist Party of Vietnam's political agenda over the coming years. Hanoi is under increasing pressure from international human rights organisations to release detained religious leaders and pro-democracy dissidents or risk further political pressure from the US, including possible economic sanctions. International rights groups including Human Rights Watch, Freedom House and Amnesty International are calling for Vietnam to be reinstated on the US government's Countries of Particular Concern list in 2011. This would classify Vietnam among a list of countries, including China, Myanmar, Eritrea, Iran, North Korea, Saudi Arabia, Sudan and Uzbekistan, that are deemed responsible for committing severe violations of religious freedom and human rights under the International Religious Freedom Act. We believe such a scenario would severely undermine Vietnam's credentials in assuming a leadership role within the Association of South East Asian Nations (ASEAN), and threaten its ambition to extend political influence in the region over the coming years. Maintaining A Grip On Power Vietnam's politburo has maintained an assertive stance in defending its single-party political system and maintaining its grip on power over the years. This has attracted criticism for resorting to aggressive means of suppressing political dissent and ignoring human rights issues. The Communist Party of Vietnam (CPV)'s National Congress in January 2011 also saw key party leaders reiterating ideals of a single-party system and zero tolerance for pro-democracy movements, suggesting the politburo is unlikely to submit to growing pressures to observe human rights and allow for democratic reforms in the near term. However, we are beginning to see evidence that public dissent is slowly becoming a threat that could undermine the CPV's political monopoly in the longer term. More worryingly, we believe Hanoi has underestimated the consequences of dissent suppression through the use of aggressive force, which has attracted the attention of international rights groups. Should the government continue to ignore calls to release religious and political detainees, we warn that international rights groups may push to exercise their political influence on the international community to impose economic sanctions on Vietnam. A Weak Attempt To Appease Political Activists In what we see as an attempt by the government to pacify political activists and human rights groups, the Vietnamese Appeals Court announced its decision in April to reduce the jail sentence given to popular democracy activist Vi Duc Hoi from eight to five years. The former party member of the CPV was © Business Monitor International Ltd Page 28 Vietnam Freight Transport Report Q4 2011 convicted in 2007 for conducting propaganda against the single-party political system and proposing democratic reforms. Human rights groups have accused and criticised the Vietnamese government of torturing political detainees during interrogation to pressure them into confessions and to disclose information about other pro-democracy activists. We believe the government's move to reduce jail sentences for political detainees will be insufficient to appease political dissidents and international rights groups. The recent wave of political uprising in the Middle East has raised doubts over the sustainability of authoritative and suppressive governments such as the CPV. Pro-democracy movements in Vietnam remain confined to small groups of political activists with limited influence on the CPV and capacity to push for major change. As such, we see are no compelling reason to revise our short-term political risks rating of 76.9 out of 100 for Vietnam (see chart). That said, we believe calls for democratic reforms will gradually gain ground as the government continues to adopt aggressive measures to suppress public dissent. Combined with growing pressure from international rights groups, this will threaten the CPV's political agenda to maintain an authoritarian government over the coming years. Domestic Politics Hmong Crackdown Not A Sign Of Broader Instability BMI View: The Vietnamese government's aggressive crackdown on Hmong demonstrations has raised concerns over growing public unrest. Although we acknowledge public unrest remains a threat to political stability in Vietnam, we see limited evidence that a large-scale political uprising could occur in the short to medium term. From our perspective, incidences of political demonstrations in recent years do not reflect a widespread and unified movement for political change, and we do not expect the latest incident to spread across the broader population. In what we see as an aggressive move to stem public unrest, the Vietnamese government ordered a military crackdown on Hmong demonstrations in the north west province of Dien Bien on May 5. Around 5,000-7,000 protesters - mainly consisting of members from the ethnic Hmong population - took part in the demonstrations, demanding for democratic reforms and religious freedom. Although we acknowledge public unrest remains a threat to political stability in Vietnam, we see limited evidence to suggest a largescale political uprising could occur in the short to medium term. No Signs Of Widespread Unrest Incidences of political demonstrations and public unrest in recent years suggest dissent against the government is related to wide-ranging and separate areas of concerns. These areas of concern include religious freedom, accountability and transparency of the government, land rights violations, income inequality and calls for democratic reforms. This is in stark contrast to a widespread and unified movement to challenge the government, which we believe would represent a more precarious scenario. We do not rule out the possibility that these separate causes of dissent could gather momentum and eventually become a serious threat to political stability and policy continuity in Vietnam. However, at © Business Monitor International Ltd Page 29 Vietnam Freight Transport Report Q4 2011 least in the near term, we have yet to see compelling evidence that these relatively small-scale demonstrations are gaining in momentum or becoming an urgent threat to the government. According to local media reports, the latest political demonstration in May appears to be due to concerns unique to the ethnic Hmong community in Dien Bien province. Foreign ministry spokeswoman Nguyen Phuong Nga issued a statement on May 5 claiming the government had to step in after individual elements were suspected of taking advantage of the situation to provoke the crowd into establishing an independent 'kingdom' of the Hmong. The Vietnamese government has consistently maintained an assertive stance in defending its single-party political system and maintaining its grip on power over the years. Thus, we are not surprised that the government has taken such an aggressive stance on clamping down on the Hmong protestors. Indeed, similar incidents of public unrest among the ethnic community in Vietnam's Central Highlands in 2001 and 2004 were quickly suppressed by the government. Given that such incidents do not reflect a widespread movement for political change, we believe these protests are unlikely to attract the interest of the broader population. As such, we believe risk of contagion remains remote and anti-establishment sentiment will remain limited to a minority group. Moderating Inflation Set To Cool Tensions A key factor posing a greater risk to widespread public unrest is the recent surge in cost of living as a result of double-digit inflation, particularly food prices. The lower-income population, which allocates a significant share of its household budgets towards food and daily necessities, has been struggling to cope with higher grain prices and rising transportation costs in recent months. The negative impact of surging food prices has been disproportionately skewed towards lower-income groups in comparison to the dominant middle class. However, on this front, we expect inflationary pressures to moderate in H211 as aggressive monetary tightening by the central bank begins to feed through the economy. More importantly, our commodities team forecasts a relatively weak outlook for grain prices through 2011, which should help provide relief to the lower-income population. The Vietnamese government is fully aware that further increases in prices of essential goods could risk undermining political stability. In respond to that, it has implemented strict price controls on essential goods. To limit risks of a supply shortage due to suppressed prices, subsidies will be increased for producers of essential goods, particularly the agricultural sector, and the government has also promised to maintain social subsidies for the poor. We believe the move will help mitigate risk of public dissent. Less Optimistic In The Longer Term Having argued against concerns of a large-scale political uprising in the short to medium term, we highlight that our long-term political outlook for Vietnam remains less optimistic. Indeed, we have repeatedly argued that Vietnam's one-party political system is inherently unstable in the long term (see our online service, February 10, Key Political Challenges Over The Coming Decade'). Calls for democratic reforms are gaining momentum, albeit very slowly. Nonetheless, we warn that further policy mistakes by the government - such as failing to address inflationary pressures and income inequality - © Business Monitor International Ltd Page 30 Vietnam Freight Transport Report Q4 2011 would risk fuelling pro-democracy sentiment. This explains the relatively low score for our long-term political risk rating for Vietnam, which currently stands at 53.8 out of 100. Long-Term Political Outlook Key Political Challenges Over The Coming Decade BMI View: Vietnam's biggest political question over the coming decade is whether one-party rule under the Communist Party of Vietnam (CPV) will face growing calls for democratisation, as was the case in other major South East Asian countries. While our core scenario envisages the CPV transforming itself into a technocratic administration, it faces major economic challenges which if mismanaged could lead to widespread unrest. On the foreign policy front, we expect an increasingly powerful China to drive Vietnam further into the camp of Asian nations with close relations with the US. Although Vietnam is a politically stable country, we view the ruling Communist Party of Vietnam's (CPV) monopoly on political power as unsustainable over the long term. One of the CPV's biggest challenges will be managing Vietnam's transformation into a more pluralistic society over the coming decade and beyond. Indeed, the CPV's strict control of the media and political opinion is already cracking, with a growing number of internet bloggers becoming increasingly critical of government policy. Challenges And Threats To Stability Inflation and devaluation as drivers of discontent: As in neighbouring China, economic growth has brought sizeable material gains for the majority of the population. However, the Vietnamese government's loose fiscal and monetary policies have led to high levels of inflation and repeated devaluations of the dong in recent years, which have eroded the real value of wages and savings. A failure to contain inflation at a reasonable level and uphold the real value of the dong could undermine confidence in the regime. Divisions within the Communist Party: High inflation and devaluation have opened schisms within the CPV leadership between proponents of continued economic reform and a more conservative wing which believes that a deceleration or even reversal of reform policies would benefit macroeconomic stability. Ethnic and regional tensions: Vietnam is relatively homogeneous, with ethnic Viet comprising almost 90% of the population. Ethnic minorities