Home · Articles · News · NikeLeaks Cables: Asia · Vietnam: UNCLOGGING VIETNAM
December 14th, 2011 WW Staff | NikeLeaks Cables: Asia
 

Vietnam: UNCLOGGING VIETNAM

     
Tags:

Reference ID: 08HOCHIMINHCITY757
Created: 2008-08-22 06:25
Released: 2011-08-30 01:44
Classification: UNCLASSIFIED//FOR OFFICIAL USE ONL
Origin: Consulate Ho Chi Minh City

VZCZCXRO6263
PP RUEHCHI RUEHDT RUEHNH
DE RUEHHM #0757/01 2350625
ZNR UUUUU ZZH
P 220625Z AUG 08
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC PRIORITY 4814
INFO RUEHHI/AMEMBASSY HANOI PRIORITY 3241
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/USDOC WASHINGTON DC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEHHM/AMCONSUL HO CHI MINH CITY 5042

UNCLAS SECTION 01 OF 03 HO CHI MINH CITY 000757
 
SENSITIVE
SIPDIS
 
STATE PASS USTR, ELENA BRYAN
STATE PASS DOT FOR MARAD
 
E.O. 12958: N/A
TAGS: EINV EWWT EIND ECON PGOV ENRG KNNP VM
SUBJECT: UNCLOGGING VIETNAM"S PORTS:  WORLD-CLASS CONTAINER TERMINAL
PROJECT COPES WITH BAD ROADS, POOR PLANNING
 
REF: 06 HCMC 411
 
HO CHI MIN 00000757  001.2 OF 003
 
 
1. (SBU) Summary:  As skyrocketing cargo volumes continue to
clog Ho Chi Minh City (HCMC) ports, a state of the art
deep-water port complex with an eventual capacity of at least
eight million shipping containers per year is taking shape 90 km
from HCMC in Ba Ria Vung Tau (BRVT) province.  Poor coordination
between GVN officials responsible for water and land
infrastructure, however, has stalled the construction of vital
bridge and road links, which will prevent the new ports from
initially operating at peak efficiency. Despite these
infrastructure shortfalls at the port that handles 70 percent of
all container traffic to/from Vietnam, the GVN is funding
commercially dubious deep-water projects in remote central
provinces, such as the Van Phong bay transshipment port, as part
of regional development efforts. Recent USG assistance in the
form of U.S. Agency for International Development (USAID) and
U.S. Trade and Development Agency (USTDA) transportation
infrastructure study grants appears to have increased both the
transparency of the GVN"s infrastructure planning process and
coordination between GVN entities responsible for different
aspects of transportation infrastructure development. End
summary.
 
Port Congestion Hikes Costs, Hinders Trade
------------------------------------------
2. (SBU) A surge in imports, on top of ten years" of 20 percent
annual increases in freight container throughput, has stretched
HCMC"s ports, Vietnam"s busiest, to the breaking point. Incoming
vessels typically wait a day or more for open berths, and port
customers complain of an additional three to four day wait to
retrieve inbound containers as wharfs crammed with freight
constrain crane operations and truck movements. Shippers as well
as port customers are straining to adapt to the unpredictable
delays. To maintain supply chain schedules, manufacturers are
increasing lead times and ordering more inputs, resulting in
larger inventory costs. Several major shippers, meanwhile,
recently announced a US$50 port-congestion surcharge on EU bound
freight, and a US$10 per twenty foot equivalent unit (TEU)
handling fee for U.S.-bound containers. This already bleak
situation is set to take a sharp turn for the worse, with
newspapers reporting that many container ships will be unable to
fit under the construction scaffolding of the long awaited Phu
My bridge once construction begins next month.  Reports indicate
that the 30% of largest ships currently calling at HCMC -- ships
that carry 60% to 70% of total volume owning to their larger
size -- will be unable to reach their destinations, decreasing
capacity at four of HCMC"s major ports. As manufacturers gear up
for the crucial U.S. holiday season -- clothing, apparel, and
electronics shipments must depart Vietnam by no later than
October to reach U.S. store shelves in time for the holidays --
port customers fear that the increasing freight volumes and
infrastructure snafus will wreak havoc with shipping costs and
schedules.
 
