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Current Status of Investment and Development of Vietnam's Seaports


procedures to implement the project so the disbursed capital is not much.

Like state budget capital, ODA capital for state-owned seaport development investment is assigned to the Vietnam Maritime Administration, Vietnam National Shipping Lines and localities for management and use.

c. Foreign direct investment (FDI)

Due to the characteristics of seaport investment requiring large amounts of capital, long payback periods, and high levels of risk, foreign direct investment in this sector is not much. Table 2.2 shows that for many years the proportion of foreign direct investment was quite small, accounting for only approximately 4% of total investment capital in seaport development. In 2011 alone, this proportion increased rapidly, reaching 23.9% due to the Government's issuance of the "Pilot Regulation on Investment in the form of Public-Private Partnership (PPP)" which initially attracted foreign investors.

- Regarding investment scale : If in the past, ports using joint venture capital were mainly specialized ports or general ports to serve the production and business of that joint venture such as Viet Xo Petrol port serving oil and gas, Caltex Vietnam joint venture port... then now the main joint venture ports are large-scale general container ports such as VICT port, SG - SSA International port... As of the end of 2011, capital from foreign investors accounted for 45% of total investment capital in Vietnamese container ports.

- Regarding investment locations : Most foreign investors when investing in Vietnamese seaports have chosen the Ho Chi Minh City - Ba Ria - Vung Tau - Dong Nai port area (seaport group 5) to invest, because this area has great potential for domestic and international maritime transport. In the North, the number of seaport projects in the form of FDI is not much and the typical one is the Lach Huyen port project (Hai Phong) applying the pilot form of public-private partnership PPP, a joint venture between Vietnam National Shipping Lines (Vinaline) and 3 Japanese private partners.

- Regarding investment partners : In recent years, the world's leading seaport and shipping corporations such as PSA (Singapore), Maersk A/S (Denmark)... have begun investing in Vietnam, with projects with high investment capital, about 250 - 300 million USD for a port and design for a wharf capable of docking 120,000 DWT ships.

- 200,000 DWT contributes to creating a breakthrough for Vietnam's seaports.

However, attracting foreign investment capital to Vietnam still has some points.


Weak. Because the policy of attracting foreign investment in the port sector of Vietnam is not yet strict and lacks uniformity, it has created loopholes for foreign investors to circumvent the law. A reality that occurs is that at some ports with foreign joint ventures, the foreign side increases the price of assets brought into the joint venture, causing the joint venture companies with large asset values ​​to operate at a false loss, pushing the Vietnamese partner into a position of prolonged losses and making it difficult to stand firm in the joint venture, and in the end, they may have to sell their shares to the foreign side. Most of the foreign joint venture parties are corporations with fleets of ships, so there is a situation of forcing customers of other ports to come to the joint venture port, creating instability in competition between ports. In addition, based on the capital potential of foreign companies (usually economic groups), these ports always accept fake losses to reduce freight rates (because in fact, the shipping lines of the foreign group enjoy this benefit), causing damage to the Vietnamese government and the Vietnamese parties in the joint venture. Therefore, it is necessary to have a policy for selecting investors. Any wrong choice of investors will leave many unpredictable consequences.

d. Port enterprise capital

This is the self-owned capital of port enterprises for investment and development. Table 2.2 shows that the investment capital of port enterprises has increased rapidly. In 2005, it was only 388 billion VND, but by 2010 it was 1,889 billion VND, a 6-fold increase in 6 years and increasingly accounting for a high proportion of the total investment capital for seaport development. However, because investment and development require a very large amount of capital, especially deep-water ports (which Vietnam is lacking) require capital of up to thousands of billions of VND, it is very difficult for port enterprises to accumulate thousands of billions of VND and spend all of it on investment and development. Therefore, most port enterprises today only have enough capacity to renovate, upgrade seaports or modernize ports through purchasing loading and unloading equipment... but do not have enough capital to invest in large ports. For port enterprises investing in large ports, to reduce the stress on investment capital, they often have to divide the scale and invest in stages. Large and successful port enterprises include Vietnam National Shipping Lines (Vinalines), Saigon Newport Corporation (SNP), Gemadept Corporation...