in the Central Highlands have previously objected to government policies promoting migration of ethnic Viet into the highland region. While protests have died down, they could emerge in future. A potential spark could be the Chinese-financed bauxite mining project in Lam Dong and Dak Nong provinces, which is currently causing widespread environmental damage and raising ire among the local population. There are also continued cultural differences between the population of the Red River Delta around the capital Hanoi in the north and the population of the Mekong Delta in the south, where Ho Chi Minh City (formerly Saigon, the ex-capital of South Vietnam) remains the commercial capital. While the general © Business Monitor International Ltd Page 31 Vietnam Freight Transport Report Q4 2011 perception is that northerners are more supportive of socialist rule and the southerners more inclined to support continued economic reform, a strong concept of national unity nevertheless exists in both parts of the country. Demands for increased religious rights: One of the most concerted challenges against the CPV in recent years has come from Catholics wishing for a stronger recognition of their right to worship in what is still a nominally atheist country. Hanoi has ceded to pressure from the US to allow a higher degree of religious freedom, but is wary of the Catholic Church becoming a rallying point of political opposition, as was the case in Communist Poland and the Philippines during the Marcos dictatorship. The Vietnamese government has thus slapped heavy sentences on Catholic activists who have extended their fight to encompass increased political freedom. Relations with China: Relations with China have become increasingly strained in recent years as Beijing has expanded its economic, political and military influence southwards. The main point of contention is the conflicting territorial claims for the Paracel and Spratly Islands in the South China Sea. Vietnam's relations with China have also been strained by the large bilateral trade deficit it runs with its northern neighbour, which amounts to more than 10% of GDP, and criticism of a Chinese-financed bauxite mining project in the central highlands. That said, the regimes in Beijing and Hanoi share the same ideological base and political system, and contacts between their respective politburos have decreased tension between them. Nonetheless, we believe Vietnam will seek increasingly close relations with the US - and potentially India and Japan - in the defence sphere, as a hedge against China's rising power in the region. Vietnam's long-term political risk rating of 52.8/100 is weighed down by a score of 27.6 in the 'characteristics of polity' subcomponent. This is due to the limited independence of the judiciary, the ban on political parties other than the CPV and severe limitations on the media and civil society. While these factors may presage stability in the short term, the experience of other South East Asian nations shows that rising wealth and development later lead to calls for political liberalisation. We have thus drawn up three scenarios for Vietnam's political future: Scenarios For Political Change Core Scenario: CPV Turns Into A Technocratic Regime Our core scenario is for the Communist Party of Vietnam (CPV) to shift increasingly towards a technocratic form of government aimed at maintaining high economic growth levels and an acceptable distribution of wealth across the population. Ambitious young Vietnamese are already joining the CPV as a career path and as a means to serve their country rather than because of ideological convictions. We thus foresee a continuation of economic reforms in spite of the criticism emanating from older more traditionally-minded party members. However, intermittent periods of harsh repression against pro- © Business Monitor International Ltd Page 32 Vietnam Freight Transport Report Q4 2011 democracy activists and other government critics are a strong indication that political liberalisation is not in the offing. Best Case Scenario: Gradual Political Liberalisation Our best-case scenario is the above scenario combined with a gradual move towards political liberalisation involving an expanded role for the National Assembly, greater scope for differing opinion within the CPV, increased political competition at elections, and greater media freedom. This scenario would see Vietnam moving from a one-party system towards a dominant-party system of the kind seen in neighbouring Cambodia, Malaysia and Singapore, where elections are held but only the ruling party has a realistic chance of winning them. Looking even further beyond the horizon, the experiences of South Korea, Taiwan, and Japan have shown that even dominant-party systems eventually give way to opposition rule. However, in Vietnam's case this may be more than a decade away. Worst-Case Scenario: Mass Unrest And Violent Suppression Our worst-case scenario involves severe policy missteps that lead to a period of prolonged economic upheaval with high unemployment and rapid inflation eroding wealth. This would significantly strengthen the case for regime change, as advocated by the pro-democracy movement. Faced with widespread street protests and an all-out challenge to one-party rule, we believe that at least part of the CPV leadership would support a crackdown on demonstrators by security forces in order to stay in power. A violent suppression of street protests as seen in Beijing in 1989 and in Myanmar in 2007 could easily result in a number of deaths and the imposition of sanctions by the international community. If so, Vietnam would likely face not only diplomatic isolation but also economic weakness as exports and foreign direct investment tumble. © Business Monitor International Ltd Page 33 Vietnam Freight Transport Report Q4 2011 Macroeconomics Outlook Public Spending Cuts To Keep Economic Growth Subdued BMI View: The