VN infrastructure Q4 2013.pdf

Q4 2013www.businessmonitor.com

VIETNAMINFRASTRUCTURE REPORTINCLUDES 5-YEAR FORECASTS TO 2017

ISSN 1750-5593Published by:Business Monitor International

Vietnam Infrastructure Report Q42013INCLUDES 5-YEAR FORECASTS TO 2017

Part of BMI’s Industry Report & Forecasts Series

Published by: Business Monitor International

Copy deadline: August 2013

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CONTENTS

BMI Industry View ............................................................................................................... 7

SWOT .................................................................................................................................... 8Infrastructure SWOT .................................................................................................................................. 8

Industry Forecast .............................................................................................................. 10Construction And Infrastructure Forecast Scenario ........................................................................................ 10

Table: Table: Vietnam Construction And Infrastructure Industry Data, 2011-2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Table: Table: Vietnam Construction And Infrastructure Long-Term Forecasts, 2017-2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Non-Residential Sector: Demand And Credit ............................................................................................... 17

Residential Sector: Oversupply ................................................................................................................. 18

Infrastructure Sector: Financing ............................................................................................................... 19

Long-Term Still Positive .......................................................................................................................... 21

Transport Infrastructure - Outlook And Overview .......................................................................................... 22Table: Table: Vietnam Transport Infrastructure Industry Data, 2011-2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Table: Table: Vietnam Transport Infrastructure Long-Term Forecasts, 2017-2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Table: Title: Competitiveness Of Vietnam's Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Roads .................................................................................................................................................. 29

Railways .............................................................................................................................................. 32Table: Table: Vietnam Railway Corporation's Main Targets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Ports ................................................................................................................................................... 36

Airports ................................................................................................................................................ 39Table: Table: Major Projects - Transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Energy And Utilities Infrastructure - Outlook And Overview ............................................................................ 56Table: Vietnam Energy & Utilities Infrastructure Industry Data, 2011-2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Table: Vietnam Energy & Utilities Infrastructure Industry Long-Term Forecasts, 2017-2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Coal: Growing Foreign Participation ........................................................................................................ 61

Hydropower: Indispensible, But Problematic .............................................................................................. 64

Nuclear: Still In The Works ...................................................................................................................... 66

Geothermal: Making A Presence ............................................................................................................... 68

Water Treatment: Droughts Driving Demand For Services ............................................................................ 70Table: Table: Major Projects - Energy & Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

Residential/Non-Residential Building - Outlook And Overview ......................................................................... 84Table: Table: Vietnam Residential And Non-residential Building Industry Forecasts, 2011-2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

Table: Table: Vietnam Residential And Non-residential Building Long-Term Forecasts, 2017-2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

Non-Civil Building To Outperform ............................................................................................................ 88

Major Projects Table - Residential/Non-Residential Construction And Social Infrastructure ............................... 91Table: Table: Major Projects - Residential/Non-Residential Construction And Social Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

Industry Risk Reward Ratings .......................................................................................... 94Vietnam - Infrastructure Risk/Reward Ratings ............................................................................................... 94

Rewards .............................................................................................................................................. 94

Vietnam Infrastructure Report Q4 2013

© Business Monitor International

Risks .................................................................................................................................................. 95

Asia - Infrastructure Risk/Reward Ratings .................................................................................................... 96

Nearly Developed Markets: Affected By Export Environment .......................................................................... 97

Giants Of Asia: Sizeable Rewards, Sizeable Risks ....................................................................................... 100

South East Asia: Better Rewards ............................................................................................................. 101Table: Asia Infrastructure Risk Reward Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

Market Overview ............................................................................................................. 104Competitive Landscape ........................................................................................................................... 104

Table: Table: Vietnam EQS Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

Company Profile .............................................................................................................. 105Cavico Corporation ............................................................................................................................... 105

Electricity Vietnam Group (EVN) ............................................................................................................. 108

Global Industry Overview ................................................................................................ 112Industry Trend Analysis .......................................................................................................................... 112

Industry Trend Analysis .......................................................................................................................... 114

Methodology .................................................................................................................... 118Data Methodology ................................................................................................................................ 118

Definitions .......................................................................................................................................... 120

Capital Investment ............................................................................................................................... 120

Infrastructure Risk/Reward Ratings ......................................................................................................... 122Table: Infrastructure Business Environment Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123



BMI Industry View

BMI View: Vietnam's construction sector is still in an upward cyclical phase, as evidenced by a real

growth rate of 5.1% y-o-y in H113. Therefore, we are maintaining our view that the recovery in Vietnam's

construction sector could last well into 2013 - our real growth forecasts for the sector remain at 5.3% for

2013 - as monetary conditions are becoming increasingly conducive to construction. We have, however,

revised down our construction growth forecasts for 2014 from 6.4% to 5.6%. This is due to an increasingly

poor external environment for trade, an oversupply of housing and difficulties in securing project financing

within the infrastructure sector.

The major developments in Vietnam's infrastructure sector are:

■ In April 2013, Vietnam started the construction of the Lach Huyen international port in the northern cityof Haiphong. The port is scheduled to be built in two phases, with the first phase entailing theconstruction of port infrastructure, while the second phase will include the construction of two 750mwharves capable of handling 100,000-tonne container ships. The Vietnam Maritime Administration willmanage the first phase, involving an investment of more than VND18.6trn (US$885mn), while a jointventure of Vietnamese and Japanese enterprises will manage the second phase worth more thanVND6.57trn (US$315mn). The port, due for completion in 2016, will have modern cargo handlingequipment. It will be capable of handling container ships of up to 8,000 twenty-foot equivalent units.

■ In April 2013, local authorities in the Kien Giang province announced that the Kien Luong Power Centreproject is likely to be halted if the Tan Tao Group is unable to arrange capital required for investment,worth around US$6.7bn. The project was licensed five years ago. The first phase of the project, thethermal power plant Kien Luong 1, was expected to become operational by end-2013. Land clearance forthe construction of the Kien Luong 1 was obtained more than 18 months ago, but no progress on it wasmade owing to a lack of capital, according to ITACO, a subsidiary of Tan Tao Group.

■ In June 2013, India-based electric utility Tata Power secured a contract worth US$1.8bn from theVietnamese government. The contract is to develop two 660-megawatt (MW) coal-fired thermal powerplants in South Vietnam. The construction of the power project, called Long Phu 2, is likely to start in2019. This is believed to be the largest Indian investment in Vietnam and will support Tata Power's ownaspirations in South East Asia and India's Look East policy.

■ In July 2013, the Vietnamese Ministry of Transport issued a request inviting applications for qualificationfor a second investor for the US$757mn Dau Giay-Phan Thiet Expressway Project. Under the project, thesuccessful bidders would design, finance, construct, operate and maintain a four-lane expressway andallied structures from Dau Giay in the Dong Nai province to Phan Thiet in the Binh Thuan provincethrough a special purpose vehicle (SPV). The SPV would be formed between Bitexco, which has beenappointed as the first investor for the project, and the second investor. The first investor will have a shareof 60% in the project and the other investor 40%. However, the first investor may dilute its share infavour of the second investor during the construction.



SWOT

Infrastructure SWOT

Vietnam Infrastructure SWOT Analysis

Strengths ■ The country's strong project pipeline will sustain growth in the sector and add

capabilities for further development, particularly as transport structure improves.

■ Rapid growth has attracted investment from many of the world's largest infrastructure

companies.

■ The poor state of infrastructure in the country provides easy wins for foreign investors

and construction companies.

■ A hike in electricity prices should stimulate investment in the energy sector.

Weaknesses ■ State-owned companies dominate the infrastructure market. This is especially the

case in the utilities sector, where Electricity of Vietnam (EVN)'s dominant position has

deterred investors.

■ Vietnam relies heavily on foreign imports and it is estimated that the country requires

2mn tonnes of steel billets to be imported a year.

■ The country presents a relatively risky environment for major infrastructure projects,

especially in relation to project finance operations.

■ Power outages are occurring daily in Vietnam, highlighting the country's severe

electricity problems.

Opportunities ■ Demand for urban infrastructure projects in transport and sanitation over our 10-year

forecast period to 2022 will rise, in tandem with urbanisation.

■ Severe drought is driving demand in electricity generation sources besides

hydropower, such as gas-fired and wind-powered plants.

■ If the government's attempts to cool the overheating economy are successful,

Vietnam will see a more stable growth trajectory over the long term.



Vietnam Infrastructure SWOT Analysis - Continued

Threats ■ The Vietnamese government's shift in focus - from driving economic growth towards

fighting inflation and addressing macroeconomic imbalances - is expected to have a

cooling effect.

■ Public spending cuts and tighter credit conditions are likely to keep economic activity

depressed.

■ Lack of energy infrastructure holds downside risk to nearly all projects and presents a

significant bottleneck to development.

■ Should any significant events occur to highlight Vietnam's structural difficulties,

uncertainty and downside risks in the business environment could have a negative

impact.

■ The EU predicts Vietnam will not become a true market economy until 2018.



Industry Forecast

Construction And Infrastructure Forecast Scenario

Table: Table: Vietnam Construction And Infrastructure Industry Data, 2011-2016

2011 2012e 2013f 2014f 2015f 2016f

Constructionindustry value,VNDbn 162,620.0 179,301.0 200,466.4 223,396.2 248,741.5 276,128.2

Constructionindustry value, US$bn 7.9 8.6 9.6 10.9 12.2 13.7

Constructionindustry, realgrowth, % y-o-y -1.0 2.1 5.3 5.6 6.1 6.0

Constructionindustry, % ofGDP 6.4 6.1 6.0 6.0 5.9 5.9

Total capitalinvestment, VNDbn 745,494.0 849,629.1 944,668.6 1,047,433.5 1,172,978.8 1,319,073.3

Total capitalinvestment, US$bn 36.1 40.7 45.2 50.9 57.7 65.6

Total capitalinvestment, % ofGDP 29.4 28.8 28.5 28.1 28.0 28.0

Capital investmentper capita, US$ 406.5 453.9 498.6 556.3 624.1 703.4

Real capitalinvestment growth,% y-o-y -10.4 4.3 4.4 4.8 6.4 7.1

Constructionindustryemployment, '000 2,687.2 2,731.3 2,845.3 2,972.9 3,118.6 3,271.1

Constructionindustryemployment, % y-o-y -0.8 1.6 4.2 4.5 4.9 4.9

Total workforce,'000 62,824.3 63,694.6 64,449.1 65,116.8 65,719.2 66,294.0

Constructionindustryemployees as % oftotal labour force 4.3 4.3 4.4 4.6 4.7 4.9

InfrastructureIndustry Value As 32.7 32.7 32.3 32.0 31.7 31.3



Table: Vietnam Construction And Infrastructure Industry Data, 2011-2016 - Continued

2011 2012e 2013f 2014f 2015f 2016f% of TotalConstruction

InfrastructureIndustry Value,VNDbn 53,227.4 58,653.2 64,758.5 71,519.5 78,729.6 86,497.8

InfrastructureIndustry Value, US$bn 2.6 2.8 3.1 3.5 3.9 4.3

InfrastructureIndustry Value RealGrowth (%) -1.7 0.9 3.9 4.6 4.8 4.9

InfrastructureIndustry Value as% of GDP 2.1 2.0 2.0 1.9 1.9 1.8

Residential andNon-residentialBuilding IndustryValue As % ofTotalConstruction 67.3 67.3 67.7 68.0 68.3 68.7

Residential andNon-residentialBuilding IndustryValue, VNDbn 109,392.6 120,647.8 135,707.8 151,876.7 170,011.8 189,630.4

Residential andNon-residentialBuilding IndustryValue, US$bn 5.3 5.8 6.5 7.4 8.4 9.4

Residential andNon-residentialBuilding IndustryValue Real Growth(%) -1.9 1.0 6.0 6.1 6.7 6.5

Residential andNon-residentialBuilding IndustryValue as % of GDP 4.3 4.1 4.1 4.1 4.1 4.0

Cementproduction(includingimported clinker),tonnes 45,837,499.7 47,694,500.4 49,674,863.4 51,930,004.4 55,080,157.6 58,798,585.4

Cementproduction(including importedclinker), tonnes, %y-o-y -9.8 4.1 4.2 4.5 6.1 6.8

Cementconsumption,tonnes 45,223,300.9 47,012,275.1 48,914,913.9 51,082,000.8 54,131,051.8 57,737,007.6



Table: Vietnam Construction And Infrastructure Industry Data, 2011-2016 - Continued

2011 2012e 2013f 2014f 2015f 2016f

Cementconsumption,tonnes, % y-o-y -8.9 4.0 4.0 4.4 6.0 6.7

Cement netexports, tonnes 614,198.9 682,225.3 759,949.5 848,003.6 949,105.9 1,061,577.8

Cement netexports, tonnes, %y-o-y -48.1 11.1 11.4 11.6 11.9 11.9

e/f = BMI estimate/forecast. Source: Vietnam General Statistics Office, BMI

Table: Table: Vietnam Construction And Infrastructure Long-Term Forecasts, 2017-2022

2017f 2018f 2019f 2020f 2021f 2022f

Constructionindustry value,VNDbn 306,297.1 339,497.7 375,120.3 413,679.0 456,190.0 503,058.3

Constructionindustry value,US$bn 15.3 17.0 18.8 20.7 22.8 25.2

Constructionindustry, realgrowth, % y-o-y 5.9 5.8 5.5 5.3 5.3 5.3

Constructionindustry, % ofGDP 5.8 5.7 5.6 5.5 5.5 5.4

Total capitalinvestment,VNDbn 1,488,904.0 1,657,150.2 1,830,488.1 2,018,113.1 2,224,969.7 2,453,029.1

Total capitalinvestment, US$bn 74.4 82.9 91.5 100.9 111.2 122.7

Total capitalinvestment, %of GDP 28.1 27.9 27.5 27.0 26.6 26.2

Capitalinvestment percapita, US$ 791.0 873.1 956.9 1,047.2 1,146.6 1,255.9

Real capitalinvestmentgrowth, % y-o-y 7.5 6.0 5.2 5.0 5.0 5.0

Constructionindustry 3,430.5 3,596.8 3,762.4 3,930.3 4,107.0 4,292.9



Table: Vietnam Construction And Infrastructure Long-Term Forecasts, 2017-2022 - Continued

2017f 2018f 2019f 2020f 2021f 2022femployment,'000

Constructionindustryemployment, %y-o-y 4.9 4.8 4.6 4.5 4.5 4.5

Total workforce,'000 66,773.8 67,197.2 67,607.8 68,026.5 68,431.5 68,849.3

Constructionindustryemployees as% of totallabour force 5.1 5.4 5.6 5.8 6.0 6.2

InfrastructureIndustry ValueAs % of TotalConstruction 31.0 30.6 30.3 30.0 29.7 29.4

InfrastructureIndustry Value,VNDbn 94,854.6 103,917.5 113,608.0 124,072.5 135,496.0 147,949.9

InfrastructureIndustry Value,US$bn 4.7 5.2 5.7 6.2 6.8 7.4

InfrastructureIndustry ValueReal Growth (%) 4.7 4.6 4.3 4.2 4.2 4.2

InfrastructureIndustry Valueas % of GDP 1.8 1.7 1.7 1.7 1.6 1.6

Residential andNon-residentialBuildingIndustry ValueAs % of TotalConstruction 69.0 69.4 69.7 70.0 70.3 70.6

Residential andNon-residentialBuildingIndustry Value,VNDbn 211,442.4 235,580.2 261,512.2 289,606.5 320,694.0 355,108.5

Residential andNon-residentialBuildingIndustry Value,US$bn 10.6 11.8 13.1 14.5 16.0 17.8

Residential andNon-residentialBuildingIndustry ValueReal Growth (%) 6.5 6.4 6.0 5.7 5.7 5.7



Table: Vietnam Construction And Infrastructure Long-Term Forecasts, 2017-2022 - Continued

2017f 2018f 2019f 2020f 2021f 2022f

Residential andNon-residentialBuildingIndustry Valueas % of GDP 4.0 4.0 3.9 3.9 3.8 3.8

Cementproduction(includingimportedclinker), tonnes 63,005,497.9 66,623,381.2 69,946,160.7 73,307,146.5 76,835,758.5 80,540,503.2

Cementproduction(includingimportedclinker), tonnes,% y-o-y 7.2 5.7 5.0 4.8 4.8 4.8

Cementconsumption,tonnes 61,820,438.3 65,303,823.2 68,492,531.8 71,710,598.4 75,193,311.6 78,803,973.1

Cementconsumption,tonnes, % y-o-y 7.1 5.6 4.9 4.7 4.9 4.8

Cement netexports, tonnes 1,185,059.6 1,319,557.9 1,453,628.8 1,596,548.0 1,642,446.8 1,736,530.1

Cement netexports, tonnes,% y-o-y 11.6 11.3 10.2 9.8 2.9 5.7

f = BMI forecast. Source: Vietnam General Statistics Office, BMI

BMI View: Vietnam's construction sector is still in an upward cyclical phase, as evidenced by a real

growth rate of 5.1% year-on-year in H113. Therefore, we are maintaining our view that the recovery in

Vietnam's construction sector could last well into 2013 - our real growth forecasts for the sector remain at

5.3% for 2013 - as monetary conditions are becoming increasingly conducive to construction. We have,

however, revised down our construction growth forecasts for 2014 from 6.4% to 5.6%. This is due to an

increasingly poor external environment for trade, an oversupply of housing and difficulties in securing

project financing within the infrastructure sector.

