Port Infrastructure in Vietnam

By Koushan Das, Vietnam Briefing, Dezan Shira & Associates

Posted: 18th May 2018 08:43

In the last 10 years, the production growth in Vietnam has led to a significant increase in freight traffic, highlighting the importance of ports and the need for further investments in its infrastructure to reduce logistics costs, which currently accounts for 21 percent of the GDP.

As of December 2017, Vietnam has 44 seaports with a total capacity of 470-500 million tons per year. The major ports in Vietnam include Hai Phong, Danang, Qui Nhon, and Ho Chi Minh City. Future ports under development include My Thuy International Seaport, Lien Chieu Seaport, and Lach Huyen International Gateway Port. These ports have attracted investors such as Vietnam Construction Service Development and Investment Co., Ltd, Golden Gate Construction Co., Ltd, Clearbrook Global Advisors, EMP Infra, PineStreet Infra, Boskalis, T&T Group, Infra Asia Investment, and Molnykit, a JV between Mitsui O.S.K Lines, Nippon Yusen Kabushiki Kaisha, and Itochu Corporation, and US-invested Cargill Vietnam.

From 2005 to 2016, Vietnam’s external trade increased from US$69 billion to US$351 billion, while the country’s total freight traffic volume more than doubled in the same period from 100 billion ton-km to 238 billion ton-km. During the same period, the freight traffic volume in inland waterways increased from 18 billion ton-km to 45 billion ton-km, while in maritime transport it increased from 62 billion ton-km to 132 billion ton-km. Going forward, the growth in production and trade will bring a corresponding growth in freight traffic, which makes it a priority for the government to invest in port infrastructure.

Ho Chi Minh City port consists of a network of ports around it and is currently the 26th biggest container port in the world and the 5th biggest in ASEAN. Port of Singapore, Malaysia’s Port Klang and Tanjung Pelepas, and Thailand’s Laem Chabang lead the rankings in ASEAN.
 

Major ports

Northern Vietnam

Hai Phong and Ving Ang port are the major ports for international container traffic in north Vietnam, but neither are deep-water ports. Hai Phong accounted for 13 percent of the total throughput of all the country’s ports in 2016.
Containers heading for Hai Phong or Vung Ang require transshipments, which usually takes place in the ports of Singapore or Hong Kong, where the containers are loaded into smaller container vessels, which can then be accommodated in the northern ports in Vietnam.

Lach Huyen Port, a new deep-water port is going to open in May 2018 in Hai Phong that will help in accommodating larger container vessels and reduce the need for transshipments. The Port will be connected to the mainland through the new Tan Vu-Lach Huyen Highway and Bridge to ensure connectivity and easier movement of goods.

Central Vietnam

The major ports in Central Vietnam are the Qui Nhon and Da Nang port, the latter being a deep-water port. In addition, the region has nine minor ports as well. In 2016, the region accounted for 11.65 percent of the total throughput, with Da Nang handling the majority of the traffic.

Qui Nhon port is mostly used for transporting goods from Mekong Delta and Western Vietnam, along with transloading of goods heading for Cambodia.

Southern Vietnam

In the south, ports in Ho Chi Minh City are the main gateway for the region, accounting for 67 percent of the total throughput of all Vietnamese ports. The Cai Mep-Thi Via Port (Cai Mep) is a deep-water port located around 80 km south of Ho Chi Minh City.

It mostly handles goods for Dong Nai and Binh Duong, which are major production centers. Despite being a deep-water port with seven terminals, Cai-Mep functions at only 30 percent capacity, due to a large number of smaller ports in the region. For example, Cat Lai, one of the biggest and most modern container terminals in Vietnam, situated in Ho Chi Ming City’s port area, is more preferred over Cai-Mep due to its proximity to Binh Duong, Ba Ria-Vung Tau, Dong Nai, and Ho Chi Minh City. The port is not a deep-water port, hence requires transshipments.

Industry challenges

The major challenge faced by the biggest ports in Vietnam is the increasing use of smaller ports and vessels, which account for around 80 percent of container imports and exports. Underdeveloped shipping infrastructure has started to impact the industry, with annual freight-related losses reaching US$2.4 billion. Some ports also suffer from being over-burdened with shipments, which has led to congestion and huge delays.

As mentioned earlier, Cat Lai port is preferred over Cai-Mep port, despite the latter being a deep-water port that can accommodate vessels with a capacity of 18,000 20-foot equivalent units (TEUs). For shipments to be unloaded in Cat Lai, containers are transshipped through Hong Kong or Singapore, which leads to delays and increases the cost by around 30 percent. In addition, the increasing use of Cat Lai has led to gridlock issues due to delays in weigh stations and road intersections.

Need to do more

Increasing port capacity

The government not only needs to invest in increasing the existing port capacity but also construct new deep-water ports to reduce transportation costs and increase efficiency, especially in Mekong Delta. The government had introduced a master plan related to the development of seaport systems by 2020 and 2030. It focuses on achieving a cargo clearance target of at least 1 billion tons by 2020 and 1.2 to 1.6 billion tons by 2030. However, the government needs to consider issues such as port placement, connectivity with economic hubs, and proximity to international maritime routes in their plan.

Developing inland waterways

Vietnam has over 42,000 km of inland waterways, mostly in the Mekong and Red River delta, that has the potential to increase connectivity and reduce costs for the transportation sector. Currently, they suffer from the lack of connectivity to major production centers and inland ports. The development of waterway transport should be a priority for the government to increase market access, connectivity, and efficiency.

Connectivity

The major hurdle facing the development of new ports and efficient functioning of the existing ones is the lack of connecting infrastructure such as roads, railways, bridges, or warehouses. Smaller ports are being preferred due to their proximity to production hubs, which has led to congestion and huge delays. Infrastructure investments focusing on connecting the ports to the customers is vital, which will allow them to function to their maximum capacity.
 
This article was first published on Vietnam Briefing.

Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll, and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India, and ASEAN, we are your reliable partner for business expansion in this region and beyond.

For inquiries, please email us at vietnam@dezshira.com. Further information about our firm can be found at: www.dezshira.com.


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