New International Container Gateway:
Vietnam"s Direct Link To The World
------------------------------------
3. (SBU) With no room to expand, most of HCMC"s downtown river
ports, 85 km from the sea, are either being relocated downstream
or replaced by new deep-water container facilities in
neighboring Ba Ria Vung Tau (BRVT) province. State-owned port
operator Saigon Port, and its parent company Vietnam National
Shipping Lines (Vinalines), have initiated joint ventures with
key international terminal operators, including Seattle-based
SSA Marine, Singapore"s PSA, Denmark"s Maersk, and Hong Kong"s
Hutchinson Port Holdings to develop eight state of the art
container terminals on the Thi Vai river in BRVT province, 90 km
from HCMC. Designed to handle so-called "Hyper-Post Panamax"
vessels of up to 190,000 dead weight tons that are capable of
transporting upwards of 15,000 containers at once, these
facilities will directly link Vietnam to Europe and the U.S.
(Note: Despite the volume of bilateral trade, there are
currently no direct US-VN sea links since the ships that can
call at VN ports are too small to be economically viable for
trans-ocean trips.  All of Vietnam"s long-distance ocean trade
is currently carried by smaller feeder vessels that transfer
cargoes to larger ships in Singapore and Hong Kong.  End Note.)
 
4. (U) Each of the new terminals under construction will
process, on average, in excess of one million TEUs per year,
meaning that when they come on line they will double the entire
country"s container capacity. (Note:  According to Vinamarine
officials, Vietnam"s 2007 container throughput was 4.2 million
TEUs.)  While such a massive increase in capacity would normally
 
HO CHI MIN 00000757  002.2 OF 003
 
 
generate concerns of overcapacity, the demand for port services
is expected to dip below the available supply by only a small
margin in 2010.  By 2012, demand is expected to exceed capacity
once again.  (Comment:  While the collection of eight or more
new ports in BRVT province will collectively constitute a true
world-class "mega port," many private port developers believe
that instead of issuing investment licenses for eight separate
container terminals (with three more planned), development of a
single mega port in BRVT province would have generated the
economies of scale necessary for a world-class transshipment
hub.  End Comment.)
 
Road, Bridge Delays Push Congestion Inland
------------------------------------------
5. (SBU) While manufacturers welcome the increased port capacity
under construction, they also worry that the commensurate
landside infrastructure linking the new ports to industrial
zones will not be ready on time. The one highway that currently
links the BRVT province with regional factories is already
overcrowded with truck and motorbikes, and will not be able to
handle the additional four to eight million container trucks per
year that will be needed to service the ports.  Unfortunately,
plans for a new parallel highway remain only that. Indeed,
several BRVT port projects, such as SSA Marine"s, currently have
no land connection whatsoever and are using river barges and
small passenger vessels to ferry all construction materials and
personnel to the work site. Port developers attribute the
looming delays to the lack of a unified ("intermodal")
infrastructure plan, noting that queries to Vinaline, the
government entity responsible for port development, regarding
the lack of land infrastructure are met with "that"s not our
problem", and referred to the Ministry of Transportation, who,
in turn, refers questioners to the master plan and provincial
authorities.  BRVT provincial officials meanwhile blame
"technical problems" for road and bridge delays, and indeed the
weak sandy soil in the area ("like building on toothpaste" one
engineer told us) requires time-consuming treatment before
cement can be poured.
 
6. (SBU) The difficulty in building in the region does not,
however, explain lengthy delays in starting land infrastructure
projects.  For example, construction of the eight km spur road
and 300 meter bridge linking the SSA terminal to the main
highway was scheduled to begin in September 2007 but has yet to
break ground.  The lack of intermodal planning appears to result
in a situation in which the various entities involved simply do
not share a common sense of the urgency of solving all of the
problems threatening the operation of Vietnam"s main port and
thus its export-driven economic expansion.
 