In line with our view, construction activity in Vietnam continues to recover in 2013. Latest data from the

Vietnam General Statistics Office reveals that real growth for the construction sector grew by 5.1% year-on-

year (y-o-y) in H113, faster than the 4.8% in Q113 and much higher than the -5.4% in H112. We do,



however, note that growth in Q113 is still significantly slower than the 12.2% growth in Q412, which could

suggest that recovery in construction might not be as forthcoming as previously expected.

On The Path To Recovery

Vietnam - Quarterly Construction Industry Value, VNDbn

Source: General Statistics Office, State Bank of Vietnam

Given this H113 performance and our belief that this recovery in Vietnam's construction sector will last

well into 2013, we are content to maintain our real growth forecasts for Vietnam's construction sector at

5.3% in 2013.



Not Like Before

Vietnam Construction (And Sum-Components) Industry Value Real Growth Forecasts

f= BMI forecast. Source: General Statistics Office, State Bank of Vietnam, BMI

This relatively optimistic outlook for Vietnam's construction sector is primarily driven by the country's

conducive monetary conditions. The government is seeking to boost economic growth and brought the

policy rate down to 7.00% in May 2013; the lowest policy rate since December 2009. Given the lagged

impact of monetary easing, this means that the positive implications of this easing will only start to translate

in H213. Furthermore, inflation continues to remain relatively benign, leading us to expect the Vietnamese

central bank to keep monetary conditions conducive throughout 2013 and into 2014 - we are forecasting the

benchmark interest rate to remain at 7.00% at the end of 2013 and 2014. This should be favourable for

construction activity as Vietnamese companies would benefit from a lower cost of capital - making them

more inclined to take up new projects or carry out capital-intensive construction works - while municipal

and provincial governments could also find the necessary financing for their infrastructure plans.



Monetary Conditions Conducive

Vietnam - Policy Rate, % & Headline CPI - Housing & Construction Materials, % y-o-y

Source: General Statistics Office, State Bank of Vietnam

We have, however, revised down our construction growth forecasts in 2014 from 6.4% to 5.6%. This is

because several issues continue to dampen the demand for residential/non-residential buildings and

infrastructure.

Non-Residential Sector: Demand And Credit

We have revised down our real growth forecasts for Vietnam's buildings sector to 6.1% in 2014 (previously

7.3%). This decline will take place in both the residential and non-residential building sectors. We expect

non-residential building activity in H213 and 2014 to be dampened by the lack of trade activity. The latest

reading on the HSBC Purchasing Managers' Index showed that the recovery experienced by Vietnam's

manufacturing sector in March and April has stalled, with manufacturing sector growth reaching contraction

territory in May and June. We believe that the manufacturing sector could continue to perform poorly in

H213 as the cyclical upturn in China's economy is already starting to show signs of losing steam, with latest

economic data on China providing evidence that the mainland economy is on course for a growth relapse in

H213 (see 'Core Views Reiterated Following Q213 Growth Print', July 15). Given this poor business

climate, companies are likely to maintain a cautious outlook and scale back on fixed investment.



Stalled Lending And Poor External Demand

Vietnam - Purchasing Managers' Index

Source: BMI, Markit, HSBC

In addition, Vietnamese banks remain saddled with bad debts, prompting them to be cautious towards

extending credit to businesses. According to the State Bank of Vietnam, total bad debts by the entire

banking sector accounted for 4.7% of total outstanding debts, which is estimated to be VN400trn in May

2013. This lack of credit from local banks has lead to failures by several investors in implementing their

non-residential building projects. For example, in June, Vietnamese media reported that local authorities

had cancelled 93 projects on Phu Quoc Island - including a EUR2.6bn luxury resort project proposed by

Swiss Trustee Group - because the investors of these projects were unable to find sufficient financing.

Although the State Bank of Vietnam has established a debt management agency in early-July to clean up the

build-up of bad debt across the banking sector (see 'All Eyes On New Debt Management Company', June

28), it remains to be seen if the clean-up and other reforms to restructure the banking sector will be

implemented in a timely manner. Therefore, even though interest rates in Vietnam are at a record-low,

businesses may still be unable to secure financing for their fixed investment plans.

Residential Sector: Oversupply



We also expect residential building activity to be poor over the near term. This is because the residential

sector in Vietnam is still suffering from significant oversupply. According to a report from the Vietnam

Ministry of Construction, 34,000 apartments and 15,300 houses across 55 provinces and cities were unsold

at the end of March 2013, and they had an estimated combined value of around VND125trn. Although there

is still significant demand for low-cost housing, supply in other housing segments is still outstripping

demand. This has created a challenging market for developers to sell their completed properties, making it

unlikely for them to take on new residential projects.

Furthermore, several of these local developers are in the red, deterring foreign investors and Vietnamese

banks from releasing credit to them. At present, some of the developers are reducing their inventory by

converting their housing projects into low-cost housing. The Vietnamese government has also approved a

VND30trn stimulus package in June 2013 to provide loans for purchasing and completing low-cost housing,

though the impact of the stimulus package is expected to be limited given its relatively small scale.

Infrastructure Sector: Financing

We have maintained our real growth forecasts for Vietnam's infrastructure sector at 4.6% in 2014. We

continue to expect the sector to face difficulties in securing project financing and this is due to three factors:

Debt Burdens: The Vietnamese government is heavily burdened by the debts of its state-owned enterprises

(SOEs), and the need to repay this debt is limiting the government's ability to finance infrastructure projects.

We have also earlier highlighted the issues with bad debt among the Vietnamese banking sector, which

should also affect access to domestic financing for infrastructure projects.

Project Viability: We believe that the uncertainties surrounding the outlook for the global economy and the

lack of financial viability seen in much existing infrastructure in Vietnam will dampen the demand for

riskier assets such as infrastructure projects in the country.



Limited By Debt

Vietnam - Capital Investment By State Budget, VNDbn And % chg y-o-y

Source: Bloomberg, BMI, General Statistics Office of Vietnam

Europe Difficulties: With European banks - a major source of finance for Vietnamese infrastructure - set to

face difficult economic conditions and stricter capital controls over the coming years, funds from these

sources could decline as European banks look to strengthen their capital ratios by calling back higher-risk

loans and imposing curbs on issuing new loans.

Evidence of these finance shortages continues to emerge among large-scale infrastructure projects. In April

2013, local authorities in the Kien Giang province announce that the US$6.7bn Kien Luong Power Centre

project will likely be halted if ITACO, a subsidiary of Tan Tao Group, is unable to arrange the capital

required for the project. Land clearance for the first phase of the project, thermal power plant Kien Luong 1,

was obtained more than 18 months ago, but no progress on it was made owing to a lack of capital,

according to ITACO.



In Decline

Vietnam - Foreign Claims From European Banks, US$mn And % chg y-o-y

Source: Bank For International Settlements (July 2013), BMI

However, we highlight that financing from foreign sources has become increasingly forthcoming and this

represents an upside to our forecasts. According to figures published by the Ministry of Planning and

Investment (MPI), foreign direct investment (FDI) inflows into Vietnam grew by 16.0% y-o-y to US

$10.5bn in H113, while FDI in new projects was worth US$5.8bn, an increase of 3.7% over the same period

in 2012. We believe these FDI inflows are from Japanese sources. In March 2013, Japan and Vietnam

exchanged a diplomatic note which stated that Japan will finance 12 projects worth a combined US$2.2bn,

mostly in transport infrastructure. Meanwhile, the US$1.2bn Lach Huyen port project, a project financed by

the Japanese government and Japanese companies, started construction works in April 2013.

Long-Term Still Positive

Looking beyond 2014, we continue to believe that the construction and infrastructure sectors in Vietnam

should register decent growth rates, though not at the levels seen in previous years. We are forecasting real

growth for the construction and infrastructure sectors to average 6.0% and 4.8% per annum between 2015

and 2017 respectively.



The Vietnamese government is currently carrying out reforms to address some of the fault-lines in the

country's business environment for infrastructure, such as the privatisation of several SOEs (a leading factor

for investment wastages), improving access to credit from domestic banks (a leading factor for excessive

allocation of resources in certain sectors) and high electricity subsidies (a leading factor for insufficient

public fixed investment). These measures could alleviate some of the government's debt issues and provide

financing for construction and infrastructure projects. Between 2012 and March 2013, 16 SOEs were

equitised, five were merged, three were sold and three were transformed into one-member limited liability

companies.

Meanwhile, we expect Vietnam's economy to grow relatively robustly over the long term - we are

forecasting real growth for Vietnam's economy to average 6.9% per annum between 2013 and 2017 - and

this should also drive construction activity in the country. Growing industrialisation will put demand-side

pressure on the electricity supply and transportation systems, while rising incomes among Vietnamese

consumers will drive demand for housing and commercial construction projects such as malls and hotel

development. The robust economic activity should also boost the financial viability of existing

infrastructure, making it more attractive for investors to finance new projects.

The Vietnamese government is also trying to secure funding for infrastructure projects by promoting the use

of public-private partnerships (PPPs). In July 2013, the Vietnamese Ministry of Transport issued a request

inviting investors to develop the US$757mn Dau Giay-Phan Thiet expressway with Vietnam's Bitexco

under a PPP framework. The country is also reviewing its PPP regulations, though progress has been slow.

Nevertheless, if properly developed, this could be help to offset the decline in credit from European banks.

Lastly, Vietnam continues to exhibit significant potential for growth in construction and infrastructure - a

youthful population, large consumption base, large unexploited deposits of bauxite and high infrastructure

deficit are just some supportive factors that spring to mind.

Transport Infrastructure - Outlook And Overview

Table: Table: Vietnam Transport Infrastructure Industry Data, 2011-2016

2011 2012 2013f 2014f 2015f 2016f

TransportInfrastructure IndustryValue As % Of TotalInfrastructure 68.6 65.5 64.9 64.7 64.6 64.4

Transport InfrastructureIndustry Value, VNDbn 36,496.3 38,444.5 42,051.2 46,241.7 50,828.7 55,666.1



Table: Vietnam Transport Infrastructure Industry Data, 2011-2016 - Continued

2011 2012 2013f 2014f 2015f 2016f

Transport InfrastructureIndustry Value, US$bn 1.8 1.8 2.0 2.2 2.5 2.8

Transport InfrastructureIndustry Value RealGrowth (%) -6.0 -3.9 2.9 4.2 4.7 4.5

Transport InfrastructureIndustry Value As % OfTotal Construction (%) 22.4 21.4 21.0 20.7 20.4 20.2

Roads and BridgesInfrastructure IndustryValue As % ofTransport Infrastructure 51.5 50.1 50.7 51.3 51.8 52.4

Roads and BridgesInfrastructure IndustryValue, VNDbn 18,779.8 19,274.3 21,307.5 23,699.5 26,337.3 29,148.4

Roads and BridgesInfrastructure IndustryValue, US$bn 0.9 0.9 1.0 1.2 1.3 1.5

Roads and BridgesInfrastructure IndustryValue Real Growth (%) 12.5 -6.6 4.0 5.4 5.9 5.7

Roads and BridgesInfrastructure IndustryAs % of TotalInfrastructure 35.3 32.9 32.9 33.1 33.5 33.7

Roads and BridgesInfrastructure IndustryAs % of TotalConstruction 11.5 10.7 10.6 10.6 10.6 10.6

Railways InfrastructureIndustry Value As % ofTransport Infrastructure 20.7 24.3 24.1 23.7 23.4 23.1

Railways InfrastructureIndustry Value, VNDbn 7,551.3 9,343.3 10,136.0 10,976.5 11,882.6 12,839.7

Railways InfrastructureIndustry Value, US$bn 0.4 0.4 0.5 0.5 0.6 0.6

Railways InfrastructureIndustry Value RealGrowth (%) -8.2 14.5 2.0 2.5 3.0 3.1

Railways InfrastructureIndustry As % of TotalInfrastructure 14.2 15.9 15.7 15.3 15.1 14.8

Railways InfrastructureIndustry As % of TotalConstruction 4.6 5.2 5.1 4.9 4.8 4.6



Table: Vietnam Transport Infrastructure Industry Data, 2011-2016 - Continued

2011 2012 2013f 2014f 2015f 2016f

Airports InfrastructureIndustry Value As % ofTransport Infrastructure 11.7 9.5 9.1 8.9 8.7 8.5

Airports InfrastructureIndustry Value, VNDbn 4,257.5 3,643.8 3,832.1 4,125.3 4,405.0 4,707.7

Airports InfrastructureIndustry Value, US$bn 0.2 0.2 0.2 0.2 0.2 0.2

Airports InfrastructureIndustry Value RealGrowth (%) -45.3 -23.7 -1.3 1.9 1.5 1.9

Airports InfrastructureIndustry As % of TotalInfrastructure 8.0 6.2 5.9 5.8 5.6 5.4

Airports InfrastructureIndustry As % of TotalConstruction 2.6 2.0 1.9 1.8 1.8 1.7

Ports Harbours andWaterwaysInfrastructure IndustryValue As % ofTransport Infrastructure 16.2 16.1 16.1 16.1 16.1 16.1

Ports Harbours andWaterwaysInfrastructure IndustryValue, VNDbn 5,907.6 6,183.1 6,775.6 7,440.4 8,203.8 8,970.4

Ports Harbours andWaterwaysInfrastructure IndustryValue, US$bn 0.3 0.3 0.3 0.4 0.4 0.4

Ports Harbours andWaterwaysInfrastructure IndustryValue Real Growth (%) -10.1 -4.6 3.1 4.0 5.0 4.3

Ports Harbours andWaterwaysInfrastructure IndustryAs % of TotalInfrastructure 11.1 10.5 10.5 10.4 10.4 10.4

Ports Harbours andWaterwaysInfrastructure IndustryAs % of TotalConstruction 3.6 3.4 3.4 3.3 3.3 3.2




Table: Table: Vietnam Transport Infrastructure Long-Term Forecasts, 2017-2022

2017f 2018f 2019f 2020f 2021f 2022f

TransportInfrastructure IndustryValue As % Of TotalInfrastructure 64.1 63.8 63.5 63.2 62.8 62.5

Transport InfrastructureIndustry Value, VNDbn 60,923.9 66,425.5 72,358.9 78,679.5 85,399.1 92,616.1