Vietnamese government's shift in focus from driving economic growth towards fighting inflation and addressing macroeconomic imbalances is beginning to have a cooling effect on the economy. Vietnam's real GDP growth came in at a relatively subdued 5.4% year-on-year in Q111, compared with 7.2% in Q410. We expect public spending cuts and tighter credit conditions to keep economic activity depressed over the coming months. Accordingly, we are maintaining our forecast for real GDP growth to come in at a subdued 6.3% in 2011. Latest economic figures published by the General Statistics Office suggest a shift in the Vietnamese government's focus from driving economic growth towards fighting inflation and addressing macroeconomic imbalances is beginning to have a cooling effect on the economy. Vietnam's real GDP growth came in at a relatively subdued 5.4% year-on-year (y-o-y) in Q111, compared with 7.2% in Q410. We expect economic activity to moderate over the coming months as the full impact of fiscal and monetary tightening continues to feed through the economy. This is in line with our forecast that economic growth will slow from 6.8% in 2010 to 6.3% in 2011. From our perspective, attempts by the government to cool the overheating economy are a positive move that will help facilitate a more stable growth trajectory for Vietnam over the longer term. Public Spending A Key Drag On Growth Prime Minister Nguyen Tan Dung unveiled the government's latest measure to cool the economy on March 31, highlighting plans to slash the fiscal budget by 7.4% this year. According to the plan, public spending cuts will amount to around VND50trn (US$2.4bn) of investment in public projects. We see this as a strong indication that the government is serious about addressing mounting inflationary pressures and an overheating economy. However, given that the impact of fiscal tightening has yet to be reflected in Q111 data, we expect economic activity to continue to slow in Q211. Accordingly, we expect reduced public spending to be a key drag on growth over the coming months. Business investments could also come under pressure as public projects begin to be put on hold. Removing The Punch Bowl In line with the Vietnamese government's attempt to slash public spending to cool the economy, the State Bank of Vietnam (SBV) has also embarked on aggressive monetary tightening. Following a total of 300 basis points (bps) of rate hikes in February, the central introduced a further 100bps hike on April 1, bringing the policy rate from 9.00% at the beginning of the year to 13.00%. The SBV's move came after headline consumer price inflation (CPI) accelerated to a 25-month high of 13.9% y-o-y in March, suggesting that inflation is at major risk of exceeding the central bank's target of 7% this year. Accordingly, we have revised our policy rate forecast from 12.00% to 13.00% for end-2011, reflecting the SBV's latest rate hike. We expect the SBV to hold its policy rate at 13.00% as we see inflationary pressures moderating over the coming months. Indeed, the multi-month high headline CPI reading in © Business Monitor International Ltd Page 34 Vietnam Freight Transport Report Q4 2011 March could be due to one-off effects of a currency devaluation in February - which caused a spike in import prices - and electricity and fuel price adjustments in March (see our online service, March 29, 'Wait-And-See For The SBV'). We acknowledge that the full impact of monetary tightening by the SBV, which was only introduced in late February, will take several months to feed through the economy. However, we note that lending rates, which have risen to 18.0-22.0% in recent weeks, are already beginning to have a cooling effect on economic activity. Industrial Production Growth Stagnates As the accompanying chart shows, industrial production growth remained stagnant at a moderate growth rate of 15.1% y-o-y in March. We believe tight credit conditions due to high lending rates, coupled with expectations for a slowdown in domestic demand will help keep industrial activity depressed in Q211. Private consumption should also start to cool as public spending and industrial activity continue to moderate over the coming months. That said, we believe private consumption will remain resilient as the government plans to provide financial support to lower-income households to help offset the impact of fiscal tightening. Moreover, a strong labour market should also help to provide support for private consumption in the coming months. As such, our long-held view that private consumption will remain a key driver of economic growth in 2011 will stay in play. Narrowing Trade Deficit Not Enough To Offset Tightening Measures Looking at the latest trade figures, we note that trade exports came in at a robust 26.0% y-o-y in March, an encouraging sign that Vietnamese exports could have benefited from an 8.5% currency devaluation in February. However, trade imports also registered a significant increase of 21.5% y-o-y in March, resulting in a trade deficit of US$1.2bn. We note that a devaluation in the Vietnamese dong, which will dampen demand for imports, should gradually translate into a smaller trade deficit in Q211. This in turn suggests that we could potentially see rising net exports acting as a cushion against an expected slowdown in domestic demand. Nonetheless, we believe that any increase in net exports will be overshadowed by the combined effect of fiscal and monetary tightening in the coming months. Therefore, we are happy to maintain our forecast for Vietnam's real GDP growth to come in at 6.3% in 2011. Our forecast is slightly lower compared to the government's growth target of 7.0-7.5% this year. However, given that the government has already reversed its pro-growth stance on the economy, we expect the government to revise its growth target accordingly in the coming months. © Business Monitor International Ltd Page 35 Vietnam Freight Transport