The data on "port enterprise capital" in Table 2.2 also includes capital of domestic private investors investing in seaports. Private investors


When investing, investors always aim to serve their business to make a profit as quickly as possible, but seaport projects are large capital, and cannot recover capital and make a profit overnight. Moreover, seaport projects require large capital, while Vietnamese private investors do not have strong financial potential and limited ability to mobilize external capital, so they are still hesitant and hesitant to invest in the seaport sector. If they do invest, they only focus on port infrastructure, where there is already public port infrastructure such as port access channels and breakwaters that have been invested by the state before. In the past, the number of private port projects was not much, and they were mainly medium and small-sized ports, such as Nanning port, Cua Lo deep-water port, Dien Loc Dong Lam port... However, recently, private investors have also started to invest in large ports. For example, Long An International Seaport was built with an area of ​​1,900 hectares along the Soai Rap River, in Can Giuoc district - Long An province. The port has an investment capital of 1 billion USD contributed by 2 units: Dong Tam Group Joint Stock Company and VinaCapital Group.

e. Other sources of capital

The equity capital of port enterprises plays a very important role but only accounts for a small proportion of the total investment capital. To meet the capital demand for investment and development activities, port enterprises must increase the mobilization of other capital sources in the form of loans, joint ventures, bond issuance and other forms. Table 2.2 shows that other capital sources for investment and development of seaports always account for approximately 20% and have become increasingly important in recent years. For example, the Cai Cui port construction investment project - phase II (2007) invested by the Maritime Corporation, with a total investment of 543 billion VND, of which the Corporation's own capital is 15%, and commercial loans from Viettin Bank are 85% of the total investment.

The investment project to build berths 2, 3, 4 of Cai Lan port is invested by Cai Lan Port Joint Stock Company in a joint venture with the US SSA Group. Cai Lan Port Joint Stock Company was established by shareholders including Quang Ninh Port One Member Co., Ltd. (accounting for 15%), Vietnam National Shipping Lines (accounting for 51%), Hanoi Import-Export Company (accounting for 6%), and the rest are other shareholders. The total investment of this project is 155 million USD, of which the joint venture's equity capital is 54 million USD (Cai Lan Port Joint Stock Company).


Cai Lan port accounts for 51% of capital, US SSA group accounts for 49%), the remaining 101 million USD is commercial loans from foreign banks: IFC, ICF, FMO and Proparco.

To develop the Vietnamese seaport system, a huge amount of capital is needed. But the most difficult problem is not capital but good projects and a team of capable people. No one, no credit institution does not want to lend or invest effectively.

2.3. CURRENT STATUS OF INVESTMENT IN DEVELOPMENT OF VIETNAM'S SEAPORTS

2.3.1. Current status of investment in seaport development - considered according to economic region structure

Vietnam's seaport system is distributed into 3 regions: North, Central, South as follows (only considering the main ports of the 3 regions):

Northern region (including seaports in group 1): Van Gia, Mui Chua, Cam Pha, Hon Gai ports (Quang Ninh); Hai Phong port; Diem Dien port (Thai Binh); Hai Thinh port (Nam Dinh).

Central region (including seaports in groups 2, 3, 4): Nghi Son and Le Mon ports (Thanh Hoa); Cua Lo and Ben Thuy ports (Nghe An); Vung Ang and Xuan Hai ports (Ha Tinh); Quang Binh port; Cua Viet port (Quang Tri); Thuan An and Chan May ports (Thua Thien - Hue); Da Nang port; Ky Ha, Dung Quat and Sa Ky ports (Quang Ngai); Quy Nhon port (Binh Dinh); Vung Ro port (Phu Yen); Van Phong and Nha Trang - Ba Ngoi ports (Khanh Hoa); Ca Na port (Ninh Thuan); Phu Quy port (Binh Thuan).

Southern region (including seaports in groups 5 and 6): Ho Chi Minh City seaport; Vung Tau seaport; Dong Nai port; Can Tho port; Binh Duong port; Dong Thap port; My Thoi port (An Giang); Vinh Long port; My Tho port (Tien Giang); Nam Can port (Ca Mau); Hon Chong and Binh Tri ports (Kien Giang); Con Dao (Ba Ria - Vung Tau).