Transport InfrastructureIndustry Value, US$bn 3.0 3.3 3.6 3.9 4.3 4.6

Transport InfrastructureIndustry Value RealGrowth (%) 4.1 4.0 3.9 3.7 3.5 3.5

Transport InfrastructureIndustry Value As % OfTotal Construction (%) 19.8 19.4 19.1 18.8 18.5 18.2

Roads and BridgesInfrastructure IndustryValue As % ofTransport Infrastructure 52.6 52.9 53.0 53.2 53.3 53.5

Roads and BridgesInfrastructure IndustryValue, VNDbn 31,966.1 35,011.3 38,214.1 41,621.4 45,326.0 49,353.9

Roads and BridgesInfrastructure IndustryValue, US$bn 1.6 1.8 1.9 2.1 2.3 2.5

Roads and BridgesInfrastructure IndustryValue Real Growth (%) 4.7 4.5 4.1 3.9 3.9 3.9

Roads and BridgesInfrastructure IndustryAs % of TotalInfrastructure 33.7 33.7 33.6 33.5 33.5 33.4

Roads and BridgesInfrastructure IndustryAs % of TotalConstruction 10.4 10.3 10.2 10.1 9.9 9.8

Railways InfrastructureIndustry Value As % ofTransport Infrastructure 22.9 22.8 22.7 22.6 22.6 22.6

Railways InfrastructureIndustry Value, VNDbn 13,908.5 15,081.4 16,345.4 17,723.2 19,219.8 20,824.9

Railways InfrastructureIndustry Value, US$bn 0.7 0.8 0.8 0.9 1.0 1.0

Railways InfrastructureIndustry Value RealGrowth (%) 3.3 3.4 3.4 3.4 3.4 3.4



Table: Vietnam Transport Infrastructure Long-Term Forecasts, 2017-2022 - Continued

2017f 2018f 2019f 2020f 2021f 2022f

Railways InfrastructureIndustry As % of TotalInfrastructure 14.7 14.5 14.4 14.3 14.2 14.1

Railways InfrastructureIndustry As % of TotalConstruction 4.5 4.4 4.4 4.3 4.2 4.1

Airports InfrastructureIndustry Value As % ofTransport Infrastructure 8.4 8.3 8.3 8.3 8.3 8.4

Airports InfrastructureIndustry Value, VNDbn 5,092.0 5,518.7 5,992.1 6,512.5 7,083.7 7,714.7

Airports InfrastructureIndustry Value, US$bn 0.3 0.3 0.3 0.3 0.4 0.4

Airports InfrastructureIndustry Value RealGrowth (%) 3.2 3.4 3.6 3.7 3.8 3.9

Airports InfrastructureIndustry As % of TotalInfrastructure 5.4 5.3 5.3 5.2 5.2 5.2

Airports InfrastructureIndustry As % of TotalConstruction 1.7 1.6 1.6 1.6 1.6 1.5

Ports Harbours andWaterwaysInfrastructure IndustryValue As % ofTransport Infrastructure 16.1 16.0 16.0 15.9 15.7 15.6

Ports Harbours andWaterwaysInfrastructure IndustryValue, VNDbn 9,786.6 10,627.2 11,512.1 12,419.0 13,375.9 14,386.1

Ports Harbours andWaterwaysInfrastructure IndustryValue, US$bn 0.5 0.5 0.6 0.6 0.7 0.7

Ports Harbours andWaterwaysInfrastructure IndustryValue Real Growth (%) 4.1 3.6 3.3 2.9 2.7 2.6

Ports Harbours andWaterwaysInfrastructure IndustryAs % of TotalInfrastructure 10.3 10.2 10.1 10.0 9.9 9.7



Table: Vietnam Transport Infrastructure Long-Term Forecasts, 2017-2022 - Continued

2017f 2018f 2019f 2020f 2021f 2022f

Ports Harbours andWaterwaysInfrastructure IndustryAs % of TotalConstruction 3.2 3.1 3.1 3.0 2.9 2.9


The transport sector forms the majority of infrastructure investment in Vietnam throughout our 10-year

forecast period, forecast to account for 60-65% in 2022. Vietnam still suffers from a significant deficit in

transportation infrastructure and we believe the Vietnamese government will continue to develop this sector

over the medium term. This is reflected in our forecast for transport infrastructure industry value, which is

expected to grow by an average of 4.1% year-on-year (y-o-y) between 2013 and 2017.

Table: Title: Competitiveness Of Vietnam's Infrastructure

Rank/133 in

2009/10*Rank/139 in

2010/11**Rank/142 in

2011/12***Rank/144 in2012/13****

Quality of Roads 102 117 123 120

Quality of RailroadInfrastructure 58 59 71 68

Quality of Port Infrastructure 99 97 111 113

Quality of Air TransportInfrastructure 84 88 95 94

Quality of OverallInfrastructure 111 123 123 119

*Rank out of 133 countries in 2009/10. ** Rank out of 139 countries in 2010/11. *** Rank out of 142 countries in 2011/12.****Rank out of 144 countries in 2012/13. Source: World Economic Forum, Global Competitiveness Report 2009/10,2010/11, 2011/12 and 2012/13



Roads Dominant

Transport Infrastructure Value By Industry, VNDbn

e/f = BMI estimate/forecast, Source: Vietnam General Statistics Office, Local news sources, industry sources,

BMI (Major Projects Database)



Roads

Within the transport infrastructure sector, the roads and bridges sub-sector leads in terms of contributions to

total transport infrastructure industry value, accounting for 50% of total value in 2013. Although most of

Vietnam's national road network is paved (only 26%, or 46,650km out of 180,549km, is unpaved as of

2008), surveys indicated that approximately 40% of the network is in a poor or very poor condition and will

require substantial investment to reach a maintainable condition. Vietnam's Ministry of Transport and

Communications has estimated that the country will require close to US$60bn in the period up to 2020 to

fund new road infrastructure projects. Reaching this investment target will be crucial to Vietnam's long-

term economic wellbeing, as roads facilitate the transport of most freight within the country, with a market

share of around 60% of domestic cargo. Combined with increased traffic levels in Vietnam's urban areas

and growing trade volumes to and from the country, there is a need for roads.

Over the past quarter, there have been several announcements regarding new road projects being planned -

such as the Phap Van-Cau Gie highway build-operate-transfer (BOT) project - or being developed in

Vietnam - such as the expansion of the NH-1A Cam Ranh City-Cam Lam District (Khanh Hoa province)

BOT project, the Danang-Quang Ngai expressway and the Ho Chi Minh City (HCMC)-Long Thanh-Dau

Giay Expressway.

However, there are still ongoing concerns about the viability of toll roads in Vietnam. In July 2012, the

Vietnamese government accepted a proposal from the Ministry of Finance to reduce toll fees for trucks

using the HCMC-Trung Luong expressway by 25-30%. The approval was given on July 4 2012 and would

allow the finance ministry to finalise the details and determine a date for the toll cut. Once implemented,

trucks weighing over 18 tonnes and 40-feet container trucks would pay around VND448,000-480,000 (US

$22-23) per trip for using the 61.9km expressway, compared with the current fee of VND640,000 (US$31).

The decision to cut toll fees is because traffic volumes fall sharply in the HCMC-Trung Luong expressway

once it required commuters to pay a toll fee in February 2012.

We believe that this toll cut in one of the highways linking Vietnam's most economically developed cities

reflects our concerns about the viability of building toll roads in Vietnam. The approval of the toll cut not

only suggests that the sector could be oversaturated, but that economic development within Vietnam has not

reached levels that are financially viable for such toll roads.

This lack of financial viability for toll roads in Vietnam is collaborated with anecdotal evidence regarding

the HCMC-Trung Luong Expressway. According to the association, heavy trucks - the main vehicle used by



transport companies - have to pay a toll fee of VND320,000-640,000 for a round trip on the expressway.

However, these companies only earn a profit of VND300,000-400,000 for each transport trip within 100km.

Costly To Build

Investment Cost of Expressways In Vietnam, US$mn per km

Source: Vietnam the Business Times (May 3 2012)

We believe that this lack of viability and the need for unattractive toll fees are due to the high cost of

construction for expressways within Vietnam. According to an official report from the Ministry of

Construction in September 2012, the cost of constructing an expressway in Vietnam is about 1.5-2.0 times

higher than comparable roads in China, Europe and Africa. The HCMC-Trung Luong expressway, for

example, costs around US$9.9mn per km, higher than an average expressway in China (US$6mn/km) and

the US (US$8mn/km).

We believe there are several factors contributing to this high construction cost for toll roads:

■ The lack of project management and technical expertise to complete road projects within budget,resulting in site clearance delays and cost overruns. To resolve this problem, the transport ministry isplanning to classify investors and contractors into three grades, A, B and C, with companies at each gradedeveloping projects of the same grade.



■ Corruption, with anecdotal evidence suggesting that 30% of a project's value is pocketed by thecontractor in order to pay bribes to relevant parties.

■ Deficiency in regulations and government institutions that effectively balance the need to safeguard thepublic interest with the need for expeditious provision of land for infrastructure development. The currentregulation - Decree 69/2009/ND-CP - only gives district-level people's committees, not the centralgovernment, the right to hire companies to settle site clearance and compensation issues.

■ Difficult geological conditions, as most of Vietnam's terrain is uneven.

■ A lack of specialised government institutions that can mediate between developers and landowners aboutcompensation. Combined with the perceived potential for corruption at the district level, thesedeficiencies do not provide landowners with the assurance that they are receiving the fair amount ofcompensation for their land. As a result, they are unwilling to sell their land, causing delays in siteclearances and cost overruns for road projects. Site clearances have been repeatedly reported by localmedia sources as the key reason for holding up major road projects in Ho Chi Minh City, and theyinclude the 14km Tan Son-Nhat Binh Loi outer ring road project, the 245km Noi Bai-Lao Caiexpressway, the 55km HCM City-Long Thanh-Dau Giay Highway and the widening of the HanoiHighway.

This lack of viability makes it difficult for Vietnam to raise financing for several road projects, which are

capital-intensive. According to a master transport plan for HCM City (approved by the government in April

2013), the city will upgrade or expand five expressways - the HCM City-Long Thanh-Dau Giay

expressway, the HCM City-Thu Dau Mot-Chon Thanh expressway; the HCM City-Moc Bai expressway,

the Ben Luc-Long Thanh expressway and the Bien Hoa-Vung Tau expressway - and build five four-lane

flyovers with a total length of 70.7km. To finance these projects, the city will need VND45trn between

2013 and 2015.

To compound the problem, the Vietnamese government is heavily burdened by the debts of its state-owned

enterprises (SOEs), and the need to repay this debt is limiting the government's ability to finance

infrastructure projects. For example, Vietnam Expressway Corporation is facing the risk of falling into

insolvency as it could be unable to pay its bond holders.

One of the major road projects being delayed due to financing is the 101km Dau Giay-Phan Thiet highway

project. The US$1.12bn highway project is planned to be Vietnam's first public-private partnership (PPP)

highway project, but has so far failed to attract foreign liquidity. A fresh capital structure proposal was put

forward in February 2013 to boost the implementation of the Dau Giay-Phan Thiet expressway project, but

it remains to be seen if this would work. The proposal has hiked the portion of the state capital contribution

to the 101km Dau Giay-Phan Thiet expressway project to 40% of the project's total investment capital from

29.4% with a loan from the World Bank. The state's share in the project would come to around US$429mn.

The figure may vary depending upon the land acquisition costs, according to the Ministry of Transport. The

project was originally scheduled to be only developed by Binh Minh Import Export Production and



Trade (Bitexco), but would now form a joint venture with the second developer, which would be selected

through an international tender.

In July 2013, the Vietnamese Ministry of Transport issued a request inviting applications for qualification

for a second investor for the US$757mn Dau Giay-Phan Thiet Expressway Project. Under the project, the

successful bidders would design, finance, construct, operate and maintain a four-lane expressway and allied

structures from Dau Giay in the Dong Nai province to Phan Thiet in the Binh Thuan province through a

special purpose vehicle (SPV). The SPV would be formed between Bitexco, which has been appointed as

the first investor for the project, and the second investor. The first investor will have a share of 60% in the

project and the other investor 40%. However, the first investor may dilute its share in favour of the second

investor during the construction.

To secure additional financing for road development, Ministry of Transport started collecting a fee for road

maintenance from the start of 2013. This is because a number of key roads, including the National Highway

1A, are deteriorating rapidly and the government does not have sufficient funds to boost its budget for road

maintenance - the ministry estimates that it only meets 40% of the funds needed for road maintenance. The

government is also hiking toll fees for existing roads and implementing new toll stations on certain

expressways - Intellasia reported that transport costs in Vietnam would treble by 2015 when 21 new BOT

toll stations on NH-1A are operational, plus a rise of 3.5 times in road fees.

These toll and fee increases came about after the Vietnam Ministry of Transport revealed at the end of

November 2012 that its original targets for highway construction between now and 2020 - 2,000km of

expressways completed and 3,000km under construction by 2020 - are not possible due to the government's

limited budget for roads and the lack of financing from the private sector.

We do highlight that financing from foreign sources for road projects has become increasingly

forthcoming. In March 2013, Japan and Vietnam exchanged a diplomatic note which stated that Japan will

finance 12 projects worth a combined US$2.2bn, mostly in transport infrastructure (such as the third phase

of the Nhat Tan Bridge and the second phase of a road project linking Noi Bai Airport with Nhat Tan

Bridge). In May 2013, Goldman Sachs was close to reaching an agreement with the BT 20 Joint Stock

Company consortium to provide US$250mn for the rehabilitation (first phase) of the 110km NH-20 under a

BT format. Besides NH-20, the World Bank was also reported to be thinking of providing around US

$600mn risk guarantee package for the Hanoi-Hai Phong expressway project.

Railways



Railways will account for around 24% of Vietnam's total transport infrastructure industry value in 2013,

according to BMI's forecasts. Vietnam's rail network stretches for 2,632km, but only 527km is standard

gauge (1.435m gauge). The network has around 1,790 bridges totalling 45km and 11.5km of tunnels. The

principal axis is Hanoi-Ho Chi Minh City (1,726km). Other lines emanating from Hanoi are to Hai Phong

(102km), Lao Cai (296km) and Dong Dang (162km).

Vietnam had previously planned to build a US$56bn north-south high-speed railway line, but this was

rejected by the Vietnamese National Assembly in June 2010. The proposed project has since resurfaced,

with Japan announcing in September 2012 that it remains keen to assist Vietnam in building this north-

south high-speed railway line by 2030. As of April 2013, plans on the north-south high-speed railway line

are still in a state flux as state-owned Transport Engineering Design Inc (TEDI), as a consultant to the

Ministry of Transport for Vietnam railway transport development strategy for 2020, had submitted a

proposal to the government with major adjustments to the high-speed railway plan. In the proposal, TEDI

suggested that work on the north-south high-speed railway project in Vietnam should be delayed and the

focus should be shifted on upgrading the current north-south track Additionally, the speed of the north-

south high-speed train should be slowed down to 150-200km per hour from more than 200km per hour,

while the time frame for the development of the trans-Asia railway should be reconsidered along with the

rail lines connected to seaports, industrial zones and tourist sites.

There are still plans to build a high-speed railway line between Laos and Vietnam. The US$5bn high-speed

railway project, which is close to starting construction works, spans 220km from the Laos central province

of Savannakhet to the Lao Bao border gate of neighbouring Vietnam and is expected to be operational in the

next five years.

Table: Table: Vietnam Railway Corporation's Main Targets

Upgrading north-south railway routes and improving the running speed of passenger trains and freight trains to100-120kph and 100kph respectively.

Upgrading west-east railway corridor so that the maximum speed of passenger trains and freight trains is 80-100kph and60-80kph respectively.

Paying more attention to the development of new routes between Ho Chi Minh City-Vung Tau, Ho Chi Minh City-CanTho, Thap Cham-DaLat, Yen Bai-Tuyen Quang-Bac Thai, Lien Chieu-Dung Quat, etc.