Report Q4 2011 Table: Vietnam - Economic Activity, 2008-2015 2008 Nominal GDP, 2 VNDbn 2009 2010 2011f 2012f 2013f 2014f 2015f 1,485,038.0 1,658,389.0 1,953,223.3 2,326,853.6 2,641,667.1 2,985,462.7 3,358,614.4 3,761,091.7 Nominal GDP, 2 US$bn 89.8 92.8 101.9 113.0 129.7 150.8 174.5 200.6 Real GDP growth, % 2 change y-o-y 6.3 5.3 6.8 6.3 7.2 7.2 7.2 7.2 1,041 1,063 1,153 1,265 1,438 1,656 1,897 2,161 86.2 87.3 88.4 89.3 90.2 91.1 92.0 92.8 13.6 6.7 14.1 10.0 15.0 16.0 17.0 16.0 4.7 6.0 5.0 6.0 5.0 5.0 5.0 5.0 GDP per capita, 2 US$ Population, mn 3 Industrial production index, 1,2 % y-o-y, ave Unemployment, % of labour 2 force, eop e f 1 2 3 Notes: BMI estimates. BMI forecasts. at 1994 prices; Sources: General Statistics Office. World Bank/BMI © Business Monitor International Ltd Page 36 Vietnam Freight Transport Report Q4 2011 Company Profiles Vietnam Airlines Cargo Strengths ƒ Vietnam Airlines Cargo is the main air cargo provider in Vietnam. Weaknesses ƒ During Q111, weather-related difficulties including avalanches in Western Canada and heavy snow significantly constrained the company's capacity. ƒ Unlike its peers Vietnam Airlines Cargo does not have a freighter fleet and is reliant on using the belly hold of its parent company's planes. Opportunities ƒ The air carrier is well placed to benefit from Vietnam's growing role in the trade sector, the country has flooded money into the development of the country's port sector, but BMI believes aviation also stands to benefit. ƒ The announcement that Vietnam Airlines is to reportedly run flights between the UK and Vietnam could result in cargo being held in the belly of aircraft in the future. Threats ƒ While the sector has recovered well, the outlook for global air freight remains volatile especially with oil prices at their current high levels. Company Overview Vietnam Airlines Cargo's parent Vietnam Airlines began operations in 1956 serving the domestic market. In 1993 it was established as Vietnam's national carrier. Vietnam Airlines Cargo's operations are concentrated in Asia, with the carrier still catering for the domestic market. The airline operates its cargo business by transporting goods in the bellies of its passenger planes. Strategy Operating out of hubs in Hanoi and Ho Chi Minh City, Vietnam Airlines Cargo has developed a route network both domestically and internationally. Within Vietnam the carrier lands at 18 domestic airports. The carrier is heavily Asia focused with three freight flights to neighbouring Thailand and routes servicing China, Hong Kong, Japan, South Korea, Taiwan, Philippines, Malaysia and Indonesia. Thereby allowing the air freight carrier to cater for all five of Vietnam's top five import partners. The carriers expansion into China offers a launch pad for further services to other Chinese airports. Vietnam Airlines Cargo has also developed routes to Australia with freight connections to Melbourne and Sydney. Allied to Vietnam Airlines Cargo's offering of cargo links to three destinations in Europe (Paris, Frankfurt and Moscow), as of July 2011, parent company Vietnam Airlines declared that it was ready to open a direct air route to the UK, scheduled to begin in the last months of 2011. Gatwick Airport will be the destination in the UK and this opens the possibility of cargo being held in the belly of planes going to and from London. © Business Monitor International Ltd Page 37 Vietnam Freight Transport Report Q4 2011 Financials Results 2010 not available Latest Activity Vietnam Airlines Explores Possibility Of Opening UK Direct Route The news that parent company Vietnam Airlines is planning to open a direct route to Gatwick Airport, London, at the end of 2011 is potentially beneficial to the cargo arm of the firm in that freight could be held in the belly of planes flying to and from the UK. Should the move go ahead, Vietnam Airlines will become the first and the only air carrier to develop a direct route between Vietnam and the UK. Some four flights a week using Boeing 777 are expected, with the number of flights increasing to seven per week from 2014. © Business Monitor International Ltd Page 38 Vietnam Freight Transport Report Q4 2011 Vinatrans Strengths ƒ Vinatrans is a diversified logistics company, offering a wide variety of services. Weaknesses ƒ The company is exposed to all of the weaknesses inherent in state-owned companies, such as inefficiency and underfunding. Opportunities ƒ BMI has identified intra-Asia trade as a market to watch, as consumer demand in the traditional markets of the US and Europe remains sluggish. ƒ Vietnam is part of the ASEAN 5. As such, it should see an uptick in trade as a result of the group's FTA with China. Threats ƒ ƒ Rising fuel prices pose a threat to logistics companies' profit margins. The rate of economic growth in Vietnam has far outpaced the country's infrastructure. Road, railways and ports are all badly in need of upgrades. Company Overview Vinatrans is a state-owned Vietnamese freight forwarding company, providing door-to-door logistics worldwide and a number of related services. These include airfreight and sea freight forwarding (including customs clearance, cargo surveying, insurance, air consolidation for inbound and export cargoes, and exhibition or project handling), shipping (including chartering, husbandry, crewing, and brokerage services) and warehousing/cold storage provision. The company is 100% owned by the Vietnamese Ministry of Trade and acts as an agent for several foreign organisations including BAX Global, Hapag-Lloyd Container, Zim Israel Navigation Company and Panalpina. The firm's warehousing and storage facilities in 2 Vietnam include a 2,500m Container Freight Station (CFS) for sea and air cargo, a joint 2 venture (JV) cold storage facility of 2,800m run by Vinatrans and Konoike Transport 2 2 Company of Japan, 40,000m of covered warehousing and 50,000m of open storage. Strategy BMI has been following the trend