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3 Overview of Vietnam's Transport Sector Vietnam National Transport Strategy Study (VITRANSS) Final Report Summary 3 OVERVIEW OF VIETNAM’S TRANSPORT SECTOR General The transport sector of Vietnam consists of the full range of transport modes: road, railway, inland waterway, coastal and sea shipping, and aviation. The transport sector grew significantly during the 1990s. Interprovincial traffic flow, for instance, increased between 1992 and 1999 by 2.1 and 2.9 times for passenger and goods, respectively. This was supported by the development of transport infrastructure during the 1990s and the effects of partial transport deregulation. In addition to general reforms, the transport sector saw extensive commercialization. Various new services commenced such as container transport on road, rail and inland waterway, bonded transport, ICD operation, scheduled liner operation even in coastal shipping, liberalized transit transport between Lao PDR, etc. The active investment in transport infrastructure with particular regard to the rehabilitation and upgrading of all modes, including urban and rural transport, has been continuing. There are 42 transport projects that are either ongoing or committed. Many are expected to be completed by 2000-2003. The projects have a total cost of US$ 5.7 billion. Of this amount, 72% is for roads followed by air (12%), ports (6%), railway (2%), inland waterway (2%), rural transport (3%), and urban transport (3%). At present though, Vietnam’s transport infrastructure and services are still weak and there are a number of areas that need immediate attention: infrastructure is still needed to fill the gaps and to meet the growing demand in many locations. Institutional arrangements and regulatory framework for transport services need to be further improved to facilitate the smooth flow of goods and people under a competitive environment. There is also a growing concern among the government and donors on how to establish a mechanism to promote development of the transport sector more effectively, to include, among others, building a sustainable infrastructure maintenance mechanism system, expanding own source of funds, strengthening operation and management capacity, balancing the investment among the regions as well as among modes, encouraging private sector participation, implementing institutional reforms (especially of SOEs), and modernizing infrastructure and management. Road and Road Transport Vietnam has a total road network of over 200,000 km as of 1999. National roads, however, account for merely 15,250 km, and provincial and district roads account for 17,449 km and 36,372 km, respectively. Village roads, comprising 131,000 km, are considered rural roads.9 The entire road network is relatively well developed 9 In addition to these roads, there are urban roads. 3-1 Vietnam National Transport Strategy Study (VITRANSS) Final Report Summary Figure 3.1-a National Transport Network: North to Central 3-2 Vietnam National Transport Strategy Study (VITRANSS) Final Report Summary Figure 3.1-b National Transport Network: Central to South 3-3 Vietnam National Transport Strategy Study (VITRANSS) Final Report Summary but poor in quality. Only 60% of national roads and 27% of provincial are paved. The poor condition of rural roads makes access to many villages difficult.10 Motorization level is still low but the number of vehicles has been growing rapidly.11 The main issues confronting the subsector include (1) Poor quality of service: highly competitive truck services are very cheap by world standards but service quality is low. Bus services are comparatively less competitive and some inefficient bus SOEs achieve poor cost recovery, (2) Poor primary/secondary roads: many roads are in poor condition because of the lack of maintenance systems, efficient organizations and working methods, and finance. Low design standards hinder operation of modern large trucks and buses, (3) Lack of tertiary roads: many roads effectively only exist on the map; (4) Lack of legal framework: there is no road act and implementing regulations, only a provisional decree defining the organization of VRA and many gaps in definitions of guidance documents and procedures for road management; (5) Inadequate road safety programs: government has yet to approve the strategy for road safety and define a concrete program of improvements. The cost of road accidents is huge – about 1-2% of GDP; (6) Weak infrastructure management, especially at provincial level: lack of capacity for planning, guiding, controlling and monitoring infrastructure. New road/bridge/pavement management systems are required. Cumbersome decision- making processes hinder improvement; (7) Lack of sustainable financing: insufficient funds are allocated to maintenance, there is weak