Carrying out surveys and preparing to link the railway network to Singapore-Kunming route is aimed at fulfilling missinglinks such as Ho Chi Minh City-Phnom Penh city and Cambodia-Vietnam.

Source: Vietnam Railways



Instead of a high-speed railway line, the government is looking to increase the speed of the existing normal-

gauge north-south railway line. In April 2013, the Ministry of Transport said that it had assigned the

Vietnam Railway Corporation to make a detailed plan to increase the speed of the line from 90km/h to

200km/h. This could be done in two phases. The first phase would increase the speed of the line from 90km/

h to 110km/h, while the second phase would involve the construction of a new double-track standard gauge

line that increases the line's speed to 220km/h.

The government is also looking to improve its existing railway network. In March 2013, the Ministry of

Transport said that between 2013 and 2020, the Vietnam Railway Corporation needed to focus on

improving the existing railway system and building several new 1,435mm gauge dual track lines along the

existing 1,726km north-south (Ngoc Hoi-Phu Ly) railway line. Under the amended planning the railway

sector would require around VND365.242trn (US$17.4bn) to 2020 for upgrading six existing lines, putting

into place three new arterial routes, including some lines heading seaports, economic zones and tourist sites.

Amendments relating to Vietnam's railway development planning to 2020, with a vision toward 2030 (2009

planning), have been reported by the Vietnam Railway Administration (VRA) to the Ministry of Transport

in April 2013. According to a proposal from the consultancy unit that is tasked with amending the 2009

planning, Vietnam will weigh up the construction of a trial electrified 1,435mm Ngoc Hoi-Phu Ly gauge

dual-track line, with a velocity ranging from 160km to 200km per hour. Overhauling the existing 1,726km

north-south railway is estimated to require a total investment of VND39.87trn (US$1.9bn). Of the total, the

capital demand to 2020 is set at VND18.61trn (US$886mn).

By 2015, Hanoi Railway Station is expected to emerge as the centre of the country's system. The station

will join the other means of transport and boast a multi-functional service centre. The upgraded facilities

and services are to have an annual transportation capacity of 13.7mn tonnes of freight and 17.7mn

passengers.

However, just like the roads, the railway sector suffers from a lack of financing. In October 2012 the deputy

director of the railway administration, Nguyen Van Doanh, said that a total of 20 railway projects were

earlier recommended by the VRA to be developed under the forms of BOT, build-transfer and build-

transfer-operate. This list of projects was submitted to the Ministry of Transport in early 2010, but a lack of

investors prevented them from starting. Among the 20 railway projects calling for investment in 2010-2020,

they include the 381km Lao Cai-Hanoi-Hai Phong railway line, the 114km Bien Hoa-Vung Tau route and

the 49km railway connecting Trang Bom in Dong Nai with Hoa Hung in HCM City.

Urban Railways



As most of the railway projects in Vietnam are at an early stage, we believe that it would be urban railway

projects that will drive our railways infrastructure industry value forecasts over the short to-medium term.

BMI believes these urban railway projects will be crucial to Vietnam's economic and social development,

as the country attempts to deal with rapid urbanisation, while successfully managing a booming economy.

The combination of rising urbanisation and steady population growth is exerting considerable pressure on

Vietnam's urban transportation systems. This urbanisation trend is felt acutely in Hoh Chi Minh City and

Hanoi, the country's largest cities and chief commercial hubs. Both cities are home to approximately 16% of

the country's total population and traffic conditions have worsened. Congestion occurs frequently at road

junctions during rush hour and average traffic speeds vary from around 10-30km/h in both cities. There is

much scope for traffic conditions to worsen further. Not only could there be a fundamental shift to cars due

to rising incomes - for example, 90% of the vehicles in HCM City are motorcycles - but Vietnam is also

looking to accelerate the urbanisation rate in the country. According to a draft national urban development

programme approved by the government in June 2012, Vietnam will strive to achieve an urbanisation rate

of 38% with 870 urban areas by 2015, and 45% with 940 urban areas by 2020. The country is estimated to

currently have an urbanisation rate of 30%.

The development of an urban railway system will therefore help alleviate many of the problems associated

with congestion. No other system can carry more people and run on such a dependable schedule at a lower

cost, and we expect Vietnam to continue to push forward with urban railway projects. As of May 2012, the

government transport plan for Hanoi to 2030 includes eight urban railways, with a total length of 284km,

and six subway lines, linking key parts of Hanoi and its outlying areas. Meanwhile, Ho Chi Minh City aims

to complete around six metro lines with a total length of 120km by 2020.

Some of these urban railway plans have moved forward (such as Ho Chi Minh's City's Ben Thanh-Suoi

Tien Metro line 1, the underground section of the Metro line 2), but just like the roads sector, several have

also faced delays. This is because they are suffering from slow site clearances (such as the Cat Linh Street-

Ha Dong District railway line in Hanoi, which is two years behind schedule), cost overruns (such as the

Nhon-Hanoi Station urban railway line No. 3), the lack of a legal framework, a lack of proper planning for

underground space and integration with other transport modes, and the lack of skilled labour.

The sector is also heavily reliant on financing, mainly official development assistance loans, from several

foreign countries and multinational development banks. This has caused delays as to access these loans

Vietnam needs to conform to the regulations of all its donors, making it difficult to coordinate construction

work for the projects. In addition, European banks are set to face difficult economic conditions and stricter

capital controls over the coming years. This could lead to a decline in European financing for Vietnamese



projects and has already transpired, with the Spanish government announcing in late-November 2012 that it

would only provide 40% of the financing it had initially promised for an urban railway project in Ho Chi

Minh City (the Metro Line No.5).

Having said that, some lenders remain keen to provide funds for Vietnam's urban railway sector. In March

2013, Japan and Vietnam exchanged a diplomatic note, under which Japan agreed to finance 12 local

projects such as the first phase of the Hanoi urban railway line 1 (Gia Lam-Giap Bat). Officials from the Ho

Chi Minh City administration also pointed out in March 2013 that the Asian Development Bank (ADB) and

the European Investment Bank (EIB) will provide a combined US$260mn and US$735mn for the Metro

Line No.5 and Metro Line No.2. The loan agreement for the Metro Line No.2 was signed in July 2013.

Ports

Although roads and railways are dominating transport infrastructure, we highlight that ports, harbours and

waterways will see their share increase significantly over the coming years. Vietnam's dense river and canal

network - which measures 17,702km - provides the country with a highly developed inland waterway

system, but its port infrastructure is poor by international standards. The main ports currently in operations

are the Cam Pha Port, Da Nang, Haiphong, Ho Chi Minh, Phu My and Quy Nhon.

Vietnam's seaport network comprises of many small and medium-sized entities, with inefficient

distribution. Most ports in the northern part of Vietnam are dispersed and small in scale, while most big

ports are located on rivers, such as Hai Phong and Ho Chi Minh City, with limited depth at the entrance.

Some ports are located in big cities, thus making it difficult to connect with other modes of transport due to

traffic congestion. With the exception of several new or upgraded ports, most have been operating for many

years and lack investment. The loading and unloading equipment in some ports is obsolete, leading to low

productivity. The average productivity of a Vietnamese port is only 2,500 tonnes/m per wharf, which is less

than half of the productivity of other ports in the region. As of January 2013, Vietnam was home to 266

large and small-scale seaports, but only nine ports are able to handle 50,000-deadweight tonne (dwt) ships.

Activity in the maritime sector is mainly concentrated on boosting the capacity of the southern economic

zone, especially in the Thi Vai River area. Major global port operators with interests in the region include

Hutchison Port Holdings, Singapore's PSA International, Saigon Port, Denmark's Maersk and France's

Compagnie Maritime d'Affrètement-Compagnie Générale Maritime (CMA CGM). These companies

have all been involved in the operation and development of major Vietnamese ports in the Thi Vai River.

BMI anticipates increasing investment into Vietnam's port infrastructure over the long term, as it is a sector

crucial to the country's economic growth. There are two major factors central to our view:



■ The country needs to upgrade its ports to avoid major bottlenecks, which would constrain the country'sexport-led growth and investment. Vietnam's port infrastructure ranked only 113th in the 2012/13competitiveness report published by the World Economic Forum.

■ Vietnam is becoming increasingly important, not just to growing Intra-Asian trade but also on the globalstage. An increasing number of shipping companies are choosing Vietnam as their port of call as they plythe east-west trade route. Vietnam's ports are gradually graduating from feeder stop-offs on the majorroutes to boasting direct services on both the Asia-US and Asia-Europe services.

Vietnam is keen to address this deficit, but lacks the necessary fiscal strength to meet the required

investment. This keenness to meet this deficit has also been dampened recently due to feeble external

demand. The slowdown in global economic activity in 2012 has also dampened the demand for Vietnamese

goods and minerals, resulting in a glut in port capacity, particularly with deep-sea ports in South Vietnam.

This glut has become so serious that in December 2012, investors were calling for a halt in licences been

issued for container terminal building projects in HCM City and a delay to the launch of the US$660mn Cai

Mep-Thi Vai port complex. A report of the Vietnam Seaport Association showed that in 2012, the

international container ports in the Cai Mep-Thi Vai deep water port complex area ran at 15-20% of their

designed capacity.

Vinacomin also decided to suspend the construction of the Ke Ga deepwater port in the Binh Thuan

province, according to Vinacomin General Director Le Minh Chuan in February 2013. The company took

the decision due to a cut in bauxite production. The port was scheduled to receive bauxite from mines in

Tay Nguyen, with an annual capacity of up to 3.5mn tonnes by 2015, 17.5mn tonnes by 2020, 27mn tonnes

by 2025 and 37mn tonnes by 2030. However, the output of bauxite at Tan Rai and Nhan Co alumina

projects in Dak Nong Province is low and may reach only 1.3mn tonnes.

Besides Vinacomin, Vinalines is also selling stakes in four of its ports - namely Hai Phong, Da Nang,

Quang Ninh, Saigon and Quy Nhon - between 2013 and 2014 to pare down its high level of debts, which

were brought on by investment in under-performing ports.

As a result, Vietnam has adjusted its port development plans at the start of January 2013, with the Vietnam

Maritime Administration announcing that it would only focus on building large deep-sea ports in Hai

Phong's Lach Huyen and Ba Ria-Vung Tau's Cai Mep - Thi Vai port complexes. The administration will

also focus on converting the remaining ports in the central region and the Mekong Delta into special-use

ports to transport materials for thermo-power plants. Small ports that had been planned for development

will not be put into this time's zoning plan if they are not in urgent need. This plan appears to be taking

place with, the Lach Huyen port project starting construction works in April 2013. There are also plans to

develop a US$3.5bn deep-sea port on Hon Khoai Island, Ca Mau province. The project proposal was



unveiled by Australia-based N&M Commodities in June 2013. The company was completing the necessary

administrative procedures for the project, which is expected to start construction works at the end of 2016.

Once completed, the Hon Khoai Seaport is expected to become the gateway to the Mekong Delta and HCM

City.

In April 2013, Vietnam started the construction of the Lach Huyen international port in the northern city of

Haiphong. The port is scheduled to be built in two phases, with the first phase entailing the construction of

port infrastructure, while the second phase will include the construction of two 750m wharves capable of

handling 100,000-tonne container ships. The Vietnam Maritime Administration will manage the first phase,

involving an investment of more than VND18.6trn (US$885mn), while a joint venture of Vietnamese and

Japanese enterprises will manage the second phase worth more than VND6.57trn (US$315mn). The port,

due for completion in 2016, will have modern cargo handling equipment. It will be capable of handling

container ships of up to 8,000 twenty-foot equivalent units (TEUs).

However, Vietnam's difficult business environment continues to slow project implementation. In July 2011,

construction work on the US$3.6bn Van Phong International Port in Vietnam's southern central province of

Khanh Hoa was suspended, because initial feasibility studies for the port project did not sufficiently assess

the site's geology. This resulted in inconsistencies in pile design during the construction phase. Although the

project investor Vinalines had signed a deal with Netherlands-based Rotterdam Port for the port's

construction, the lack of financial strength in Vinalines has finally forced the government to suspend the

project in September 2012. In June 2013 the management of the Van Phong Economic Zone cancelled the

investment licence, held by Vinalines, to build Van Phong International Port project. Vinalines is required

to complete all procedures to liquidate the project within H114.

Another business environment issue that is hindering the growth of the port sub-sector is the lack of

coordination in developing the different types of infrastructure (roads, ports, airports, railways). Two ports

in Ho Chi Minh City - the US$17.5mn Phu Huu Port and the US$19.1mn Phu Dinh Port - have been left

unused for several years due to lack of access to key roads. These ports are connected to streets that are

either often flooded, too narrow for container trucks or lack access to highways. This could remain an issue

for other ports currently being developed. The VND2.73trn Saigon-Hiep Phuoc port was scheduled to be

completed by 2014, but as of March 2013, a harbour bridge and port routes to connect it with main

highways and roads have yet to materialise.

A shortage of qualified logistics staff is also an issue, where according to the Vietnam Freight Forwarders

Association (July 2012), only 40% of the demand for qualified logistics staff is met.



A lack of proper planning is also an issue. According to the Vietnam Seaports Association in January 2013,

seaport zoning plans of Vietnam are yet to be synchronic and have still failed to meet rising sea transport

demand due to a disproportional focus on the construction of small ports, which are inefficient in meet

Vietnam's transhipment needs.

The government has also been slow in implementing regulations that support the development of a PPP

framework for port projects. A PPP framework has been on the cards for several years but has yet to be

developed, with investors still seeking incentives from the government to attract PPP investment in August

2012.

Lastly, access to financing remains an issue, despite a sharp decline in Vietnam's interest rates. This is

partially due to Vietnam's financial regulations and the decline in government investment.

In June 2012, Formosa Plastics Group (FPG) was reported to be facing difficulties in obtaining funds for

its steel and seaport project in Vietnam's Central Ha Tinh province. This is due to lending limitations at

foreign bank branches in Vietnam, as a foreign bank is not permitted to lend more than 15% of its own

equity for a single borrower.

In December 2012, Saigon Port Company Deputy Director Huynh Van Cuong said that the Saigon Port

relocation project has not made any considerable progress due to capital shortages. The relocation work is

moving at a slow pace despite financial assistance from the Vietnamese government. The Hiep Phuoc Port

construction project is required to be finished first in order to relocate the Saigon Port from Ho Chi Minh

City; however, construction work is only 38% completed.

Airports

Although the airport infrastructure sub-sector accounts for the smallest portion of transport infrastructure,

the government has ambitious plans to modernise and expand the country's airport infrastructure, which

consists of 44 airports. The government initial plans were to develop 10 international airports by 2020 - Noi

Bai, Cat Bi, Phu Bai, Danang, Chu Lai, Cam Ranh, Tan Son Nhat, Long Thanh, Can Tho and Phu Quoc -

and 16 domestic airports in the same timeframe - which includes Dien Bien Phu, Na San, Lao Cai, Quang

Ninh, Gia Lam, Vinh, Dong Hoi, Phu Cat, Tuy Hoa, Pleiku, Buon Ma Thuot, Lien Khuong, Rach Gia, Ca

Mau, Con Son and Vung Tau.

This willingness by the government to get projects under way for the private sector (which is partially due

to a lack of public funds) provides grounds for optimism and this has attracted foreign investors to the



sector. In April 2011, US-based ADC-HAS Airports presented a proposal to the Vietnamese Ministry of

Planning and Investment with regard to investing in seven airports in the country's central region - Chu Lai,

Phu Bai, Da Nang, Tuy Hoa, Quy Nhon, Pleiku and Cam Ranh airports. This plan is still in the works. In

August 2012, ADC-HAS Airports suggested a plan to develop the Chu Lai airport into an industrial airport,

while the Khanh Hoa provincial government was seeking permission for a plan to develop the Cam Ranh

airport with ADC-HAS Airports and Vietnam Airlines (VAC). ADC-HAS Airports is also interested in

developing the Da Nang airport with VAC. In April 2013, the Airports Corporation of Vietnam (ACV)

tasked Parsons Brinckerhoff with investigating the potential to develop the Chu Lai airport into a regional

cargo hub. The study was funded by a grant from the US Trade and Development Agency. In June 2013,

ADC-HAS Airports reiterated its interest in expanding the Cam Ranh Airport and Danang airport.