* First of all, the current status of seaport development investment in the three regions is shown through the amount of investment capital for seaport development, the scale of the seaport (shown through the number of wharves and total length of the wharves) and the actual volume of goods passing through the port. The scale of the seaport can be considered as the investment result. The volume of goods passing through the port can be considered as the ability to promote the effectiveness of the investment results.


Table 2.3: Comparison of total investment and investment results in seaport development in the three regions of North - Central - South, period 2005 - 2011

STT

Target

Unit

North

Central region

Southern

1

Port investment capital ratio

%

17.5

14.9

67.5

2

Port wharf length ratio

%

18.6

18.5

64

3

Proportion of number of wharfs

%

34

28

38

4

Average size of a port

m/berth

106

129

319

5

Actual cargo volume ratio

through port

%

30

13

57

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Current Status of Investment and Development of Vietnams Seaports

Source: Calculated based on data from the Ministry of Transport

Table 2.3 shows that the ratio of investment capital and the ratio of wharf length (considered as investment results) are equivalent, so it can be temporarily concluded that 1 dong of investment capital in seaports in the 3 regions has brought about the same results (results, not the efficiency of investment capital). At the same time, Table 2.3 also clarifies that the average size of a port in the North and Central regions is small, while the average size of a port in the South is 3 times larger and is more modernly equipped. Therefore, the ability to receive goods through ports in the South is much larger than that of the North and Central regions. If we compare lines 1 and 5 of Table 2.3, we can see that the Central region uses port investment capital and exploits ports inefficiently, while the North also receives an equivalent amount of capital but the ability to pass goods through is much higher, proving that the North invests more effectively. The current status of seaport investment in the 3 regions is as follows:

a. Investing in developing the Northern seaport system

The North has 7 seaports (Appendix 1.2), the total length of wharfs is 8097m, of which there are 3 type I ports (Hon Gai, Hai Phong, Cam Pha ports) and 4 type II ports (Van Gia, Mui Chua, Diem Dien, Hai Thinh ports), Hai Ha port (Quang Ninh) is under investment and construction. Cai Lan port (belonging to Hon Gai port) can receive the largest unloaded ship up to 45,000 DWT and similarly Cam Pha coal port can receive ships up to 70,000 DWT. Other ports only receive ships from 1,000 DWT.

– 10,000 DWT. Goods through Northern ports are mainly coal and minerals.

- Among the 7 ports in the Northern seaport group, there are currently 44 loading and unloading wharves.


general cargo, general merchandise, containers; 24 specialized wharves; 8 other service wharves (such as Fisheries, Customs, Border Guard...) and 15 buoy wharves (coal and general cargo wharves).

+ If we consider only general ports, they are numerous in quantity but limited in scale, the average wharf length is 140m/wharf; the average loading capacity is about 3000 - 4000 tons/meter length/year. This capacity is considered quite good compared to the general level in Vietnam due to relatively modern equipment.

+ Container berths (located in the general port) have an average length of 170m/berth. Loading and unloading productivity is not high, reaching about 500 - 800 TEU/meter length/year due to unsynchronized investment in equipment and uneven container flow.

+ Specialized ports in the North are mainly associated with industrial facilities of the coal and electricity industries... which are invested quite synchronously with factories. Therefore, loading and unloading productivity is high, receiving many large ships at the port.

+ Local ports have degraded infrastructure, are very outdated and have received little investment.

- The equipment at the northern seaports is invested very differently between type I ports and local ports. Hai Phong port and Cai Lan port (belonging to Hon Gai port) are equipped with relatively modern equipment, while local ports use outdated equipment.

- The channel into the ports of the Northern region is quite long and has uneven depth along the entire channel, causing most large ships entering the port to have to reduce their load and take advantage of the tide.

- Port connection traffic: road transport still plays a major role. Railways only transport a large amount of air cargo. Cargo transported by river is insignificant because the bridges across the river have very low clearance, container ships cannot enter.