monitoring of fund allocation and no reliable basis for forecasting future funds. Railway Transport Railway operates over 2,600 route-km, comprising seven main lines and several branch lines. The network is all of single track with 1,000 mm gauge, 1,435 mm gauge and dual-gauge sections. Vietnam’s railway subsector has two divisions: transport and infrastructure. Government is responsible for infrastructure and VR pays government 10% of its operating revenue as rent for the infrastructure. VR, an independent SOE under the MOT, has a total of about 42,000 employees including three transport unions (19,000 employees), 48 SOEs (22,600 employees involved in track maintenance, construction, etc.) and a project management unit, among others. In 1999, VR operated 65 passenger trains and 91 freight trains daily.12 It has 339 diesel locomotives, 750 passenger cars and 4,338 freight cars. VR transported 9.7 million passengers (2.5 billion passenger-km) in 1998 and 4.8 million tons (1.5 billion ton-km) in 1997. Tracks, tunnels, bridges, and signals are generally in poor condition but railways are relatively well operated technically. The Transport Division generated a revenue of VND 900-950 billion in 1996-1998, of which 10 Motor vehicles cannot access 606 out of 9,816 commune centers. 11 In 1996 the number of registered vehicles was 132,800 cars, 66,500 buses and 201,400 trucks. The number of motorcycles was 4,158,989. 12 There are five Hanoi-Saigon (taking 34 hours) and 12 Hanoi-Hai Phong (2 hours) passenger trains. 3-4 Vietnam National Transport Strategy Study (VITRANSS) Final Report Summary roughly a half came from passenger transport. Expenditure exceeded revenue slightly. The subsector faces the following issues: (1) Lack of market orientation: the railway does not have a proper legal basis, is mainly driven by production concerns and is not successful in finding new markets; (2) Low utilization of assets: track utilization is low. Locomotive utilization is very poor. Much equipment is unserviceable and staff productivity is low; (3) Huge backlog of infrastructure maintenance: past neglect means that much has to be spent on track, bridges and tunnels just to sustain operations in the short-term. Most of the track needs replacing in the next ten years; (4) Lack of modern business tools: the management cannot assess the costs and revenues of carrying particular traffic, assess alternative ways of utilizing assets, and predict the financial effects of alternative business strategies; (5) Inadequate financial/performance agreement between railway and government: the infrastructure payment is not directly related to costs incurred (variable maintenance costs and costs on different lines). There is no long-term agreement on investment, subsidy and operating/financial performance. Inland Waterway Transport About 8,000 km of rivers are used for inland waterway transport, of which 6,230 km are managed by the VIWA and the rest by local governments. Transport services are mainly provided by SOE operators in the north and by private operators in the south. Although inland waterways play an important role in the deltas, navigability is reduced due to a substantial dredging backlog and lack of navigational facilities, among other reasons. Moreover, facilities and equipment of river ports are mostly in poor condition. Other issues besetting the subsector are (1) Poor port services: ports are in poor condition, have few facilities and are badly managed; (2) Weak market mechanisms: there is still major traffic handled by SOE operators under long-term contracts which have not been awarded competitively; (3) Inadequate dredging and navigational aids: lack of lights means that safe nighttime navigation is impossible. Limited or uncertain draft constrains use of large vessels; (4) Lack of legal framework: there is no inland water act and implementing regulations. There is only a provisional decree defining the organization of VIWA, and many gaps in definitions of guidance documents and procedures for waterway management; (5) Weak infrastructure management: lack of capacity in planning, guidance, control and monitoring. Completely new management systems are required (data bases, maintenance, revenue collection etc.). There is no clear division of responsibility for management of sea-cum-river ways, between VINAMARINE and VIWA; (6) Lack of sustainable financing: more finance is required for maintenance but there is no mechanism yet for providing predictable levels of finance. 3-5 Vietnam National Transport Strategy Study (VITRANSS) Final Report Summary Maritime Transport Ports: Vietnam’s ports are owned and operated by the state sector except for a few.13 They are managed by VINAMARINE (Nghe Tinh, Quy Nhon, Nha Trang), Vietnam National Shipping Lines (VINALINES,
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