However, the lack of demand for air travel in the near term and the stiff competition from other airports in

Asia to serve as regional hubs could make it difficult for these new airports to be financially viable.

Since early 2012, Vietnam has announced that it was in the search for foreign investors to help construct

two international airports: the US$1.2bn Van Don International airport in the northern province of Quang

Ninh and the US$10bn Long Thanh International airport in the southern province of Dong Nai. The two

airports are part of a strategy to compete with neighbouring airports in Thailand and Singapore. According

to Nguyen Cong Hoan, a director for the Vietnamese airport operator ACV, foreign investors have already

expressed interest in the Van Don airport, with South Korean investors being highlighted as one of the

interested parties in late-2012. Interested investors were due to complete project documents and submit

them to provincial and central agencies in November 2012.

The Long Thanh airport, approved in 2011, also appears to be make some progress, albeit slowly. In March

2013, the provincial government of Dong Nai disclosed a development plan for the area surrounding Long

Thanh International Airport. The government plans to develop a tourism complex, several industrial clusters

and world-class sporting, education and healthcare venues in the 21,000-hectare (ha) area. The plan entails

the development of 12 communes in Long Thanh and Cam My districts in the area, excluding the 5,000ha

zoned for the terminal, by 2025. The northern part of the airport covering 5,720ha will boast condominiums

for aviation employees and locals, while the southern area covering about 4,400ha will boast an

international transhipment centre, a supporting industrial park and an area zoned for fruit farms and

industrial plants. The plan is likely to be implemented in three phases during 2012-2025, with land

acquisition estimated to cost VND10trn as of March 2013.



The terminal will also be developed in three phases, starting from 2015. The first phase (2015-2020)

requires US$5.6bn for the construction of two runways, taxiways, aircraft parking zones and two terminals

with an annual handling capacity of 25mn passengers and 1.2mn tonnes of cargo. The second phase

(2020-2030) involves the construction of a third runway and the increase in passenger handling capacity by

50%, while cargo handling capacity is increased to 1.5mn tonnes per annum. The third phase (2030-)

involves the construction of a fourth runway and the increase in passenger and cargo handling capacity to

100mn passengers and 5mn tonnes of cargo per annum.

Both airports are part of the government's strategy to develop as many as six international airports, which

include locations such as Cam Ranh, Chu Lai, Danang and Hue. The Long Thanh airport is the centrepiece

of this expansion, as it is the largest greenfield airport project in Vietnam (and possibly in Asia), with an

eventual annual passenger capacity of 100mn per annum, a 5mn tonne cargo capacity and four runways.

While there are compelling factors driving the government to build new airports - to meet a growing

demand to travel within Vietnam's population and to unlock the growth potential of its tourism sector -

these airports could struggle to be financially viable if their aim is to serve as regional transit hubs. Not only

is there a lot of competition from other airports in Asia to serve as regional hubs, but these airports already

have well established airlines using them as their main point of transit.

Several airports in Vietnam, particularly in the central provinces, were already operating way below

capacity, despite the rapid rise in tourists. The Dong Hoi airport incurred losses of VND6.9bn (US

$332,000) in 2010 and VND9bn (US$432,000) in 2011. This suggests that the demand for new airports is

not broad-based throughout Vietnam, with air traffic in certain regions still immature.

Another reason for this lack of usage could be due to the small number of runways that are able to handle

international flights. Most of the international flights in Vietnam are handled by just three of the country's

21 airports, while only nine of these have runways with a length of more than 3,047m, which is a standard

requirement to handle international flights for wide-body aircraft. This suggests that Vietnam could need to

upgrade the runways in its existing airports, rather than construct new airports. As of September 2012,

Vietnam continues to find difficulty in securing financing for its airport projects and is still seeking

investment capital from different sources.

The government has since recognised this lack of financial viability for some of these proposed airports and

is shifting its focus on a few key airports such as Noi Bai, Danang and Long Thanh. The smaller airports

such as Lao Cai, Lai Chau and Quang Ninh could be developed after 2020, according to official from the

ministry of Transport in April 2013.



Table: Table: Major Projects - Transport

Project NameValue (US

$mn)Capacity/

Length Companies Timeframe Status

Airports

Quang Tri Airport -Gio Linh DistrictAirport 27 na na 2009-2015

Planning stage -Approved in

February 2009

Passenger terminal,Danang InternationalAirport 74

6mnpassengers /

year

Middle Airports Corp., Louis BergerGroup, Airport Consultants

B.V. and National ConstructionConsultants

2006 -December

2011

Completed, twoyears behind

schedule(December 2011)

Cam RanhInternational Airportexpansion 590

5.5mnpassengers/

yr na 2009-2020

Project approved,US$9.5mn terminal

completed inlate-2009 (Nov

2011)

Noi Bai InternationalAirport extension(includes T2 terminal) 960

10mnpassengers /

year

Northern Airports Corporation(NAC), Taisei, Hoa Binh

Construction and Real EstateCorporation

September2012 -

November2014

Contract awarded(September 2012);

US$759mn ODAloan from Japan

Phu QuocInternational airport,Duong To Commune 780

3mnpassengers/

yr Southern Airports Corporation

2009 -December

2012

UnderConstruction,

Construction onterminal started in

end-Jan 2012(October 2012)

Chu Lai InternationalAirport 1,000

4mnpassengers /

year Garuda Asea, Airis International -2025

Memorandum ofunderstanding

(MoU) for feasibilitystudy approved

Long Thanhinternational airport(Passenger terminal,runway, parkingplace), Dong Naiprovince 6,740

100mnpassengers /

yearJapan Airport Consultants, Airports

Corporation of Vietnam 2015-2020

At planning stage,Land clearing to

begin in 2013 (April2013)

Phu Bai InternationalAirport upgrade, ThuThien-Hue Province 595

5mnpassengers/

year Middle Airports Corp. 2011-2020

At planning stage,government to

arrange financingfor 2012 (Nov 2011)

Tien LangInternational Airport,Hai Phong na

80mnpassengers /

year na 2010- At planning stage

Pleiku Airport (two-phase upgrade), GiaLai 105

500,000passengers /

year na2011-2030

(first phase) At planning stage

Da Nang InternationalAirport terminalexpansion 64.5

6mnpassengers /

year Da Nang International Airport na

Completed;Opening in May

2011

Seven PPP airportprojects (Chu Lai, PhuBai, Da Nang, TuyHoa, Quy Nhon,Pleiku and Cam Ranh) na na na 2011-

Proposal forprojects send to

VietnameseMinistry of Planning

and Investment(MoPI) by ADC-

HAS



Table: Major Projects - Transport - Continued


$mn)Capacity/


Cat Bi internationalairport (first phase)upgrading project,Haiphong, NorthernVietnam 240

2mnpassengers/

yr na

February2013-2015

(first phase);- 2025

At planning stage,seeking financing(November 2012)

Quang NinhInternational airport,Doan Ket commune,Van Don region,Quang Ninh province 250

2-5mnpassengers/

yr Joinus, Korea Airports Corporation 2013-2015

Preparation to befinalised by 2012,

Project site movedto Doan Ket

commune (Jan2012)

Vung Tau airportexpansion na na na 2011 -

At planning stage,received approval

for new project site(September 2011)

Van Don Internationalairport, 45km from HaLong Bay, QuangNinh province 1,200 na Airports Corporation of Vietnam

October2012 -

At planning stage,South Korean

companiesexpressed interest

(October 2012)

Lao Cai internationalairport 62.6 na na

January 2012- 2020

At planning stage,project announced

(January 2012)

Ports

Cai Cui port project 3260,000tonnes

Can Tho City People's Committee/Vietnam Shipping Line Corp

(Vinalines) 2009-2015Second phase

under construction

Saigon InternationalTerminal, Phu My 1Industrial Park 163 na

China Harbour EngineeringCompany 2009-2011 Completed

Deep water Port atKhe Ga Cape, BinhThuan Province 250

35mntonnes /year Vinacomin 2009-2020 At planning stage

Ben Dam deep watertranshipment port,Con Dao district,Vung Tau city 300

10mntonnes /year

Trai Thien Sea TransportInvestment and Development Joint

Stock Company April 2009 -

Licence awarded(April 2009);

Delayed due todisputes (April

2010)

Saigon-Hiep Phuocport 337

8.7mntonnes /year na 2009-2020

UnderConstruction, 38%

completed(December 2012)

Van PhongInternationalEntreport, Khanh HoaProvince 3,600

12,000-15,000TEUs

Vinalines, Portcoast, Nippon Koei,Rotterdam Port , SK E&C

October2009 - 2015;

- 2020

Constructionsuspended;

Seeking investors(September 2012)

Cai Mep-Thi VaiInternational Port(includes roadsconnecting NationalHighway 51 to the CaiMep port) 700

100,000tonnes

Civil Engineering Construction JointStock Co. No.6 and Truong Son

Corp, ODA [Sponsor]

October2008 - June

2013Under construction

(December 2012)





$mn)Capacity/


My Thuy deep waterport 1,100

50,000tonnes

Marine Consultant Co. and QuangTri province 2010-2020

Approved inOctober 2008

Son Duong deepwater port, part ofVung Ang EconomicZone, Ha TinhProvince 1,200

30mntonnes/yr

Formosa Plastics Group, FormosaHa Tinh Steel, Samsung C&T

November2008 -

end-2015

Underconstruction,

facing financingdifficulties (June

2012)

Gemalink Cai MepContainer Terminal(first phase) 300

1.2mn TEUs/yr

Gemalink, CMA-CGM, Dealim-SAMWHA

2010-2013(first phase)

Underconstruction,

construction temposlowed (June 2012)

Lach Huyendeepwater port two-phase PPP project(four containerwharves), Hai Phongprovince, east ofHanoi 1,200

60mntonnes /yr

Vinalines, Molyto, Mitsui O.S.K.Lines (MOL), Nippon YussenKaisha (NYK), Itochu, Saigon

Newport Corporation, Japan ODA[Sponsor] Q213 - 2015

Under construction(May 2013)

Cai Lan InternationalContainer Terminal na 720,000 TEU

Cai Lan Port Investment JointStock Company, Carrix, Cordiant

Capital 2010-2011

Completed; US$127mn funding

secured

Dong Lam cementport 64 71mn tonnes

International TransportDevelopment And Investment Joint

Stock 2010-2017

Licence granted;first phase to be

completed by 2013

Cua Lo portexpansion, Nghe An 490 18mn tonnes

International TransportationDevelopment and Investment 2010-2030

Ongoingdevelopment,

Phase II and III tobe completed in2020 and 2030

Tan Cang-Cai Mepdeepwater containertrans-shipmentterminal, Ba Ria-VungTau province 204

1.8mn TEU /year MOL, Hanjin and Wan Hai - March 2011 Completed

Port facility, Nghe Anprovince 365 na Kobe Steel 2011-2013 At planning stage

Ke Ga deep-waterport (three-phase),Tan Thanh Commune,Ham Thuan NamDistrict, Binh ThuanProvince 1,000

3.5mntonnes /year(first phase)

Vietnam Coal and MineralIndustries (TKV)

April 2012 -2015 (first

phase)

Construction halteddue to reduced

bauxite production(April 2013)

Waterway transport(corridors and riverports) upgrade project(includes Viet Tri -Quang Ninh corridor,Lach Giang estuary,Phu Tho port, NinhBinh port), northerndelta, Bac Ninhprovince 201.5 na Word Bank [Sponsor]

December2011 -

First two biddingpackage under

construction, US$171.5bn loan from

World Bank(December 2011)

Deepwater port,Mekong Delta region 1,000 na

OGL Mineral and Coal MiningCompany May 2012 - At planning stage





$mn)Capacity/


Thanh Phuoc Port,Tan Uyen District,Binh Duong province 107.5 na

Binh Duong Construction,Consulting and Investment JSC,

Nam Tan Uyen Industrial Park JSC,U&I Logistics JSC.

2012-2014(first stage);

2018 (secondstage)

US$37.5mn firststage under

construction (May2012)

Two-phase shipyardproject, Thinh DongCommune, Cam Ranhcity 180 na Oshima Shipbuilding company

June 2012 -2016

Investment licencegranted (June

2012)

Port project, part ofDuyen Hai coal-firedpower centre, TraVinh province 181

12mntonnes/yr

China Communication Construction[EPC], EVN

Q4 2012 -Q3 2014

Construction tostart in Q4 2012(October 2012)

Dung Quat II Port,part of Dung QuatEconomic Zone,Quang Ngai province na na

Nikken Sekkei Civil EngineeringLtd, Port and Waterway

Engineering Consultants CompanyAugust 2012

-

At design phase,design consultant

contract signed(August 2012)

Da Nang portupgrading projectphase 2 na na

Japan Transport CooperationAssociation (JTCA), Japan Port

Consultants Ltd (JPC) and JapanOverseas Coastal Area

Development Institute (ACDI), JICA[Sponsor]

September2012 -

At planning stage,seeking ODA funds

from JICA(September 2012)

SP-SSA internationalterminal, Cai MepRiver, Ba Ria-VungTau province 240 1.5mn TEU

SSA Holdings International, SaigonPort, Vietnam National Shipping

Lines Corporation 2009 - 2013Under construction

(February 2013)

Rail

Saigon My ThoRailway 445 na Vietnam Railway Corporation (VRC) 2010-2015 At design stage

Cat Linh (Dong DaDistrict) - Yen Nghia(Ha Dong District)urban railway line No.2A, Hanoi 419 13.08km na

October2011 - June

2015

Underconstruction,

delayed by landclearance (July

2012)

Hanoi Urban RailwayLine 1 (Gia Lam -Hanoi railway station -Ngoc Hoi), Hanoi 1,070 15km na 2010-2016

Underconstruction; ODA

loans of US$386.5mn from

France, theremaining financingfrom EIB and Hanoi

Metro line 1 (BenThanh Market [District1] - Suoi Tien [outlyingDistrict 9]), Ho ChiMinh City 2,250

19.7km(2.6km

underground)

Sumitomo [EPC], Traffic WorksConstruction Corporation No. 6(Cienco 6) [EPC], Vincom Joint

Stock Company, Japan [Sponsor],European Investment Bank

[Sponsor], GS E&C [EPC], Hitachi[Equipment] Q312 - Q417

Under construction(June 2013)

Metro line 2 (BenThanh [District 1] -Thu Thiem Pennisula[District 2] - ThamLuong [District 12]),Ho Chi Minh City 1,370

11.3km(9.3km

underground)

Asian Development Bank (ADB)[Sponsor], European Investment

Bank [Sponsor], Tedi South[Design], Obermeyer Planen &

Beraten [Design], ILF BeratendeIngenieure [Design], Poyry [Design]

August 2013- December

2017

Design and siteclearance phases

underway,construction tender

to start in Q113(December 2012)





$mn)Capacity/


North-South (Ho ChiMinh City - Hanoi)railway rehabilitationproject 1,900 1,726km

Vietnam Railway Corporation,Japan International Cooperation

Agency 2013-2020At planning stage

(April 2013)

Monorail line 2(between East-WestHighway and NationalRoad No 50), Ho ChiMinh City 350 14km Italian Thai Development 2011- MoU signed

Monorail line 3(between QuangTrung street to TanThoi Hiep ward), HoChi Minh City 200 8.5km Italian Thai Development 2011-

MoU signed (March2011)

Metro line 4 (NguyenVan Linh - Ben CatBridge [District 12]),Ho Chi Minh City 2,500

24km (19kmunderground

) Italian Thai Development April 2012 -

Pre-feasibility studyfor BOT project

under way (April2012)

Urban railway line No.3 project (Nhon [Liemdistrict] - Hanoirailway station [HoanKiem district]), Hanoi 1,430

