Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Vietnam Bets $21 Billion on Ports to Beat China: Freight Markets

Vietnam Bets $21 Billion on Ports to Beat China
The Vietnamese government aims to boost shipping volume at ports like Ho Chi Minh City more than 400 percent this decade. Photographer: Stephen Shaver/Bloomberg

Vietnam is pouring billions of dollars into building ports for the world’s largest container ships in a drive to draw export industries from China.

The investment may propel the port complex near Ho Chi Minh City into the ranks of the world’s top 15 ports within a decade, said Malcolm Gregory, chief commercial officer at the $270 million Cai Mep International Terminal Co. His optimism underlines the former Saigon’s transformation less than four decades after being overrun by Communist forces.

Companies from Nokia Oyj to Intel Corp. are shifting production to Vietnam, lured by cheaper labor compared with China and deeper ports for container vessels sailing directly to the U.S., Europe and Asia. The government aims to boost shipping volume more than 400 percent this decade in the quest for economic growth. Exports make up about 75 percent of Vietnam’s gross domestic product.

“Vietnam is so heavily dependent on external demand that getting the entire system to work, not just ports, but roads and railways too, and making customs work faster, is a big part of the story,” said Jonathan Pincus, the dean of the Harvard Kennedy School’s Fulbright Economics Teaching Program in Ho Chi Minh City.

Port manager Vietnam Container Shipping Joint-Stock Co. is among stocks worth buying, says Cha Kyung Jin, the Seoul-based head of investment at Golden Bridge Asset Management Co. He pointed to the untapped potential in a nation that last year exported less than half as much as Thailand, whose population is about a quarter smaller.

Investment Opportunities

“We want to increase our investment in Vietnamese companies, including Vietnam Container Shipping,” he said. “Their port industry offers a lot of potential as their international trade is growing.”

Shares in the Vietnamese company, based in Haiphong, east of Hanoi, have risen 1.6 percent this year. Another shipping enterprise, General Forwarding & Agency Joint-Stock Co., is a “good buy” after sliding since 2009, said Ho Chi Minh City-based Nguyen Hoai Nam, an analyst at Kim Eng Vietnam Securities.

General Forwarding, also based in the commercial capital and known as Gemadept, is down 14.2 percent this year, more than the 5 percent decline in the Ho Chi Minh City Stock Exchange’s VN Index.

“You’ve got all these wonderful exports, but you can’t get them to the market,” said David Creighton, chief executive officer of Cordiant Capital Inc. in Montreal. It invested $27 million in the Cai Lan International Container Terminal, LLC in the northern province of Quang Ninh.

Devaluation Buffer

“The new ports will allow much larger ships to get access and will earn fees in U.S. dollars, meaning devaluations of the Vietnamese currency won’t hit their balance sheets,” he said.

The port-investment target is part of Prime Minister Nguyen Tan Dung’s plan to boost Vietnam’s economic growth. The premier is also striving to tame inflation, which climbed to a two-year high of 12.31 percent in February.

The State Bank of Vietnam raised borrowing costs for the third time in as many weeks on March 8, increasing its refinancing and discount rates to 12 percent each, matching the level of the repurchase rate. The monetary authority devalued the dong for the fourth time in 15 months on Feb. 11 as it strives to narrow the nation’s trade deficit.

Officials have also clamped down on the use of gold and dollars as they seek to stabilize the currency and steady the economy after Fitch Ratings, Moody’s Investors Service and Standard & Poor’s cut Vietnam’s credit rating in 2010. The central bank devalued the dong by about 7 percent last month, the most since at least 1993.

Cargo Surge

The dong was little changed at 20,860 per dollar at the close yesterday, according to data compiled by Bloomberg. The yield on Vietnam’s benchmark five-year bonds gained four basis points to 11.94 percent, the highest since May 2010, on speculation inflation may accelerate. A basis point is 0.01 percentage point.

Dung’s goal is to invest as much as 440 trillion dong this decade to increase deep-water port capacity for larger vessels, including container ships and oil tankers. The volume of goods handled will expand to between 900 million and 1.1 billion metric tons by 2020 from 172.1 million in 2009 under the plan.

Vietnam has a coastline of about 3,400 kilometers facing the South China Sea, giving access to shipping routes to China and Japan, across the Pacific Ocean to the U.S. and over the Indian Ocean toward Europe. France unified the country in 1887, though Japan engaged in border conflicts during World War II.