Assessment : In general, the Northern Type I seaports are invested in accordance with the planning, however, there are still projects that are behind schedule, such as Quang Ninh has 1 project behind schedule out of a total of 15 projects implemented in the past. Similarly, Hai Phong has 2/11 projects. Local seaports are not invested enough according to the planning. In particular, there are 2 ports Diem Dien and Hai Thinh due to the flow


The port has been heavily silted up and has not been dredged or maintained, so it has not received cargo for a long time.

b. Investing in developing the Central region's seaport system

The Central region has favorable natural conditions for building seaports, so it has the fastest port construction speed in the country. In the past 10 years, dozens of large and small ports have appeared, of which Van Phong port is considered a great hope for the Vietnamese maritime industry. Up to now, the Central region has 19 ports (Appendix 1.2) with a total length of wharfs of 8,026m, including 10 type I seaports and 9 type II seaports. Goods passing through the ports are mainly construction materials, wood of all kinds and mining products. Of the 19 seaports in the Central region, there are currently 37 general cargo, general cargo, container loading ports and 25 specialized ports. Of the total length of wharfs, 1,476m are capable of receiving ships from

20,000 - 30,000 DWT. Vung Ang port and Gemandept Dung Quat wharf alone can receive ships of 45,000 - 50,000 DWT.

- Regarding equipment, the Central ports are equipped quite simply, if not too outdated, so the loading and unloading capacity is low, except for some newly built ports such as Tien Sa and Gemandept which are equipped with modern equipment with relatively large capacity.

- The main transport connecting the port is still by road.

- Post-port service infrastructure in the Central region is almost non-existent (except for some ports in the North Central region).

- The access channels at the ports in the Central region are mostly short because most of the wharf areas are located near the deep coast and the sedimentation level is not too large (except for some ports in the South Central region).

- The biggest characteristic of the Central region's seaports is: lack of "rear", lack of economic flows from neighboring regions, so the source of goods is too little, leading to the Central region's ports always being in a state of shortage of goods, the seaport infrastructure is heavily invested but not used, causing great waste. The shortage of goods in the Central region is due to the following reasons: First : Due to the reality of production capacity as well as the market in the Central region being too fragmented. Second : Due to the ineffective operation of industrial zones, it is not possible to create a large enough and stable source of goods to supply the seaports. Third : Due to the dense density of seaports, investment capital is spread out.


spread, the investment scale is only small and scattered. Dozens of seaports in this region have to share a very small amount of cargo. Fourth : Unscientific and unsynchronized investment occurs in many seaports in the Central region. For example, Chan May port was built in 2003 with a total investment of 203 billion VND to receive 30,000-ton ships. But Chan May port is located too far from Phu Bai industrial park and too close to Da Nang port, so there is no cargo. The port was built to receive 30,000-ton ships, but the loading and unloading capacity and services for a ship are weak and unsynchronized. The port has the advantage of deep water but is not windproof, so it is necessary to continue investing in building breakwaters with an investment capital of at least 500 - 1,000 billion VND (three times higher than the investment capital for port construction). Fifth : Due to lack of goods, there are no ships leaving daily at the Central ports, so businesses in the Central region cannot export goods but must transport them to Saigon or Hai Phong for transit through Singapore, Hong Kong... That has pushed up freight rates at businesses in the Central region and created a shortage of goods for the Central ports.

Assessment : The Central region's seaport system is considered an advantage with potential, but so far it has not been invested in synchronously, with low exploitation efficiency. The Central region's ports only operate to collect goods and then bring them to Hai Phong or Ho Chi Minh City ports for export. The necessary factors for the development of the seaport economy are not yet complete, lacking a suitable port urban system, finance, logistics, port rear... The process of implementing seaport investment projects in the Central region is also delayed due to lack of capital, such as Thanh Hoa has 2 projects behind schedule out of a total of 10 projects implemented in the past. Similarly, Quang Ngai has 2/9 projects, Binh Dinh has 1/4 projects, Khanh Hoa has 5/9 projects.

c. Investing in developing the southern seaport system

The South has a dense system of rivers and canals, and water transport is very developed, so the seaports in the South have the outstanding feature of being located on rivers with long entrance channels sometimes several tens of kilometers long.

The South has 13 seaports (Appendix 1.2), with a total length of wharfs of 27,774m, including 4 type I ports and 9 type II ports. Goods passing through the ports are mainly agricultural products, fertilizers, motorcycle components, ores and products from industrial zones... Of the 13 seaports in the South, there are currently 39 general wharves and 48 specialized wharves.

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