12.5 km(8.5km of

aerial trackand 4km of

undergroundtrack)

Systra, Vietnam Bank for Industryand Trade; ADB [Sponsor], EIB

[Sponsor], France [Sponsor]

September2010 - Q3

2015

Underconstruction,

delayed byfinancing and

manpower issues(December 2012)

Nam Thang Long-Tran Hung Dao urbanrailway line project,Hanoi na 11.5km

Hanoi Urban Railway ManagementBoard

October2011 - 2020

Awaitinggovernment

approval in Q411(Oct 2011)

Underground section(Ben Thanh Market -Ba Son Shipyard),part of Metro line 1,Ho Chi Minh City na 2.6km na

end-2013 -end-2017

At tendering stage,contract to be

awarded inmid-2013 (February

2013)

National railwayproject (involves HoaHung railway stationand District 3 [HaoHung] - Binh ChanhDistrict [Tan Kien]track section), Ho ChiMinh City na na na June 2012 -

At planning stage,initial design

rejected by HCMCauthorities (June

2012)

Underground MRTSection (Thu ThiemNew Urban Area[District 2] - An SuongCoach Station [District12]), part of MassRapid Transit (MRT)line 2 na 9.3km ADB [Sponsor]

April 2013 -2016

US$500mn loanfrom ADB received

for undergroundsection (May 2012)

Railway developmentplan (includesconstruction of Hanoi- HCM City railwayline, Lao Cai - Hanoi -Hai Phong line, Hanoi- Dong Dang line) 9,300 na Vietnam Railway Corporation

June 2012 -2015

Receivedgovernment

approval,preparations being

finalised (June2012)





$mn)Capacity/


Thu Thiem/Hoa Hungstations [Ho Chi MinhCity] - Cai Rangstation [Can Thoprovince] railway line 9,630 191km

Southern Transport Design andConsulting JSC 2015 -

At planning stage,detailed plan to be

completed by2013, financing

unresolved(December 2012)

Metro line 3A/3B [BenThanh Market [District1] - Tan Kien, CongHoa Crossroads [TanBinh District] - HiepBinh Phuc [Thu DucDistrict]), Ho Chi MinhCity na 23km na

August 2012-

At planning stage(July 2012)

Metro line 5 (SaigonBridge [District 2] -Bay Hien Intersection[Tan Binh District] -Can Giuoc BusStation [District 8]), HoChi Minh City 1,850 17km

GEV, Ho Chi Minh City UrbanRailway Management Board,

Spanish government [Sponsor],Idom Ingenieria Consultoria, ADB

[Sponsor] 2013 - 2016

Technical studycompleted, US

$260mn financingfrom ADB and EIB

(April 2013)

Undergroundinterchange/terminalsfor lines 1, 2, 3A, 4and, District 1, Ho ChiMinh City 429 na JICA [Sponsor] July 2012 -


Urban railway line No.1 (Giap Bat-Gia Lam),Hanoi na na JICA

July 2012 -2017

Technical designcompleted (July

2012)

Urban railway line No.2 (Nam Thang Long-Trn Hung Dao), Hanoi na na JICA July 2012 -


Urban railway line No.5 PPP project (WestLake-Ba Vi District),Hanoi na na JICA July 2012 -

At feasibility studystage (July 2012)

Trang Bom (Dong Nai)- Hoa Hung (HCMCity) railway lineproject, Ho Chi MinhCity 528 49km na

September2012 -

At planning stage,seeking investor

(September 2012)

Bien Hoa-Vung Taurailway line, Ho ChiMinh City 720 114km na

September2012 -

At planning stage,seeking investor

(September 2012)

Lao Cai-Hanoi-HaiPhong railway line na 381km na

September2012 -

At planning stage,seeking investors(September 2012)

Metro line (connectingHanoi station withNhon station) na 12.5km na 2013-2016

At planning stage(December 2012)

Metro line (connectingNam Thang Long toTran Hung Dao),Hanoi City na 11.5km na na

At planning stage(December 2012)





$mn)Capacity/


North-South high-speed railway project na na

Transport Engineering Design Inc(TEDI) 2013 -

At planning stage(April 2013)

Roads & Bridges

Song Bung 4 accessroad 1 na Cavico Corp. 2009-2010 Completed

1A National Highway(Ngoc Hoi - Cau Giesection) 50 24km

Hanoi Department ofTransportation -2009 Completed

Tran Thi Ly- NguyenVan Troi bridge 86 0.731km na 2010-2014

Approved inJanuary 2009 - To

be completed in2014

Mu Loi Bridge 88 na na 2009-2012Project approved in

September 2008

My Phuoc-Tan VanExpressway 196 42km Becamex IDC Corporation 2009-2013 Under Construction

Ring Road No. 3,Hanoi, Phase II 256 8.5km Cienco4, JICA 2011-2013

Under construction(October 2012)

Tan Son NhatInternational Airport -Binh Loi - Outer RingRoad BT project, HoChi Minh City 383 13.7km GS Engineering and Construction

June 2008 -late-2013

Project stalled dueto delays in site

clearances (June2012)

Highway to link CaiMep and Phuoc Anports 350 21.3km na 2009-2015

Construction of thefirst phase due to

commence in Q409

Nhat Tan Bridge(includes accessroads), package No.3,Hanoi 423 3,900km

IHI, Sumitomo Mitsui Construction,Import-Export Construction

Corporation (Vinaconex), 2009-2012

Under construction(Third and Final

stage)

Four-lane Noi Bai[Hanoi Airport] - LaoCai [Chinese border]highway 952 245km

Vietnam Expressway, POSCO E&C[package A1, A2, A3], Keangnam

[A4, A5], Doosan [A6], GuangxiRBEC, Vinaconex, Asian

Development Bank [Partialsponsor]

2010 -late-2013

Underconstruction,

significantly behindschedule due toland clearances(January 2013)

Ho Chi Minh City-Long Thanh-Dau Giay(National Highway 1)expressway, part ofNorth South Highway 1,180 55km

Vietnam Expressway Corporation(VEC), Japan Bank for International

Cooperation [Sponsor], AsianDevelopment Bank [Sponsor],

Hashin ConstructionJune 2010 -

2014

Underconstruction,

significantly behindschedule, 60%

completed atHCMC-Long Thanh

section (January2013)

Six-lane Hanoi [GiaLam] - Hai Phong[Dinh Vu dam]expressway project 1,500 105.5km

Vietnam InfrastructureDevelopment and Finance

Investment Joint Stock Company(VIDIFI) [BOT], PSJ Holdings,

Cienco 1 Company andInfrastructure Development and

Finance Investment Company, GS 2009-2015

Underconstruction, 33%

completed,significantly behindschedule (February

2013)





$mn)Capacity/

Length Companies Timeframe StatusE&C, Citibank Japan [Sponsor],

Sumitomo Mitsui Bank [Sponsor]

Ca pass tunnel BOTproject (Dong Hoa[Phu Yen province] -Van Ninh [Khanh Hoaprovince] section),part of NationalHighway 1A 750 13.4km

Hanoi Construction Corp, Mai LinhGroup JSC, Hai Thach Investment

JSC. A Chau (Asia) JSC, Deo CaInvestment; Credit Agricole

Corporate & Investment Bank[Sponsor], Societe general

[Sponsor], Vietinbank [Sponsor]late-2012 -

Q2 2016

Underconstruction,

financial closurereached (November

2012)

Ben Luc-Long Thanhexpressway, part ofNorth-South Highway 1,600 57.8km

Vietnam Expressway DevelopmentCompany, JICA [Sponsor], ADB

[Sponsor]Q2 2013 -

2017

Constructiondelayed to 2013

due to costescalations

(January 2013)

Road linking East-West Avenue with theTrung LuongExpressway, part of217km south coastalcorridor project 1 2.7km na 2010-2013

Project approved(October 2010);

Seeking financing(June 2012)

Deo Ca tunnel 500 11.125kmHanoi Construction, BOT Hai

Thach Investment, Mai Linh Group 2010-2014 Under construction

Thai Ha Bridge 102 na Construction Corp No 1 2010-2012 Under construction

Road project betweenuyen Van Cu andNgoc Thuy Roads inHanoi 12 3km na 2011-2013

Receivedgovernment

approval

Fifth bidding packagefor Ho Chi Minh City -Long Thanh - DauGiay expressway, partof North-SouthHighway 43 13.9km Pumyang-Sungjee Construction 2010-2013 Under construction

Road linking Phuc Thoand Son Tay district 8 4.3km na 2011-2014

Investmentfinalised in Q410

My Thuan-Can ThoExpressway project,south west Vietnam 441.6 32.3km

Transport Engineering DesignIncorporated, Cuu Long CIPM

November2011 - 2014

US$441.6mn loanfrom Vietnamesegovernment (Nov

2011)

Design andconsultancy contractfor Ben Luc-LongThanh expressway 10 na

Katahira, Nippon, VietnamExpressway Investment and

Development Company 2010-2012 Contract awarded

Upgrading of theprovincial road No39B, Thai Binhprovince 106 29km

Tasco Joint Stock, Agribank,Maritime Bank, Southeast Asia

Bank 2010-2013US$92.3mn loan

pledged by banks

Ring road No. 4,Hanoi 1,970 98km na 2010-2015 At planning stage

National Road No 25expansion (ie Phu Yensection, 21.5km; GiaLai section) 113 57.5km na 2010-2014

Project approved(December 2010)





$mn)Capacity/


A 530.5m bridgelinking the east side ofHanoi with the VanGiang district acrossthe Bac Hung Hai river 26 0.53km

Viet Hung Urban Development andInvestment, Utracon Overseas,

Ultracon Vietnam Company 2010-2012 Contract signed

Hoa An Bridge overDong Nai River 56 1.30km na 2010-2013

Constructionunder way

Kon Brai Bridge, KonTum province (Part ofNational Highway No24) 164 19m

Vietnam Road Corporation[Sponsor]

December2010 - May


(January 2011)

Overhaul of PhapVan-Cau Gieexpressway 71.4 30km

Central Japan Expressway,Vietnam Expressway Investment

and Development Company (VEC) 2011-

Under negotiationsfor a joint venture

(JV)

National Road No 14crossing, Dak Nongprovince 50 na

Duc Long Gia Lai Group, VietnamCommercial Joint Stock Bank for

Industry and Trade (VietinBank-CTG) 2010-2022

Credit contractsigned; BOT

contractannounced in

September 2010

Six-lane Cau Gie -Ninh Binh expresswayproject first phase,connects NationalHighway 1A (in Hanoi)and Highway No.10(Nam Dinh province) 430 50.3km

Vietnam Expressway, JICA[Sponsor]

2006 - June2012

Completed (June2012)

Vam Cong Bridge 500 na na 2011-

US$200mn loan forproject by Korea

Eximbank, the restfrom Australian and

ADB

Ring roads 3 and 4,connecting Ho ChiMinh City with theBen Luc-Long Thanhand Bien Hoa-VungTau highways 8,000 100km na 2011-

(Ring road 3);197.6km (Ring road

4) - VietnameseMinistry of

Transport to start aprocedure to call

Road upgradingproject, northernprovinces 170 300km na 2011-2017

First phase to finishin 2017 -US$80mn

loan from ADB

Hoa Vang District (DaNang) - Quang NgaiExpressway (involves65km Danang-Tam Kysection and 74kmTam Ky-Quang Ngaisection), part ofNorth-South Highway 1,470 139km

Project Management Unit 85,Nippon Koei, Nippon Engineering

Consultants, Chodai and ThaiEngineering Consultants, JICA

[Sponsor], World Bank [Sponsor]Q2 2013 -

2016

Constructiondelayed due to

costs escalations,undergoing land

clearance (January2013)

Six-lane Ninh Binh -Thanh Hoa [Nghi Son]road project 2,800 126.7km na 2011 -

Under tenderingprocess (July

2011); 30%Financing from

government, 70%from private

investors





$mn)Capacity/


Rach Gia section, partof 924km southerncoastal corridorproject, Chau ThanhDistrict, Kien GiangProvince 82 na na May 2011 -

Under construction(May 2011);

Financing fromADB, Korea,

Australia, Vietnam

Minh Luong - Thu Baysection 50 21km

Financing from ADB, Korea,Australia, Vietnam May 2011 -

Under construction(May 2011); -

(including twobridges over CaiLon and Cai Be

rivers), part of217km

Nhieu Loc-Thi Ngheflyover no. 1 project na na

Bach Khoa ConstructionConsultant Corporation 2011 -

Initial reportsubmitted to

Transport Ministry(July 2011); Designcompleted by 2011

Six-lane Dau Giay-Phan Thietexpressway PPPproject (parallel toNH-1), Dong NaiProvince 757 101km

Binh Minh Import ExportProduction and Trading Group

(Bitexco)

2013-2014(first phase);

2020 (secondphase)

US$320mnfinancing from

World Bank; US$430mn financingfrom government;

in tender (July2013)

Thu Bay - Kenhsection, part of 924kmSouthern CoastalCorridor Project 47.3 31km

Ssangyong Engineering andConstruction, Korea Exim Bank

[Sponsor]September

2011 -

Contract awarded(September 2011);

Financing fromKorea Exim Bank

Two overpasses, partof Ho Chi Minh City-Long Thanh-Dau Giay(National Highway 1)expressway 33.8

800m &680m

IDICO Investment ConsultancyJoint Stock Company

Q411 -mid-2012

BOT contractsigned (September

2011)

Duong Dong - CuaLap road, connectingPhu Quoc Airport 16 7km

508 Company, Civil EngineeringConstruction Company No 5

October2008 -

50% completed(September 2011);

Originallycompleted by

November 2009

Four-lane elevatedhighway, Vinh Binhbridge (Thuan Ancommune) to MyPhuoc town (Ben Catdistrict), southern BinhDuong province 800 31.5km na 2012-2014

Receivedgovernment

approval(September 2011)

Gia Loc-Tu Kysection, Package EX5of six-lane Hanoi-HaiPhong expresswayproject, Hai Duongprovince 169 15.3km

VIDIFI, Guangdong ProvincialChangda Highway Engineering 2012-2015

Contract awarded(September 2011)

Package EX4, EX5 &EX6, part of six-laneHanoi-Hai Phong na 40km VIDIFI 2012-2015

EX5 awarded byVIDIFI, EX4 & EX6

awarded bySeptember and

October





$mn)Capacity/

Length Companies Timeframe Statusexpressway project,Hai Duong province

respectively (Sep2011)

Noi Bai InternationalAirport to Nhat TanBridge connectingroad constructionproject 83 12.1km JICA [Sponsor]

May 2012 -September

2014At planning stage

(May 2012)

Southern CoastalCorridor Project(Vietnam - Thailand) 47.3 31km

Ssangyong Engineering andConstruction 2011 -


Ring Road No. 2 (fromNhat Tan Bridge toending point of CauGiay Crossroad),Hanoi 304.7 2km

World Bank, Global EnvironmentalFacility

March 2012 -2015

Underconstruction; US

$155mn loan fromWorld Bank

(Mar-12)

Mekong Deltaconnectivity (firstphase) project(includes Vam CongBridge, Cao LanhBridge and 23.5km ofroads) 751 29.3km

Australian Agency for InternationalDevelopment (AusAID), the Asian

Development Bank (ADB)October

2011-

Technicalconsultancy

service agreementsigned; US$751mnfrom AusAID, ADB

and Vietnamesegovernment

Road tunnel beneathCa mountain pass,between Dong Hoa(Phu Yen province)and Co Ma Pass inthe Van Ninh district(Khanh Hoa province) 749 14.5km na May 2012 -

Project announced,construction to

start in May 2012(Feb 2012)

Saigon Bridge No. 2BT project, links BinhThanh District andDistrict 2 in Ho ChiMinh City 71.5 987m

HCM City Infrastructure InvestmentJoint Stock Co (CII)

mid-April2012 -

October2012

Under construction(April 2012);