of increasing investment in the Vietnamese port sector as the country establishes itself as a centre of production, particularly for the textile industry. We caution, however, that as many factories are situated inland, investment in the supply chain as a whole, including road, air, rail and storage, will be needed to deal with increasing demand. Having declined by 10% year-on-year (y-o-y) in 2009, 2010 once more saw increased growth for Vietnamese exports. The volume of imports and exports is forecast to grow by 20% in 2011. According to the Civil Aviation Authority of Vietnam, air freight to and from Vietnam increased by 37% y-o-y to reach 340,000 tonnes in 2010. As such, we see growth opportunities for Vinatrans in the sector. We note that several air cargo carriers have already spotted the potential in the market. Chinese carrier Jade Cargo has recently opened the first airfreight link between Vietnam and Amsterdam. In 2009 Lufthansa Cargo, the airfreight subsidiary of Deutsche Lufthansa, launched a weekly direct service between Frankfurt and Hanoi, which it is considering doubling in the future to keep up with demand. Vietnam Airlines is planning to increase its flights between Hanoi and Paris, Hanoi and Moscow, and Hanoi and Frankfurt, from late-June 2011, which could potentially mean an increase in the © Business Monitor International Ltd Page 39 Vietnam Freight Transport Report Q4 2011 amount of freight carried on the routes. Financials Results Vinatrans has reported consolidated earnings for the second quarter and first half of 2010. In the second quarter, the company made a net profit of VND5.06bn on revenues of VND 109.42bn, versus VND 3.42bn and VND62.99bn in the same period of 2009. The company made a net profit of VND9.94bn in the first half, down 14.16% on a year earlier. Net revenues, however, rose 44.05% on year to VND189.08bn during the period. Its six-month earnings per share (EPS) was VND 1,816, compared to VND2,117 in the same period in 2009. The company was targetting pre-tax profit of VND23bn on revenues of VND 300bn for 2010. The company targetted a dividend payout equivalent to VND1,500 per share for the year. Latest Activity Vietnam Freight Forwarders Association Voices Fears That Logistics Companies Are Too Small According to the Vietnam Freight Forwarders Association (Viffas) Vietnam now has more than 1,000 enterprises which provide logistics services, most of which, about 600-700 enterprises, are located in Ho Chi Minh City. Commenting on the capabilities of the enterprises, Mai Xuan Thieu, Head of the Vietnam Logistics Institute said the majority of enterprises have a modest capital of VND1-1.5bn. As a result, the majority of their work is as agents for multinational groups. Thieu said that Vietnamese enterprises are not capable of providing enough transport services throughout Vietnamese territory with competitive costs. Currently, Vietnamese companies can only meet 25% of total domestic demand. BMI believes this is a cause for concern, given that we expect the country's trade volumes to continue growing. © Business Monitor International Ltd Page 40 Vietnam Freight Transport Report Q4 2011 Vietnam National Shipping Lines (Vinalines) Strengths Weaknesses ƒ Diversified fleet operating in dry bulk, container and oil transport. ƒ Largest commercial shipping line in Vietnam. ƒ Does not play a role on the major Asia-Europe routes, despite Vietnam developing as a direct port of call on these routes. ƒ In June 2011 it was announced that the US$3.6bn Van Phong International Port project, which is primarily constructed by state-owned Vinalines, was suspended following a reassessment of the geological conditions at the project site. Opportunities ƒ Vietnam is expanding its role in the global box market and it fast becoming a mainstay port of call on Asia-Europe services. ƒ Potential to increase its intra-Asia role - evidenced by the expansion work at Cai Mep - and well placed to be chosen as partner on these services by the bigger lines. Threats ƒ While Vietnam has invested heavily in the port network, the logistic supply chain could be let down by the landside freight network, which will have a negative impact on operators in the country. Company Overview Vinalines is Vietnam's largest commercial shipping line, and was established in 1996. The line caters for domestic trade in Vietnam and also offers intra-Asia services. The company also has a port operating division that is the largest in Vietnam, controlling and managing ports in Quang Ninh, Hai Phong, Da Nang, Ho Chi Minh and Can Tho. Strategy Vinalines' 14 shipping companies operate a diverse fleet, dominated by dry bulk vessels but also boasting container ships, oil and product oil vessels. As of the end of Q210, Vinalines fleet consisted of 150 vessels with a capacity of 3.1mn deadweight tonnes (DWT). The line is looking to expand, with a mid-term plan to increase the line's capacity to 6-7mn DWT by 2010. The plan centres on increasing the proportion of specialised vessels such as box ships or oil tankers. In order to achieve this, the line was seeking to spend US$2bn on ordering new ships from Vietnamese yards seeking state funding for the plan. Vinalines has in fact ended up expanding its fleet quicker than it first planned with the shipping line taking on 36 vessels from the debt laden Vietnamese shipbuilder Vinashin in July 2010. Vinaline's chair, Duong Chi Dung, said at the time that up to two-thirds of the acquired vessels cannot be used currently as they fail to meet technical requirements. He estimated that the company will need to spend US$26mn to repair the vessels and purchase insurance cover. Dung said he expected some financial aid from the government for the project. Vinalines services the trade needs of Vietnam's domestic shipping market but also has exposure to the intra-Asia trade lane by joining forces with NYK in December 2010 to launch a Thailand-Vietnam-Singapore (TVS) service providing a 1,100TEU vessel for the service. BMI believes Vinalines' presence on the intra-Asia trade route will increase, with major lines © Business Monitor International Ltd Page 41 Vietnam Freight Transport Report Q4 2011 looking to expand into the route and Vinalines well placed to play a role in partnering with these big lines on the route. Vinalines is increasing its contacts in the container sector partnering with a number of the majors on container terminal projects in Vietnam. Of rising interest in East Asia is Vietnam, according to Port Strategy due to the fact that the country is focusing on being better connected with both short and long haul destinations. Providing the bedrock to this strategy are the new terminals constructed in the Cai Mep area. Financial Results 2010 Not available at the time of writing. Latest Activity Van Phong Port Suspension Highlights Weakness In Business Environment The US$3.6bn Van Phong International Port project, which is primarily constructed by stateowned Vinalines, was suspended in June 2011 because of a reassessment on the geological conditions at the project site. BMI believes the delay is a result of the escalating cost of capital in Vietnam, allied to a lack of proper planning for projects which lead to slow execution, and the lack of regulatory maturity in the country's business environment. There were inconsistencies in pile design at the project during the early days of the construction phase due to the initial explorative drilling not sufficiently studying the site's geology, meaning that the project designer – a joint venture (JV) between Japan-based Nippon Koei and Vietnam-based Portcoast – must now conduct the reassessment and resolve the issue. However, this is not as clear cut as it may at first seem, with Tran Huu Chieu, deputy general director of Vinalines, stating that Portcoast is delaying the revision for the project because Vinalines refused to pay an advance to Portcoast. © Business Monitor International Ltd Page 42 Vietnam Freight Transport Report Q4 2011 Vietnam Petroleum Transport Company (VIPCO) Strengths ƒ 60% of the company's fleet is employed by Petrolimex. ƒ The company boasts a relatively young fleet. ƒ The company has diversified away from operating in a single sector, with a real estate arm. Weaknesses ƒ The company only operates in one shipping sector. Opportunities ƒ The company plans to expand its fleet. Threats ƒ Vietnam's reliance on imported refined products is decreasing as the country brings online more refining capacity, which could negatively affect VIPCO. In the longer term Vietnam's refining capacity could allow the state to export. Company Overview The Vietnam Petroleum Transport Joint Stock Company (VIPCO) offers maritime transport for petroleum products. The company has a diversified portfolio and units that support its product tanker fleet such as its port operations and freight forwarding services. It is also engaged in real estate. Strategy VIPCO's has developed a fleet of six product tankers with a total capacity of 176,111 deadweight tonnes (DWT). The fleet is relatively young with an average age of 16 years. VIPCO has a fleet expansion strategy in place and is prepared to invest in either via new builds or purchasing tankers under the age of 10 years. The company plans to boost its fleet to 200,000DWT. VIPCO's employment strategy for its tankers divides the fleet's employment up, with 60% of the fleet meeting the transport needs of the Vietnam National Petroleum Corporation (Petrolimex) and the other 40% charted to other consignees. Via its connection with Petrolimex, the company is able to cater for Vietnam's oil sector. While the country has estimated oil reserves of 4.6bn barrels, it imports refined products. The company's shipping unit is complemented by its petrochemical terminal's sector. Financials Results 2010 Not available at the time of writing. Latest Activity VIPCO stands to benefit from a deal signed between Petrolimex and SK Energy in February 2011. The South Korean firm will supply Petrolimex with 900,000bcm of RON 92 gasoline and diesel oil in 2011. © Business Monitor International Ltd Page 43 Vietnam Freight Transport Report Q4 2011 BMI Methodology How We Generate Our Industry Forecasts BMI’s industry forecasts are generated using the best-practice techniques of time-series modelling. The precise form of time-series model we use varies from industry to industry, in each case being determined, as per standard practice, by the prevailing features of the industry data being examined. For example, data for some industries may be particularly prone to seasonality, i.e. seasonal trends. In other industries, there may be pronounced non-linearity, whereby large recessions, for example, may occur more frequently than cyclical booms. Our approach varies from industry to industry. Common to our analysis of every industry, is the use of vector autoregressions. Vector autoregressions allow us to forecast a variable using more than the variable’s own history as explanatory information. For example, when forecasting oil prices, we can include information about oil consumption, supply and capacity. When forecasting for some of our industry sub-component variables, however, using a variable’s own history is often the most desirable method of analysis. Such single-variable analysis is called univariate modelling. We use the most common and versatile form of univariate models: the autoregressive moving average model (ARMA). In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality is poor. In such cases, we use either traditional decomposition methods or smoothing methods as a basis for analysis and forecasting. It must be remembered that human intervention plays a necessary and desirable part of all our industry forecasting techniques. Intimate knowledge of the data and industry ensures we spot structural breaks, anomalous data, turning points and seasonal