Four Times

Cargo volumes at Vietnam’s ports surged more than four times from 1999 to 2009, while the number of calls by vessels increased about 215 percent, according to the Vietnam Seaports Association.

The complex close to Ho Chi Minh City ranked 29th among the top 100 container ports in 2009, behind such regional rivals as Singapore. The city-state took the top spot, according to London-based Cargo Systems, a unit of Informa Plc.

Dung’s strategy aims to reduce reliance on transiting goods through neighboring countries, such as Malaysia and Taiwan, which can accommodate bigger ships. Cai Mep International Terminal gives access to vessels with a draught of as much as 16 meters, the company said in a presentation dated February 2011.

“Many manufacturing bases are being moved to Vietnam,” said Jay Ryu, a Hong Kong-based analyst at Mirae Asset Securities Co. “With the yuan appreciating and costs, especially labor expenses, on the rise, it’s becoming less attractive to do business in China and many are moving out.”

Nokia, Intel

Espoo, Finland-based Nokia, the world’s biggest maker of mobile phones, said this month it plans to open a plant in Vietnam to manufacture low-end phones. Last year Santa Clara, California-based Intel, the world’s largest chipmaker, opened a $1 billion assembly and testing plant in Ho Chi Minh City.

Gerry Weber International AG, Germany’s second-largest maker of women’s clothing, is increasingly shifting production from China to sites with cheaper labor, Chief Executive Officer Gerhard Weber said in an interview in December. The Halle, Germany-based company cited Vietnam as one of the new locations.

Average monthly pay in 2009 for Shenzhen in China was $235, compared with monthly manufacturing wages of $100 in Ho Chi Minh City and $104 in Hanoi, according to data compiled by the Japan External Trade Organization.

Gross domestic product rose by an average of 7.3 percent annually last decade as the government favored expansion to cut poverty, a stance that’s fueled bursts of quickening inflation, contributed to trade deficits by stoking imports and led to a weaker currency.

Taming Inflation

Dung, who is on course to win another five-year term as prime minister after being reappointed to the ruling Communist Party’s governing Politburo in January, has shifted the focus to taming consumer prices as he strives to reassure investors the economy won’t overheat.

The premier aims to curb credit growth to below 20 percent this year from an earlier target of 23 percent and narrow the budget deficit to less than 5 percent of GDP from a goal of about 6 percent in 2010. At the same time, the government has targeted annual economic growth of at least 7 percent over the next decade.

Fitch cited “inconsistent” economic policy as one reason for its ratings downgrade last year. Moody’s highlighted the risk of a balance-of-payments crisis and “debt distress” at state-owned Vietnam Shipbuilding Industry Group, known as Vinashin, while Standard & Poor’s said the banking system was vulnerable to shocks following a jump in lending.

‘On the Sidelines’

“The foreign direct investment numbers haven’t been that impressive recently as investors are waiting on the sidelines,” said Sherman Chan, a Hong Kong-based economist at HSBC Plc. “If the government continues with fiscal and monetary tightening, then they will soon return to Vietnam.”

The government’s decision to provide some assistance to Vinashin without bailing the company out entirely is positive, as it signals the state-owned sector must take responsibility for its performance, Chan said.

Vinashin risked bankruptcy after expanding into businesses from securities to tourism, accumulating about 86 trillion dong of debt as of June, the government said in August.

HSBC this month cut its estimate for Vietnam’s economic growth to 7 percent in 2011 from 7.5 percent. The company predicts the dong will be devalued again by about 4 percent in the third quarter, with inflation slowing by the yearend.

Crucial Seaports

“Seaports play a crucial role in Vietnam’s economic growth, as trade is central to the growth of manufacturing and the export of farmed and natural resources,” said Tony Hsun, managing director of VinaCapital Investment Management Ltd. in Ho Chi Minh City. “The government’s plan to develop deep-water ports is therefore extremely important.”

Major projects worth $10.3 billion dollars are under way or planned in the sector, many with foreign involvement, data from London-based researcher Business Monitor International shows. Cai Mep International said the port is a joint venture between APM Terminals, a unit of Denmark’s biggest company A.P. Moeller-Maersk A/S, and Vietnam National Shipping Lines and Saigon Port.

Vietnam needs further investment in projects such as roads, railways and terminals, said Creighton of Cordiant Capital. “That shows there’s a lot of growth ahead of us,” he said. “We believe in the country’s long-term prospects.”

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.