Vietnam ports on sale to boost efficiency

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saigon portThe state-owned Vietnamese ports of Hai Phong, Da Nang, Quang Ninh, Ho Chi Minh City and Quy Nhon will see the sale of between 25 and 49 per cent of shares by 2014. The decision came after the Vietnamese government realised it would be better to improve efficiency of the existing ports through privatisation rather than build new facilities, which also would allow the government to redirect capital towards more important sectors.

Despite the management of public ports having improved in the past, there are still many bottlenecks.

As a matter of fact, in 2012 the ports showed a total average capacity of 294.5 million tonnes per year, operating at just 20 to 30 per cent of their capacity. This low performance comes with considerably higher shipping costs than at other ASEAN ports. For example, a 40-foot container shipped from Hong Kong to Los Angeles is 28 per cent less expensive than one shipped from Ho Chi Minh City, while from Shanghai, Ningbo or Shenzhen the rate is 16 per cent lower.

Apart from high shipping costs and underperformance in capacity, Vietnam’s ports also face congestion problems. Some ports are located near big cities where road traffic is particularly heavy, making it difficult to forward shipments to other transportation nodes.

These are critical issues that threaten Vietnam’s export growth, and it is expected that the country will need between $18 and $22 billion to improve the situation. Even though in 2009 the government approved several big seaport projects, which are now under construction, many problems haven’t been resolved.

Thus, the government decided that three of the main ports (Quy Nhon, Da Nang and Hai Phong) will partially be privatised by 2014 while the Saigon Port privatisation would begin later since it needs to be relocated to the Hiep Phuoc New Urban and Port Area, a new industrial zone at the outskirts of Ho Chi Minh City.

“The privatisation aims to improve the efficiency of the seaports, assisting the process of restructuring the maritime industry,” said Ho Kim Lan, Secretary General of the Vietnam Sea Port Association, adding that he expects that new private management mechanisms would help improve the ports’ business performance.

Nguyen Tan Dung, Vietnam’s Prime Minister, announced in April 2013 a new $1.2-billion project to build the Hai Phong International Gateway Port in a joint venture with Japan’s Official Development Assistance. The project, the first public-private partnership between Vietnam and Japan, is scheduled to be completed by 2016 and “will play a crucial role in creating a dynamic and effective logistical system that will allow Vietnamese exports to reach Europe and the US directly without going through other regional ports such as Singapore and China,” the prime minister said.

Despite the government’s push, of Vietnam’s current 127 ports only 25 are operating sea cargo. The five main ports are Saigon Port (managing 72 per cent of total cargo), Hai Phong (20 per cent), Cai Lan (4 per cent), Da Nang (1 per cent) and Quy Nhon (1 per cent), while two new big ports in Ba Ria-Vung Tau province are slowly gaining more importance after their inauguration in 2010. In line with the country’s Seaport Development Plan, Vietnam will get six new harbour complexes comprising of 39 ports and 180 wharves.

Vietnam is listed behind its neighbours in the World Bank’s 2012 Logistics Performance Index at 53, while Singapore is placed first, Malaysia 29th, Thailand 38th and the Philippines 52nd. The country, as statistics show, is not fully capitalising on its strategic location in Southeast Asia, but incoming private participation is expected to boost its performance in the global cargo business.

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Reading Time: 3 minutes

The state-owned Vietnamese ports of Hai Phong, Da Nang, Quang Ninh, Ho Chi Minh City and Quy Nhon will see the sale of between 25 and 49 per cent of shares by 2014. The decision came after the Vietnamese government realised it would be better to improve efficiency of the existing ports through privatisation rather than build new facilities, which also would allow the government to redirect capital towards more important sectors.

Reading Time: 3 minutes

saigon portThe state-owned Vietnamese ports of Hai Phong, Da Nang, Quang Ninh, Ho Chi Minh City and Quy Nhon will see the sale of between 25 and 49 per cent of shares by 2014. The decision came after the Vietnamese government realised it would be better to improve efficiency of the existing ports through privatisation rather than build new facilities, which also would allow the government to redirect capital towards more important sectors.

Despite the management of public ports having improved in the past, there are still many bottlenecks.

As a matter of fact, in 2012 the ports showed a total average capacity of 294.5 million tonnes per year, operating at just 20 to 30 per cent of their capacity. This low performance comes with considerably higher shipping costs than at other ASEAN ports. For example, a 40-foot container shipped from Hong Kong to Los Angeles is 28 per cent less expensive than one shipped from Ho Chi Minh City, while from Shanghai, Ningbo or Shenzhen the rate is 16 per cent lower.

Apart from high shipping costs and underperformance in capacity, Vietnam’s ports also face congestion problems. Some ports are located near big cities where road traffic is particularly heavy, making it difficult to forward shipments to other transportation nodes.

These are critical issues that threaten Vietnam’s export growth, and it is expected that the country will need between $18 and $22 billion to improve the situation. Even though in 2009 the government approved several big seaport projects, which are now under construction, many problems haven’t been resolved.

Thus, the government decided that three of the main ports (Quy Nhon, Da Nang and Hai Phong) will partially be privatised by 2014 while the Saigon Port privatisation would begin later since it needs to be relocated to the Hiep Phuoc New Urban and Port Area, a new industrial zone at the outskirts of Ho Chi Minh City.

“The privatisation aims to improve the efficiency of the seaports, assisting the process of restructuring the maritime industry,” said Ho Kim Lan, Secretary General of the Vietnam Sea Port Association, adding that he expects that new private management mechanisms would help improve the ports’ business performance.

Nguyen Tan Dung, Vietnam’s Prime Minister, announced in April 2013 a new $1.2-billion project to build the Hai Phong International Gateway Port in a joint venture with Japan’s Official Development Assistance. The project, the first public-private partnership between Vietnam and Japan, is scheduled to be completed by 2016 and “will play a crucial role in creating a dynamic and effective logistical system that will allow Vietnamese exports to reach Europe and the US directly without going through other regional ports such as Singapore and China,” the prime minister said.

Despite the government’s push, of Vietnam’s current 127 ports only 25 are operating sea cargo. The five main ports are Saigon Port (managing 72 per cent of total cargo), Hai Phong (20 per cent), Cai Lan (4 per cent), Da Nang (1 per cent) and Quy Nhon (1 per cent), while two new big ports in Ba Ria-Vung Tau province are slowly gaining more importance after their inauguration in 2010. In line with the country’s Seaport Development Plan, Vietnam will get six new harbour complexes comprising of 39 ports and 180 wharves.

Vietnam is listed behind its neighbours in the World Bank’s 2012 Logistics Performance Index at 53, while Singapore is placed first, Malaysia 29th, Thailand 38th and the Philippines 52nd. The country, as statistics show, is not fully capitalising on its strategic location in Southeast Asia, but incoming private participation is expected to boost its performance in the global cargo business.

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