Port to Nowhere:  Build It and They Might Not Come
--------------------------------------------- -----
7. (SBU) While delays and underinvestment in land infrastructure
will postpone the onset of the new BRVT ports" peak operating
efficiency, the GVN is pushing ahead to build a two billion
dollar international transshipment port, "to rival Hong Kong and
Singapore" at Van Phong bay in central Khanh Hoa province. While
Van Phong bay is one of the world"s finest natural harbors --
it"s natural depth of 23 meters can accommodate the largest
container ships afloat today without resorting to expensive
dredging -- private sector shippers question GVN officials"
aspirations for creating a world-class transshipment facility
here, citing the lack of local industry that would create a
demand for cargo (the province"s cumulative FDI for the last 20
years totals $500 million), long distances to industrial and
population centers (450 km from HCMC and 1,300 km from Hanoi)
and poor road and rail connections. While GVN officials have
been besieged by foreign partners desiring to invest in the BRVT
port complex (three additional facilities are planned in
addition to the eight already under development there), they
have yet to find a foreign partner for the Van Phong project,
and recently decided to complete the first $700 million phase of
the project entirely with public funds.
 
8. (SBU) Comment: While the poverty and lack of industrial
development in Khanh Hoa province places the port on very shaky
economic ground, these are also the factors that apparently led
the GVN to decide to invest so heavily in such an out of the way
port.  The goals of the project appear to be rural economic
development and the geographical diversification of Vietnam"s
economic engine, which is currently heavily concentrated in and
around HCMC.  While these are understandable goals, the Khanh
Hoa port project has little chance of helping Vietnam"s near- to
mid-term economic prospects. End Comment.
 
HO CHI MIN 00000757  003.2 OF 003
 
 
 
USG Assistance Increases Transparency and Cooperation
--------------------------------------------- --------
9. (SBU) The U.S. Agency for International Development (USAID)
and the U.S. Trade and Development Agency (USTDA) have recently
funded studies designed to achieve higher efficiency in trade
transportation logistics. In late June, fourteen high-level GVN
decision makers, including ministerial and provincial level
infrastructure development officials, took part in a
USAID-funded study mission to Singapore and China to visit
counterpart officials to discuss high-efficiency, intermodal
transportation infrastructure development.  According to study
mission participants, this trip was the first time
representatives from diverse agencies such as the Office of
Government, the Ministries of Planning and Investment,
Transportation, and Finance as well as their provincial
counterparts sat together to discuss intermodal infrastructure
issues. Since then, private industry co-sponsors of the mission,
including Nike, Neptune Orient Lines and Maersk, tell us that
GVN officials have promised more transparency in the planning
process and for the first time offered private sector
stakeholders the opportunity to review GVN infrastructure master
plans before they are released.  Also in late June, the USTDA
awarded a $148,170 grant to Vinalines to adopt procedures and
technologies to more efficiently move containers in and out of
Vietnam, a project to be carried out in conjunction with SSA
Marine.
 
Comment
-------
10. (SBU) The challenges facing HCMC"s ports are serious enough
to represent a very real constraint on the continued expansion
of the Vietnamese economy.  At present, over half of the entire
GDP of Vietnam, as well as over 80 percent of its non-oil
exports by value, originate from the five provinces around HCMC
known appropriately as the "Southern Key Economic Zone." If
exports -- and imports of the inputs needed to produce them --
are significantly delayed or become more costly due to increases
in shipping surcharges associated with congestion, the entire
Vietnamese economy will suffer.  At present, the outlook is not
good.  While the Phu My bridge project is absolutely vital for
relieving chronic congestion and improving land-side access to
ports, there appears to be no way to avoid the looming
congestion that construction-related river traffic restrictions
will generate.  The lack of investment in land-side
infrastructure makes the next several years look even more
challenging.  At the same time, huge publicly-funded
developments projects such as the trans-shipment port Van Phong
Bay and five other deep-water port projects in relatively
undeveloped areas of central Vietnam are unlikely to make more
than a small contribution to growth while generating a large
public debt burden.
 
11. (SBU) Comment continued: Recent efforts to influence the
GVN"s thought processes on infrastructure planning appear to be
bearing fruit. The USAID-funded study mission to Singapore and
China appears to have opened up the official infrastructure
planning process to private sector stakeholders and opened lines
of communication between the "stove piped" ministries and
departments that are responsible for different aspects of
infrastructure development.  The USTDA grant to Vinamarine will
hopefully continue this positive trend.  End Comment.
FAIRFAX

 
  • Currently 3.5/5 Stars.
  • 1
  • 2
  • 3
  • 4
  • 5
 
 
 

 

 

Web Design for magazines

Close
Close
Close