features where a purely mechanical forecasting process would not. Transport Industry There are a number of principal criteria that drive our forecasts for each transport variable: GDP Growth As transport activity is heavily influenced by real GDP growth, this factor is examined to ascertain its relationship with overall trade volumes. Projected GDP growth is calculated using BMI’s own macroeconomic and demographic forecasts. Real Trade Volumes The sum of imports and exports plays a particularly important role in developing countries with a small © Business Monitor International Ltd Page 44 Vietnam Freight Transport Report Q4 2011 domestic industrial sector. In particular, the focus is on goods, as services do not employ transport. The volumes are forecast based on the following criteria: ƒ Trends manifested through historical data; ƒ The impact of future step changes to the economy (such as future membership of the EU or some other regional body). Port Traffic Port traffic levels act as a ‘second opinion’ on trade volumes. However, this check needs to be used with caution as trade values and volumes do not always move over time in the same way. Market Share The market share of each mode (road, rail, inland waterway, coastal shipping) for future years is based upon: ƒ Trends in historical modal split data; ƒ Evidence of government policy favouring one or more modes over others; ƒ Government and or private sector investment plans in specific modes. Sources Sources used in transport reports include local transport ministries, officially released company results and figures, established think tanks and institutes and donor agencies such as the World Bank and the Asian Development Bank. © Business Monitor International Ltd Page 45 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. [...]... 10 Vietnam Freight Transport Report Q4 2011 Industry Trends and Developments Air Air France-KLM Cargo's Asia Expansion Strategy Flying High Air France-KLM Cargo continued its Asia expansion drive by launching a new connection between Vietnam and France in June 2011 Airfreight links between Vietnam and Europe are increasing - a phenomenon we also note in the shipping sector - with ports of call in Vietnam. .. Business Monitor International Ltd Page 14 Vietnam Freight Transport Report Q4 2011 'It is also our vision to develop this facility into an international consolidation hub, linking the Indochina region through our cross-border solutions.' © Business Monitor International Ltd Page 15 Vietnam Freight Transport Report Q4 2011 Market Overview In January 2007 Vietnam officially joined the WTO, an event seen as... 49,182.1 0 - % change y-o-y 13.47 8.20 13.90 6.88 7.39 7.71 7.64 7.23 Road freight, '000 tonnes f = BMI forecast Source: General Statistics Office of Vietnam © Business Monitor International Ltd Page 22 Vietnam Freight Transport Report Q4 2011 Rail Freight Contraction Consigned To the Recent Past Rail freight is forecast to recover in 2011, with year-on-year (y-o-y) tonnes/km growth of 4.7% to 3.893bntkms,... handling freight are located at Ho Chi Minh City, Hanoi and Da Nang, each of which have international connecting flights Minor airports such as Cat Bi at Haiphong are generally used for domestic flights to the three larger hubs In 2010, Vietnam' s air transport infrastructure was ranked 84/ 133 nations by the WEF © Business Monitor International Ltd Page 16 Vietnam Freight Transport Report Q4 2011 Vietnam' s.. .Vietnam Freight Transport Report Q4 2011 Vietnam Business Environment SWOT Strengths ƒ ƒ Weaknesses ƒ ƒ Opportunities ƒ ƒ Threats ƒ ƒ Vietnam has a large, skilled and low-cost workforce, that has made the country attractive to foreign investors Vietnam' s location - its proximity to China and South East Asia, and its good... between Vietnam and Europe, which in our view is connected to Vietnam' s development into the factory of Asia In March 2011 Jade Cargo launched an airfreight link between Vietnam and Amsterdam Lufthansa Cargo has been operating a Frankfurt Hanoi freighter flight for two years and Vietnam Airlines is looking into linking Hanoi with Paris, Moscow and Frankfurt from late June 2011 The increase in routes to Vietnam. .. higher than a year earlier, increasing by 48.2% BMI is currently forecasting a 2011 average global price of US$119.62 © Business Monitor International Ltd Page 20 Vietnam Freight Transport Report Q4 2011 BMI currently expects naphtha to average US$105.41/bbl over the course of 2011, due to a dip back below US$100/bbl in Q4 After a rapid run up in prices from US$102.41/bbl in Q1 to an estimated US$112.31/bbl... problem in Vietnam' s business environment According to a Khanh Hoa People's Committee report, the Van Phong Economic Zone, which the port is expected to service, has attracted 101 projects, but only 16 of these projects have come into full operation © Business Monitor International Ltd Page 12 Vietnam Freight Transport Report Q4 2011 Lastly, we believe that there is a lack of regulatory maturity in Vietnam' s... International Ltd Page 26 Vietnam Freight Transport Report Q4 2011 Vietnam' s principal export commodities are crude oil and manufactured goods The country's main imports are machinery and equipment Vietnam' s main export partners are the US, Japan, China, Switzerland and Australia The country's main sources for imports are China, Japan, South Korea, Thailand and Singapore Vietnam' s position on the South... due © Business Monitor International Ltd Page 11 Vietnam Freight Transport Report Q4 2011 to the escalating cost of capital in Vietnam, the lack of proper planning for projects which lead to slow execution, and the lack of regulatory maturity in the country's business environment The Van Phong port project, which is primarily constructed by state-owned Vietnam National Shipping Lines (Vinalines), was

Ngày đăng: 28/09/2015, 10:33

TỪ KHÓA LIÊN QUAN

TÀI LIỆU CÙNG NGƯỜI DÙNG

  • Đang cập nhật ...

TÀI LIỆU LIÊN QUAN