Seeking financing(June 2012)

Six-lane roadwidening BOT project,Hanoi - Can Thosection, part of2300km NationalHighway 1 6,000 1,760km Vietnam government [Sponsor]

June 2012 -end-2016

At planning stage,Awaiting

governmentapproval (June

2012)

Ho Chi Minh Road,NH-2 (Pac Bo [CaoBang province] - DatMui [Ca Mauprovince])

690(Second

phase) 3,183km na

2000-2007(first phase);

2015 (secondphase)

First phasecompleted; Second

phase underconstruction

(Mar-12)

La Son [Thua Thien-Hue province] - TuyLoan [Danang city]highway BT project,part of North-SouthHighway 1,000 81.7km

Volunteer Youth Group,Construction Corp No 1, TruongSon Construction Corp, Truong

Thinh Group Joint Stock Co, SonHai Group Co Ltd, Traffic Works

Construction Corp No 8, VietnamExpressway Corporation 2013-2015

At tenderingprocess, seeking

financing (June2012); Construction

to start in 2013(January 2013)

National Highway No1 expansion BOTproject, Thanh Hoa -Vung Ang (Ha Tinh 4,300 1,057km Vietnam government [Sponsor] March 2012 -

At planning stage,seeking

governmentapproval,





$mn)Capacity/


province) - Can Thosection

government fundsfully disbursed, inneed of additionalfunds (May 2012)

Bac Luan 2 bridgeconnecting Mong Cai(Quang Ninh) andDongxing (Guangxi) na na na March 2012 -

Agreement signedbetween Vietnamand China (March

2012)

Vinh Thinh Bridge,part of NationalHighway No 2C,Hanoi 137 5.5km

Thang Long, South Korea[Sponsor]

December2011 -

Underconstruction, US

$130mn ODA loanfrom South Korea(December 2011)

Four-lane Buu Hoa -Hiep Hoa bridge,Dong Nai province 29 1.5km VRC

January 2012- early-2013

Under construction(January 2012)

Provincial Road 10,Long An Province na na na 2010-2013

Land acquisitiondelayed (April

2012)

Beltway No. 2 (An Lapintersection to NguyenVan Linh Parkway) na na na April 2012 -

Design workcompleted, Land

acquisition notcompleted (April

2012)

Nguyet Vien-ThanhHoa Bridge na na na May 2012 - At planning stage

National Highway 61B(Vi Thanh District [HauGiang Province] - CanTho City [MekongDelta]) 165 47.5km na - May 2012

Completed (May2012)

Ha Long City - MongCai City expresswayproject, part of NoiBai - Halong - MongCai expressway,Quang Ninh province 2,100 134km Italian-Thai Development

Q1 2013 -2015

MoU signed forfeasibility study

phase 2(September 2012)

Ha Long - Hai PhongHighway BOT project,Quang Ninh province na 25km na June 2012 -

MoU signed (June2012)

First overhead roadproject (Cong HoaIntersection - NguyenHuu Canh Street), HoChi Minh City 714 8.4km na June 2012 -

At planning stage,seeking Financing

(June 2012)

Second overheadroad project (To HienThanh Street - Beltroad No. 2), Ho ChiMinh City 328 10.2km na June 2012 -


(June 2012)

Third overhead roadproject (To HienThanh Street - District7), Ho Chi Minh City 817 na na June 2012 -


(June 2012)





$mn)Capacity/


Fourth overhead roadproject (Binh PhuocJunction - Cong HoaIntersection), Ho ChiMinh City 547 7.7km na June 2012 -

At planning stage,seeking financing

(June 2012)

Sa Huynh - DungQuat coastal roadproject, Quang Ngaicentral province 269 na na 2012 -

Underconstruction, cost

increased by 100%(June 2012)

Tan Vu-Lach Huyenexpressway project,part of Lach Huyenport project 630 15.63km Japan ODA [Sponsor]

December2012 -

At planning stage(May 2012)

Trung Luong - MyThuan - Can Thoexpressway project 1,000 54km

Cuu Long Corporation forInvestment, Development and

Project Management ofInfrastructure 2013 -

At planning stage,seeking financing

(August 2012)

Ring Road No. 5 (SonTay-Phu Ly, Phu Ly-Bac Giang; BacGiang-Thai Nguyenand Thai Nguyen-SonTay), Hanoi 4,700 385km TEDI

September2012 - 2015

(detailedplanning);

2030

At detail planningstage (September

2012)

84 bridge upgradingproject 376 na JICA [Sponsor]

September2012 -

US$376mn loanfrom JICA, at pre-

feasibility studystage (September

2012)

National Highway 20upgrade BT project(Dau Giay [Dong Naiprovince] - NH-27[Lam Dong province]) 345 268km

Cuu Long Traffic Investment,Development and Management

Joint Venture and Mekong East Co,Petroleum and Construction Joint

Stock Company, ConstructionMaterials No 1

September2012 - late

2014

At pre-constructionstage, seekingfinancing, first

phase contractsigned (September

2012)

Six-lane Nha TrangCity [Khanh HoaProvince] - Phan ThietCity [Binh ThuanProvince] PPPexpressway project,part of north-southHighway 3,500 235km na

September2012 -

At feasibility-studystage (August

2012)

North-South Highway 22,800 1,811km Cengiz Insaat

2010 - 2015(136km); -

2020(793km); -

2020(1018km)

Certain sectionsunder construction

(August 2012)

4 road projects, ThuThiem new urbanarea, District 2, HoChi Minh City 480 na VIDFI

October2012 - 2015

Under construction(October 2012)

Lao Bao [Quang TriProvince] - Hai Phongport [Hanoi], anextension of the Khon na 900km na

December2012 -

At planning stage,project undernegotiations

between Laos,





$mn)Capacity/


Kaen-Tien Sa Portroad

Thailand andVietnam (December

2012)

Road connectorproject (East-WestHighway - HCM City-Long Thanh-Dau GiayExpressway section),Ho Chi Minh City 106 4km

Vietnam Expressway Corporation(VEC)

December2012 -

end-2014Under construction

(December 2012)

na = not available. Source: BMI Key Projects Database



Energy And Utilities Infrastructure - Outlook And Overview

Table: Vietnam Energy & Utilities Infrastructure Industry Data, 2011-2016

2011 2012e 2013f 2014f 2015f 2016f

Energy & Utilities Infrastructure IndustryValue As % Of Total Infrastructure 31.4 34.5 35.1 35.3 35.4 32.9

Energy & Utilities Infrastructure Industry Value,VNDbn 16,731.2 20,208.7 22,707.3 25,277.8 27,901.0 40,754.9

Energy & Utilities Infrastructure Industry Value,US$bn 0.8 1.0 1.1 1.2 1.4 2.0

Energy & Utilities Infrastructure Industry ValueReal Growth (%) 9.0 11.5 5.9 5.5 5.1 5.5

Energy & Utilities Infrastructure Industry Value As% Of Total Construction 10.3 11.3 11.3 11.3 11.2 14.5

Power Plants and Transmission GridsInfrastructure Industry Value As % Of TotalEnergy & Utilities 89.6 90.5 90.8 90.9 90.8 89.5

Power Plants and Transmission GridsInfrastructure Industry Value, VNDbn 14,989.1 18,288.7 20,606.9 22,967.0 25,338.8 36,480.2

Power Plants and Transmission GridsInfrastructure Industry Value, US$bn 0.7 0.9 1.0 1.1 1.2 1.8

Power Plants and Transmission GridsInfrastructure Industry Value Real Growth (%) 8.7 12.7 6.2 5.7 5.1 5.4

Power Plants and Transmission GridsInfrastructure Industry Value As % of TotalInfrastructure 28.2 31.2 31.8 32.1 32.2 29.5

Power Plants and Transmission GridsInfrastructure Industry Value As % of TotalConstruction 9.2 10.2 10.3 10.3 10.2 13.0

Oil and Gas Pipelines Infrastructure IndustryValue As % Of Total Energy & Utilities 2.3 1.7 1.6 1.5 1.4 1.9

Oil and Gas Pipelines Infrastructure IndustryValue, VNDbn 392.3 341.8 356.9 377.9 398.3 754.5

Oil and Gas Pipelines Infrastructure IndustryValue, US$bn 0.0 0.0 0.0 0.0 0.0 0.0

Oil and Gas Pipelines Infrastructure IndustryValue Real Growth (%) -25.7 -22.1 -2.1 0.1 0.2 0.4

Oil and Gas Pipelines Infrastructure Industry As% of Total Infrastructure 0.7 0.6 0.6 0.5 0.5 0.6

Oil and Gas Pipelines Infrastructure Industry As% of Total Construction 0.2 0.2 0.2 0.2 0.2 0.3

Water Infrastructure Industry Value As % OfTotal Energy & Utilities 8.1 7.8 7.7 7.6 7.8 8.6



Vietnam Energy & Utilities Infrastructure Industry Data, 2011-2016 - Continued

2011 2012e 2013f 2014f 2015f 2016f

Water Infrastructure Industry Value, VNDbn 1,349.7 1,578.2 1,743.6 1,932.9 2,163.9 3,520.2

Water Infrastructure Industry Value, US$bn 0.1 0.1 0.1 0.1 0.1 0.2

Water Infrastructure Industry Value Real Growth(%) 28.5 7.7 4.0 5.1 6.7 7.5

Water Infrastructure Industry As % of TotalInfrastructure 2.5 2.7 2.7 2.7 2.7 2.8

Water Infrastructure Industry As % of TotalConstruction 0.8 0.9 0.9 0.9 0.9 1.3


Table: Vietnam Energy & Utilities Infrastructure Industry Long-Term Forecasts, 2017-2022

2017f 2018f 2019f 2020f 2021f 2022f

Energy & Utilities Infrastructure IndustryValue As % Of Total Infrastructure 36.0 36.3 36.6 36.9 37.3 35.4

Energy & Utilities Infrastructure Industry Value,VNDbn 34,101.4 37,678.7 41,544.3 45,796.4 50,490.7 74,073.3

Energy & Utilities Infrastructure Industry Value,US$bn 1.7 1.9 2.1 2.3 2.5 3.7

Energy & Utilities Infrastructure Industry ValueReal Growth (%) 5.6 5.5 5.3 5.2 5.3 5.5

Energy & Utilities Infrastructure Industry Value As% Of Total Construction 11.1 11.1 11.1 11.1 11.1 14.5

Power Plants and Transmission GridsInfrastructure Industry Value As % Of TotalEnergy & Utilities 90.8 90.8 90.8 90.8 90.8 89.5

Power Plants and Transmission GridsInfrastructure Industry Value, VNDbn 30,956.0 34,214.1 37,725.4 41,594.6 45,868.1 66,304.4

Power Plants and Transmission GridsInfrastructure Industry Value, US$bn 1.5 1.7 1.9 2.1 2.3 3.3

Power Plants and Transmission GridsInfrastructure Industry Value Real Growth (%) 5.6 5.5 5.3 5.3 5.3 5.6

Power Plants and Transmission GridsInfrastructure Industry Value As % of TotalInfrastructure 32.6 32.9 33.2 33.5 33.9 31.7

Power Plants and Transmission GridsInfrastructure Industry Value As % of TotalConstruction 10.1 10.1 10.1 10.1 10.1 13.0



Vietnam Energy & Utilities Infrastructure Industry Long-Term Forecasts, 2017-2022 - Continued

2017f 2018f 2019f 2020f 2021f 2022f

Oil and Gas Pipelines Infrastructure IndustryValue As % Of Total Energy & Utilities 1.3 1.2 1.2 1.1 1.1 1.4

Oil and Gas Pipelines Infrastructure IndustryValue, VNDbn 442.5 466.4 491.6 518.1 546.1 1,034.4

Oil and Gas Pipelines Infrastructure IndustryValue, US$bn 0.0 0.0 0.0 0.0 0.0 0.1

Oil and Gas Pipelines Infrastructure IndustryValue Real Growth (%) 0.4 0.4 0.4 0.4 0.4 0.4

Oil and Gas Pipelines Infrastructure Industry As% of Total Infrastructure 0.5 0.4 0.4 0.4 0.4 0.5

Oil and Gas Pipelines Infrastructure Industry As% of Total Construction 0.1 0.1 0.1 0.1 0.1 0.2

Water Infrastructure Industry Value As % OfTotal Energy & Utilities 7.9 8.0 8.0 8.0 8.1 9.1

Water Infrastructure Industry Value, VNDbn 2,702.9 2,998.2 3,327.4 3,683.6 4,076.4 6,734.5

Water Infrastructure Industry Value, US$bn 0.1 0.1 0.2 0.2 0.2 0.3

Water Infrastructure Industry Value Real Growth(%) 6.2 5.9 6.0 5.7 5.7 5.6

Water Infrastructure Industry As % of TotalInfrastructure 2.8 2.9 2.9 3.0 3.0 3.2

Water Infrastructure Industry As % of TotalConstruction 0.9 0.9 0.9 0.9 0.9 1.3




Slowly Overshadowed

Energy & Utilities Infrastructure Value And Share Of Infrastructure Value

e/f = BMI estimate/forecast, Source: Vietnam General Statistics Office, Local news sources, industry sources,

BMI (Major Projects Database)

Although the total investment in the transport sector will continue to overshadow spending on energy &

utilities, the value of the power plants and transmission grids sub-sector will increase, with real growth

averaging 5.5% annually between 2013 and 2017. Vietnam's power consumption is expected to rise sharply,

in light of both positive economic and demographic growth. The government will therefore need to step up

the country's power generation to meet growing demand and avoid the real risk of persistent electricity

shortages, which could in turn deter foreign manufacturers from using the country as an export base and

force them to direct investment elsewhere.

The government has since announced ambitions plans for the sector. Under the government's Seventh

Power Development Plan, the government has set a target of developing 75,000 megawatts (MW) of power

generation capacity by 2020, with coal-based plants taking up 48% of this investment. This plan is expected

to require an investment capital of US$48.8bn.

Vietnam does not have the fiscal strength to finance this ambition plan, and we believe that investor demand

is vital for it to succeed. However, private investment has been limited, due to the bureaucratic obstacles



and rigidity of the internal market. Electricity Vietnam (EVN) enjoys a monopoly over distribution in

Vietnam's electricity market. A unified tariff is applicable across the country, and artificially low, capped

prices have long made it unprofitable for foreign infrastructure companies to invest in the power sector,

mainly because most of the equipment for power stations has to be purchased from other countries at global

market prices. They have also been deterred by an onerous negotiating process for pricing and distribution

contracts.

Addressing those two issues is clearly within the government's reach and could boost activity in the market,

helping to mitigate some of the risks to future growth inherent in the over-reliance on EVN's investment

programme. In early 2006, the country's Prime Minister approved EVN's master plan for the development

of a three-step competitive power market by 2022. This will be restricted to power generation up to 2014,

expanding to the wholesale market between 2015 and 2022, followed by the retail sector.

Bottom-Up Restructuring

Vietnam's Power Development Roadmap

Source: Electricity Regulatory Authority of Vietnam

Vietnam officially launching its competitive generation market (CGM) on July 1 2012, marking the first

phase of its power market development roadmap. The roadmap spans over 10 years and is projecting the

introduction of an electricity wholesale market in 2014 and an electricity retail market by 2022. Under the

CGM, independent power producers (IPPs) would forward their asking prices to the Electric Power Trading

Company (EPTC). These EPTCs would purchase the electricity via a competitive cost-based pool and sell it

to distribution companies and large consumers at regulated prices.



To liberalise the power sector further, Vietnam's Minister of Industry and Trade, Vu Huy Hoang, granted

approval to establish three power generation companies in June 2012: Genco 1, Genco 2 and Genco 3.

