VIETNAM INFRASTRUCTURE DEVELOPMENT IN HO CHI MINH CITY MAY 2009 1 This document has been prepared by a team composed by Nam Tran Quang (parts II, III, IV, V and VI), Giang Van Nguyen (Part I, paragraphs 1 and 2), Massimiliano Bertollo (Part I, paragraph 3 and editorial support) and Marco Saladini (concept, editing and supervision). Thai Nguyen Chinh and Huong Phung Thi Thanh took care respectively of editing the final version and of researching some background information. The document has been finalized in May 2009 and it is part of the project “actions in favor of investments” carried out jointly by the office for industrial co-operation and relations with international organizations at the Italian Institute for Foreign Trade (IIFT or ICE) in Rome and the IIFT’s Vietnam country office. The aforementioned project is funded by the Italian Ministry of Economic Development, under the extraordinary promotion programme for Vietnam 2008-2010. ICE is thankful to all those who contributed, directly or indirectly, to the preparation of this document. Vietnam – Infrastructure development in Ho Chi Minh City 2 TABLE OF CONTENTS OVERVIEW ..................................................................................................................................4 PART I: HOW TO ENTER THE CONSTRUCTION MARKET IN VIETNAM...................................6 PART II: WHY HO CHI MINH CITY? ........................................................................................11 PART III PROJECTS OFFERING BUSINESS OPPORTUNITIES...............................................13 TRANSPORTATION...........................................................................................................................13 BRIDGES............................................................................................................................................27 PARKING LOTS .................................................................................................................................32 METRO ...............................................................................................................................................36 MONORAIL.........................................................................................................................................41 WATER ...............................................................................................................................................43 ENVIRONMENT AND WASTE MANAGEMENT ................................................................................48 POWER ..............................................................................................................................................53 PORTS................................................................................................................................................55 AIRPORT ............................................................................................................................................58 PART IV: UNIVERSITIES ..........................................................................................................59 PART V: RELEVANT AUTHORITIES.........................................................................................61 PART VI: CONCLUSIONS.........................................................................................................64 Vietnam – Infrastructure development in Ho Chi Minh City 3 OVERVIEW This report aims to facilitate the approach to business opportunities in the Vietnamese infrastructure sector by Italian companies. It focuses on Ho Chi Minh City, the biggest and most dynamic urban area in Vietnam, where plans for developing a wide range of modern infrastructure works have been designed and in some cases are already being implemented. In all infrastructure subsectors both needs and ambitions are very high, while existing facilities are overburdened. Furthermore, local authorities are very familiar with overseas development aid procedures and management of works carried out by foreign contractors and are adopting a fairly open approach to public-private partnerships. According to official estimates, the needs for investments in infrastructure projects amount to over Usd 23 billion, in the period from 2008 to 2020, with 22% of this amount coming from project finance schemes, 37% from People’s Committee own funds, 18% from Ministry of Transportation’s funds and 23% from Overseas development aid funds (see table below). Project finance funds’ needs would be concentrated in the period from 2008 to 2015, while in the following five years the budget of the People’s Committee would be the major source of funds. As tentative as they may be, given that they cover a very long period of time, these figures give a first overview of the substantial business opportunities which may arise in the future and pinpoint a strong business case for getting involved in them. Altogether, the city seems a very good starting point of entry for Italian companies, which nonetheless will have to face stiff competition and seek the right local partner, before bidding or investing. FINANCING NEEDS FOR MAJOR INFRASTRUCTURE PROJECTS IN HO CHI MINH CITY Projects performed/financed by Capital needed (billion VND) Total 08-20 (Vnd Total 08-20 (Usd bn.) bn.) 2008-10 2011-15 2016-20 Build, operate and transfer (Bot) 21.901 28.295 1.215 51.411 3.213 Build and transfer (Bt) 12.687 1.186 0 24.547 1.534 HCM People’s Committee 24.752 6.502 49.013 138.785 8.674 Ministry of Transportation 27.608 33.062 8.983 69.653 4.353 Overseas development aid 35.318 51.331 0 8.665 5.416 Bot or Bt 300 9 0 9 593 Total 122.566 120.385 59.211 293.070 23.783 Source: Ho Chi Minh City's People Committee Among recent developments, we could not help but notice a much deeper concern by the authorities with respect to transparency and compliance to procurement rules and best practices. This is much welcome news, given that some recent scandals had caused concern in the industry about the relevant administrations’ capacity to sustain the very high volume of activity in this area necessary to upgrade local facilities to current and projected needs. The lack of a stable presence by Italian companies interested in this sector contrasts with the active role played by other developed and developing countries’ companies, among which one can find French, German, United States, Malaysian, Thai and Chinese ones. To fill Italian companies’ knowledge gap with respect to business opportunities in infrastructure and to respectfully prompt them to act in its respect, the Italian Trade Commission, Ho Chi Minh City office, in agreement with guidelines approved by its Rome-based headquarter and the Ministry of Economic Development of the Italian government, is now carrying out a program of activities at the national level, of which this report forms an integral part. Data and opinions mentioned in the report are gathered from responsible persons of relevant authorized organizations, so they are expected to be reliable. Given that many projects are still at the design or initial implementation stages, changes are possible. Interested companies are advised to check with the Italian Trade Commission’s office for further assistance and information. Vietnam – Infrastructure development in Ho Chi Minh City 4 The report is divided into six main sections. Part I is about procedures for bidding for contracts and investing in public-private partnership infrastructure projects in Vietnam, with a special attention to those based on project finance schemes. Part II is about some key information about Ho Chi Minh city and why foreign companies investors should consider it in order to develop their business. Forty-five major projects and some master plans calling for investment and/or participation in bidding for contracts are listed in part III, with all basic details for each one of them, including desired investment form, total investment value, organizations responsible for those projects and their contact information. The list is an operational tool which can be used to learn and follow-up about business opportunities. When appropriate, we mention the multilateral development bank (e.g. The World Bank Group or the Asian Development Bank), which sponsored the project; in these cases, we advise the reader to visit the relevant websites to collect more information. Unfortunately, regarding power and airport projects, we could not collect detailed information from the relevant authorities. Part IV introduces some reputable universities in Ho Chi Minh City related to the study of civil engineering and urban planning and architecture, where young Vietnamese engineers are trained and research in these fields is carried out. Given their public service and/or utility nature, it goes without saying that in all cases the project originator or owner is a public body. Therefore the authorities relevant for investors and bidders alike are mentioned in part V. This list complements the project-specific contact information provided in part III. The conclusions are articulated in part VI. Vietnam – Infrastructure development in Ho Chi Minh City 5 PART I: HOW TO ENTER THE CONSTRUCTION MARKET IN VIETNAM 1. Introduction The Vietnamese construction market is one of the most vibrant ones in Asia and although it has been affected by the global recession in 2008-9, at the moment of writing this report i.e. in Spring 2009 demand was already showing signs of a comeback, both in prices and quantity.