[Vnbiz] EIU Vietnam travel Infrastructure and Investment

[Craig Stevenson]

  Vietnam travel: Infrastructure and investment
   Printer version<http://www.viewswire.com.ezproxy.umuc.edu/index.asp?layout=IwPrintVW3&article_id=1551135140&printer=printer>
 September 4th 2006

   FROM THE ECONOMIST INTELLIGENCE UNIT

The road network is in poor condition

Vietnam had around 126,000 km of roads in 2003, according to official
statistics. However, the road network is generally considered to be in poor
condition, with only around 35% of roads being covered with asphalt. Over
10% of villages are inaccessible by road for at least one month of the year.
Road use has been rising by about 8% a year for a decade, and in 2005 the
roads racked up 34.4bn passenger-km and 11.3bn tonnes-km. Since 1993, 90% of
aid and counterpart funding for roads has gone towards the major highways,
which constitute less than 10% of the total network. Insufficient attention
has been paid to secondary roads, leaving many parts of Vietnam,
particularly those in mountainous areas, isolated. In an effort to rectify
this problem, in 2005 the Ministry of Finance proposed increasing spending
on roads to US$900m annually through to 2010. Over 600 communes (out of a
total of 8,850) are inaccessible by car.

Motorcycles are the favoured means of local transport

The favoured means of transport in Hanoi and Ho Chi Minh City is a
motorcycle. There are an estimated 12m motorcycles on the road in Vietnam,
equivalent to one for every 1.4 households, and local production reached
1.6m units in 2004. The demand for cars is still modest, but is rising. In
an effort to alleviate congestion in urban areas and reduce the number of
road deaths, which have risen in line with the increasing number of vehicles
on the roads, the authorities in Hanoi and Ho Chi Minh City have long-term
plans for rapid mass-transit systems. In Hanoi, there are plans for the
construction of a 25-km elevated railway, and the authorities in Ho Chi Minh
City have been given approval to build two 21-km underground rail lines by
2007 with help from Germany, at an estimated cost of US$800m. A subsequent
project would build four additional lines.

Rail usage has increased by 10% in recent years

The railway system comprises six single-track routes totalling 3,260 km;
this is equivalent to 0.04 km per head, or about one-third of the average
density of other low-income countries. The Reunification Express takes 32
hours to travel the 1,730 km between Hanoi and Ho Chi Minh City. One-quarter
of the rolling stock is not operational, and one-quarter of the functioning
rolling stock is over 30 years old. However, rail use in terms of
passenger-km rose by nearly 5% to 4.6bn in 2005, while the volume of freight
carried (measured in tonne-km) has also risen, expanding by 5.6% year on
year in 2005 to 2.9bn.

The tonnage-km of freight carried on the inland waterway systems, chiefly on
the Mekong River, its tributaries and canals (which total 4,500 km) and the
Red River and its tributaries (totalling 2,500 km), is nearly double that
transported by rail. In 2005, 4.8bn tonnes-km of cargo was transported on
the waterways, down by 14.4% on the previous year. The World Bank estimates
that poor maintenance and navigation aids reduce the productivity of water
transportation to 40% below its potential.

Ports have been upgraded and can handle larger ships

There are seven international seaports and five special ports through which
only oil and coal are shipped. The main ones are Haiphong in the north,
Quang Ninh, Danang and Qui Nhon in the centre, Ho Chi Minh City in the
south-east and Can Tho in the Mekong Delta. A significant amount of
investment has gone into upgrading the ports, which can now handle more and
larger ships. The ports handled 34m tonnes of freight in 2005, although
improvements in ship-handling and land access have provided the capacity to
handle three times the present volume. The port system is competitive, but
the cost of shipping garments from Ho Chi Minh City to Los Angeles is 10% of
the landed cost, compared with 4% for garments shipped from Shanghai, China.


Vietnam Airlines has modernised rapidly

The state-owned national airline, Vietnam Airlines (VA), has been
modernising and expanding rapidly. The airline owned or leased a total of 38
planes in 2005, a fleet that included ten Boeing 777s (six of which are
leased), six Boeing B767-300s and 15 Airbus A320/321s. The fleet has
expanded over the past few years in line with the delivery of four Boeing
777s and five Airbus A321s. The boom in international arrivals has also
enabled VA to record strong growth. In 2005 the airline flew over 6m
passengers, a year-on-year increase of around 25%, and up from around 4m a
year in both 2003 and 2002.

The Vietnamese government has been slow to open its air routes to full
competition in order to protect VA. As a result, air fares to Vietnam are
considered to be high and to form an impediment to the development of
tourism. However, change is occurring; a Singapore-based low-cost carrier,
Tiger Air, now serves Hanoi and Ho Chi Minh City, and time slots at domestic
airports will no longer be allocated by Vietnam Airlines. International
airlines carry almost two-thirds of foreign visitors to Vietnam.
The Economist Intelligence Unit
Source: Country
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