and Coastal Shipping - Viet Nam Supply...

Opportunities, Limitations, and the Case for Investment

Vietnam’s Inland Waterways

and Coastal Shipping

Luis C. Blancas Transport & Logistics Specialist, The World Bank

Vietnam faces two key “twin” challenges: spur growth and protect

the environment

5.6%

7.4%

1990-2007 2008-2018

Vietnam: Historical and Projected

Average Annual Growth in Real GDP

Source: IMF; McElwee et al. (2010), The Social Dimensions of Adaptation to Climate Change in Vietnam, World Bank Discussion Papers Series, No.12, 2010; and Blancas and

El-Hifnawi (2013), Facilitating Trade Through Competitive, Low Carbon Transport: The Case for Vietnam’s Inland and Coastal Waterways, Washington DC: World Bank.

Top 5 Vietnam’s position in the list of

countries in the world likely to be

most affected by sea level rise

5%

Share of Vietnam’s land area that

would be permanently inundated

under a 1-meter sea level rise by the

end of the century (MONRE

projections through 2100 between

65 cm and 1m, depending on

severity of emissions)

25% Share of Vietnam’s population living

in coastal areas

Growth has slowed… …while climate change risks have intensified

Investments in the country’s waterways can

tackle both challenges simultaneously

It is difficult to overstate the importance of inland waterway transport

(IWT) for the everyday functioning of the Vietnamese economy

Source: Blancas and El-Hifnawi (2013), Facilitating Trade Through Competitive, Low Carbon Transport: The Case for Vietnam’s Inland and Coastal Waterways, Washington DC: World Bank;

tonnage share and volume data derived from VITRANSS-2.

Vast waterway resources… …that impact market and economic growth

15,000+ kilometers of navigational

inland waterways under management

3,000+ kilometers of coastline

adjacent to major east-west trades

2 major river deltas

46% 53% 48% captured by IWT alone

210 million tons of freight transported via IWT and coastal shipping per year

IWT tonnage share for key commodities:

73% 79% 69% 54% 30%

Coal Construction

materials Fertilizer Cement Rice

Waterborne Transport

Road Transport

1% Other modes

Inland waterway transport is both more economical and cleaner than

road transport

Source: Blancas and El-Hifnawi (2013), Facilitating Trade Through Competitive, Low Carbon Transport: The Case for Vietnam’s Inland and Coastal Waterways, Washington DC: World Bank.

Vietnam: Estimated transport costs

borne by carriers US$ per ton-km

0.02

0.18

15-ton truck 700-ton barge

Estimated CO2 emissions by mode Weighted average grams of CO2 per ton-km

40

71

110

Vietnam’s

current truck

fleet

Vietnam’s

current barge

fleet

Holland’s

barge fleet

Yet Vietnam’s inland waterway sector remains largely underfunded…


Insufficient capital expenditures… …coupled with insufficient maintenance

expenditures

Weighted Average Barge Size Deadweight tons

100

2,400

Netherlands,

Belgium and

Germany

Vietnam

50-60%

Estimated funding level of

maintenance need for

Vietnam’s core IWT network

…despite the presence of significant economies of ship size in IWT

Source: Paul Amos, international consultant.

0

20

40

60

80

100

120

140

160

180

500 750 1000 1250 1500 1750 2000 2250 2500 2750 3000 3250 3500

DWT

Estimated unit cost per ton-km index for self-propelled dry cargo barge, (1000 DWT barge = 100)

There is tangible evidence that carriers and end-users respond to

economies of ship size, both internationally…

1\ Germany, Belgium and the Netherlands.


Average DWT in Western European\1 IWT Barge Fleet, 1951-2008

…and right here in Vietnam

Source: Blancas and El-Hifnawi (2013), Facilitating Trade Through Competitive, Low Carbon Transport: The Case for Vietnam’s Inland and Coastal Waterways, Washington DC: World Bank; data

obtained from Vietnam Register.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2000 2005 20100%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2000 2005 2010

> 1,000 tons and >135 HP

700 to 1,000 tons and >135 HP

500 to 700 tons and >135 HP



50 to 200 tons and 50 to 135 HP



Vietnam: Breakdown of the National Barge Fleet by Barge Size

Vessel count share Available DWT capacity share

Barge size:

Over the next 20 years, Vietnam’s main inland waterway corridors are

expected to grow… but to also lose tonnage share to the roads


Main corridors of the Red River Delta


Main corridors of the Mekong River Delta


expected to grow… but to also lose tonnage share to the roads (cont.)

Source: Blancas and El-Hifnawi (2013), Facilitating Trade Through Competitive, Low Carbon Transport: The Case for Vietnam’s Inland and Coastal Waterways, Washington DC: World Bank; data

derived from VITRANSS-2.

Vietnam: Projected Long-term Tonnage Volume

Growth by Mode, 2008-2030 Average annual growth rate

3.6%

5.9%

3.3%

Roads Coastal shipping

IWT


expected to grow… but to also lose tonnage share to the roads (cont.)


We conducted a two-step quantitative analysis of the economic

desirability of investments in IWT and Coastal Shipping

Needs assessment

and strategy Modal Split Model

Cost-Benefit

Analysis

Analysis

Output

Interventions and

investment costs

Impact on:

Modal shift

Transport costs

Emissions levels

Economic rationale

NPV

eIRR

B/C ratio

2 1

On a preliminary basis, we find economically viable investments in the

IWT sector


Corridor 1 of the Mekong River Delta is the most heavily used IWT

corridor in the country—and the most congested


Cho Gao Canal

Emission reductions are projected to be significant contributors to the

economic viability of waterborne transport investments, despite modest

modal share gains


Key takeaways from modal share and benefit-cost analysis


Investments in the waterways can deliver attractive economic returns, but these

are heavily dependent on the expected intensity of future traffic.

Among all main inland waterway corridors, the upgrading of Corridor 1 of the

Mekong Delta—including the 29-kilometer Cho Gao Canal, the most pressing

bottleneck in the Mekong Delta network for flows to and from HCMC—yields the

most attractive economic returns to infrastructure improvements and should

be seen as a development priority.

Further upgrades to Corridor 1 of the Red River Delta appear to also be

economically viable.

Left to market forces, the potential for modal shift from roads to waterways in

Vietnam is limited (to within 1 to 3 percentage points over the long term).

This being the case, the majority of benefits associated with waterway infrastructure

upgrading stem from within-mode (i.e., IWT-specific) transport cost efficiency improvements.

Better maintenance of the waterways is expected to pay for itself.

Thank you!

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