These companies are to take over power generating plants directly under EVN. Genco 1 will manage

hydropower plants, such as Dai Ninh, Ban Ve and Song Tranh. Meanwhile, Uong Bi Thermal Power in

Northern Quang Ninh Province will serve as a backbone for Genco 1, which will also acquire EVN's shares

in the Quang Ninh thermal power plant and some other thermal project management boards throughout the

country. Genco 2, which is the upgrade of Can Tho Thermal Power, will manage the Quang Tri and An

Khe KaNak hydropower plants and the Thu Duc, Hai Phong and Pha Lai thermal power plants. The

establishment of Genco 3 is based on Phu My Thermal Power and 11 affiliates, including the Vinh Tan

thermal power plant and the Buon Kuop hydropower plant. These three companies will remain under EVN,

which will also appoint their personnel.

EVN Still Dominating Power Generation

Vietnam - 2010 Installed Capacity Mix By Owners, %

Source: Vietnam Institute of Energy 2011

Coal: Growing Foreign Participation

The first ever public-private partnership (PPP) in Vietnam's power generation sector gained momentum in

May 2009. Malaysia's JAKS Resources reportedly signed a memorandum of understanding (MoU) with



the Vietnamese government for the construction and operation of the Hai Duong thermal power station.

This is a significant milestone for Vietnam as it indicates that opportunities to fill the investment gap left by

state-owned EVN are proliferating for IPPs.

Since then, foreign involvement in the sector has significantly accelerated, with the largest project a U

$10.6bn deal signed between Russian and Vietnamese authorities to construct Vietnam's first 2000-

megawatt (MW) nuclear power plant in the Ninh Thuan province.

The coal generation sector has also been receiving significant attention from foreign investors. The Mong

Duong 2 plant in particular is representative of this growing liberalisation in the Vietnamese utilities sector,

as it is one of Vietnam's first foreign-backed build-operate-transfer (BOT) coal-fired plants. Aside from

being built and operated by foreign companies, the project is financed by foreign banks. Besides the Mong

Duong 2 plant, four other coal-fired plants (Nghi Son 2, Phu My 3, Mhy My 2.2 and Hai Duong) are being

implemented by foreign independent power investors under BOT contracts.

Several BOT coal-fired power plant projects are in the pipeline.

In April 2012, Sembcorp Utilities secured in-principle approval for the construction of a 1,200MW power

plant in Dung Quat Economic Zone in Quang Ngai, Vietnam. The company is evaluating the feasibility of

this project.

In February 2013, Japan's Sumitomo Corporation lodged an application to secure an investment licence for

the construction of a US$2bn, BOT coal-fired power plant in Khanh Hoa. The first turbine of the 1,320MW

plant is likely to start commercial operations in 2017. The plant will use coal imported from Australia and

other nations and will deliver power to state-owned EVN. As of May 2013 negotiations with the

government over the contract terms were under way, with the BOT contract expected to be signed in Q114.

In April 2013, the Vietnamese government approved Toyo Ink Group's request to be the project investor of

the US$3.5bn Song Hau 2 thermal power plant under a BOT basis. A MoU would be negotiated and signed

by the Ministry of Industry and Trade and several government agencies with Toyo Ink on the project. As of

July 2013, the company had yet to finalise negotiation with the authorities regarding detailed terms such as

the power tariff, concession period, and fuel supply.

In June 2013, India-based electric utility Tata Power secured a contract worth US$1.8bn from the

Vietnamese government. The contract is to develop two 660MW coal-fired thermal power plants in South

Vietnam. The construction of the power project, called Long Phu 2, is likely to start in 2019. This is



believed to be the largest Indian investment in Vietnam and will support Tata Power's own aspirations in

South East Asia and India's Look East policy

Besides BOT contracts, the Vietnamese government is keen to award foreign players engineering,

procurement and construction (EPC) contracts for thermal (gas- and coal-fired) power plants. The

government had announced in September 2011 that it is in talks with foreign companies over the

construction of a further 12 power plants in the country. Some of the foreign companies that have won such

projects are: Chinese consortium CHENGDA, DEC, SWEPDI and ZEPC for the Duyen Hai 3 coal-fired

power plant in August 2011; Hyundai Engineering & Construction for the Mong Duong 1 coal-fired

plant in September 2011; Wuhan Kaidi Electric Power for the Thang Long coal-fired power plant in

December 2011; PHI Group for the Hai Lang coal-fired power plant in December 2011; Toyo Ink

Group for the Song Hau 2 coal/diesel oil plant in January 2012; Trisun International Development for a

US$400mn plasma-converted gas plant for power generation in Ho Chi Minh City; and Daelim Industrial

for the O Mon 1 gas-based power plant in September 2012. The 440MW Mao Khe coal-fired power plant

was also completed in April 2013 under an EPC contract, awarded to Wuhan Kaidi Electric Power and

Germany's WULFF.

Vietnam is also reliant on foreign players to provide equipment for coal-fired power plants. In May 2012, a

joint venture (JV) comprising South Korea's Daelim Industrial and Japan's Sojitz Corporation was

awarded an US$826mn contract to provide plant equipment for the 1,200MW Thai Binh 2 coal-fired power

plant. The JV signed the contract with PetroVietnam Construction Joint Stock(PVC), the construction

subsidiary of state-run oil and gas company PetroVietnam. Under the terms of the agreement, the JV

would install and test-run boilers, turbines and two generators for the US$1.6bn Thai Binh 2 plant,

according to the Vietnamese government cited by Reuters. This was followed by US-based Babcock &

Wilcox being awarded a US$300mn equipment contract for the project in August 2012. In February 2012,

PVC had signed a US$1.6bn contract with state utility EVN to provide EPC services for the Thai Binh 2

plant. If completed, the Thai Binh 2 plant would be the largest conventional thermal power plant in northern

Vietnam. The plant is expected to become operational by 2016.

The country is also keen for foreign companies to develop a domestic power equipment manufacturing

industry in Vietnam. In July 2012, the Vietnamese government had selected three thermal power plants that

are to use locally manufactured power equipment, reports Intellasia. Through the use of local power

equipment, the government is aiming to increase the capacity of domestic power equipment manufacturers

and end low-quality power equipment imports, which arrive mostly from China. The three plants in

question are: the Vinacomin-invested Quynh Lap 1 in Central Nghe An province; the PetroVietnam-



invested Song Hau 1 in Southern Hau Giang province; and the PetroVietnam-invested Quang Trach 1 in

Central Quang Binh province.

The pilot plan to use locally manufactured power equipment is expected to encourage domestic and foreign

manufacturers that have established facilities in Vietnam to boost their investment in the country. The

statement was made by Dao Phan Long, the deputy president of the Vietnam Association of Mechanical

Industry. Tran Viet Ngai, the chairman of the Vietnam Energy Association, said that Chinese contractors

have participated in 20 thermal power projects in Vietnam. Surveys have found that the weakness of

contracts has led to problems in the implementation and operation of these projects.

We highlight that coal-fired power plants that rely on domestically sourced coal are set to face rising fuel

costs, which could erode their profitability. This is because state coal miner and supplier Vinacomin has

been selling coal to power plants below the cost of production. Although the price of coal sold to the power

sector was raised on April 20 2013, this is still just equal to 85-87% of the projected production cost for

2013. Vinacomin was previously able to sustain losses from these sales as the power sector only accounted

for 10-15% of total output, while coal exports (which accounted for most of total output) were highly

profitable. However, a decline in global coal prices and an increase in demand from local power producers

(30% of total output in 2012) has led to the unwinding of the situation, and the Vietnamese trade ministry is

in the midst of determining a second rate hike.

Some coal-fired power plant projects are also facing difficulties with reaching financial closure. In April

2013, local authorities in the Kien Giang province announced that the Kien Luong Power Centre project

will likely be halted if the Tan Tao Group is unable to arrange capital required for investment, worth

around US$6.7bn. The project was licensed five years ago. The first phase of the project, thermal power

plant Kien Luong 1, was expected to become operational by end-2013. Land clearance for the construction

of the Kien Luong 1 was obtained more than 18 months ago, but no progress on it was made owing to a lack

of capital, according to ITACO, a subsidiary of Tan Tao Group.

Hydropower: Indispensible, But Problematic

Hydropower provides more than a quarter of Vietnam's electricity. In previous years, there has been a stable

stream of investment into increasing hydropower capacity as elevated coal prices in Asia render coal plants

costly to operate. This trend has changed in recent years, with a growing number of hydropower projects,

particularly small-scale hydropower plants, being cancelled. The country has 1,021 hydropower projects,

with a combined capacity of 24,246MW, located in over 36 provinces and cities.



In October 2012, nine hydropower projects planned in the Vietnamese province of Thua Thien Hue were

cancelled by the provincial People's Committee in late-September. These nine are part of 21 small- to

medium-capacity plants planned in the province for completion by 2020, with a total combined capacity of

357MW. Reasons given for the cancellation included poor economic feasibility, a lack of progress and

environmental concerns.

In March 2013, the Vietnamese province of Kon Tum had implemented a ban on new hydroelectric power

(HEP) projects, reports Energy Business Review. The ban was imposed owing to environmental reasons,

namely the loss of forest cover and the erosion of downstream river basins, which has occurred as a result of

HEP development. 21 proposed HEP projects have been cancelled as a consequence of the ban. Several

other Vietnamese provinces have previously imposed similar prohibitive legislation.

In June 2013, a recent report published by the Vietnam National Assembly (NA) showed that nearly half of

the 1,108 small-scale hydro-power projects in the National Master Plan for Power Development until 2020

had been cancelled. In addition, NA Deputy Truong Van Vo had also proposed that the government

withdraw the planned hydropower projects 6 and 6A in Dong Nai Province from the national master plan.

The projects have a combined capacity of 240MW, and were undergoing environmental impact

assessments.

We believe this adverse sentiment towards hydropower plants is due to three factors:

Reliability: In recent years, hydropower has proven to be an unreliable source of electricity, due largely to

the severe droughts that have plagued Vietnam.

A lack of economic feasibility: The report published by the NA stated that there was a lack of investor

interest in hydropower projects due to low profits. We believe this is due to the low electricity prices - the

government controls prices, and the average rate for electricity in Vietnam is VND1,369 (US$0.066) per

kilowatt hour (kWh); one of the lowest in the world. This means that the country's sole electricity

distributor, EVN, is likely to purchase electricity at an even lower rate, thus making it hard for hydropower

projects (loaded with high upfront costs) to break even within an attractive period of time.

Environmental concerns: Environmental concerns - namely deforestation and the destruction of natural

landscapes - were key reasons cited by the Vietnamese Department of Industry and Trade in June 2012

regarding its decision to reject 52 sub-standard hydroelectricity projects for the first half of 2012. The NA

also stated that only 2.1% of the 51,000 hectares (ha) of forested land that had been used for construction of

hydro-power projects in Vietnam had been planted with new trees.



Despite this negative investment climate, there are still hydropower projects being developed. In January

2013, Alstom was awarded a contract to supply electro-mechanical equipment for a hydroelectric power

plant in Vietnam, reports Energy Business Review. Alstom will install turbines and generators at the

154MW Dong Nai 5 facility, working in conjunction with its Chinese business partner, Hydrochina

Huadong.

Nuclear: Still In The Works

Vietnam has taken the first step towards nuclear. Vietnam's nuclear ambitions stretch back to the 1980s,

when the country first considered developing the technology. According to the country's Seventh Power

Master Plan, there are plans for 10 nuclear power plants with an installed capacity of 10,700MW by

2030. Eight sites in central Vietnam are being considered as location for potential nuclear power plants,

including locations in Ninh Thuan, Binh Dinh, Phu Yen, Ha Tinh and Quang Ngai provinces. According to

a statement by the Vietnamese prime minister in March 2013, the country now plans to build 8000MW of

nuclear capacity by 2025 and 15,000MW by 2030, representing 10% of total generation.

This ambition appears to be in process of being achieved as, in November 2011, Vietnam signed two key

agreements - one loan agreement and one consultancy agreement - with Russia for the construction of its

first nuclear power plant, the US$10bn, 2,000MW Ninh Thuan 1 nuclear project. The project is estimated to

cost a total of US$10bn, and Russia will provide up to US$9bn for the project, as well as a second loan of

US$500mn for the establishment of a nuclear science and technology centre. A Russian consortium is

expected to complete the feasibility study of the project by end-July, which includes the selection of the

project site. Atomstroyexport, a subsidiary of Russian state nuclear holding company Rosatom, will begin

constructing the plant in 2014, which is to become operational in 2020.



Thermal Dependent

Vietnam Electricity Generation Capacity Mix, 2012e

e = BMI estimate. Source: UN Data, EIA, BMI

Similarly, in September 2011 a Japanese consortium, known as the International Nuclear Energy

Development of Japan (INEDJ), signed an agreement with Vietnamese state utility EVN to jointly develop

the Ninh Thuan 2 nuclear power project in Vietnam. As part of the agreement, nuclear plant operator Japan

Atomic Power conducted a US$26mn feasibility and environmental study on the project and was set to

report the results, which include an assessment on tsunamis, to EVN in July 2013. Japan Atomic will also

provide consulting to EVN on the preparation of necessary documentation for site approval for Vietnam's

Ninh Thuan 2 nuclear plant, according to the Wall Street Journal. Japan Atomic would also provide or

secure financing and insurance of up to 85% of the project's total coast, with Japan providing loans around

US$500mn for the project.

Vietnam's Song Da 5 also signed a contract in early February with Russian company NIAEP to send some

Vietnamese workers to build Russia's Rostov nuclear power plant. This is part of the training to build the

Ninh Thuan nuclear plant, with Vietnamese workers to be sent to Japan as well.

Despite concerns over Vietnam's readiness to adopt nuclear power, the country is at a more advanced stage

than other developing countries and already has cooperation agreements in place with South Korea, Japan,



the US, Canada, China and France. Vietnam has also passed an Atomic Energy Law - which has been in

effect since 2009 - and a national nuclear safety commission responsible to the Prime Minister, which was

established in July 2010. Vietnam was also planning to set up a new National Council for Atomic Energy

Development in May 2013. The council, headed by Vietnam's science and technology minister, will advise

the government on identify strategies and draw up key policies on nuclear energy development. It will also

coordinate with various agencies, governmental bodies and localities in developing nuclear

energy. However, even in its most optimistic outlook, the Vietnamese government does not expect nuclear

capacity to come online before 2020.

South Korean companies are also keen to build nuclear power plants in Vietnam. In March 2012, South

Korea signed an agreement with Vietnam to check the viability of building a nuclear power plant. South

Korea was expected to initiate the feasibility studies in April 2012 and these were scheduled to be

concluded in mid-2013. The US also appears keen to secure any future nuclear power plant contracts in

Vietnam, as the country sent a delegation in May 2013 to discuss the development of nuclear generation in

the US and Vietnam.

Geothermal: Making A Presence

In October 2012, a 25MW geothermal power plant was scheduled to be constructed in Dakrong District in

Central Quang Tri Province, Vietnam, according to the deputy chairman of Viet Nam Thermal Association,

Ta Huong. This will be the first power plant of its kind in Vietnam and has already secured licences by

provincial authorities. The geothermal plant will have the capability to operate 24 hours a day without being

affected by weather conditions such as sunlight, wind or waves. The plant will reportedly use hot dry rock

heat mining technology to generate power.

ADB To Support Underinvested Transmission Network

Vietnam's electricity transmission network is in a poor condition and suffers from high levels of electricity

wastages, due to an inefficient grid system. According to EVN, electricity losses in the first five months of

2012 were over 5.3bn kWh; 11% of the total electricity production and purchase. This is significantly

higher than its South East Asian peers who have an electricity loss ratio of about 4-5% according Tran Viet

Ngai, chair of the Vietnam Energy Association. According to Ngai (cited from Intellasia), the losses are due

to old transmission lines, overloading, locking connectors, distribution wires and old substations.

Significant investment is therefore required to address these transmission losses and meet future demand for

grids. According to the National Power Transmission Corp (NPT) in June 2012, total demand for



investment capital to develop the electricity transmission network to 2020 reaches about US$10bn.

Transmission projects have so far borrowed only US$4bn-worth of official development assistance (ODA)

and commercial loans; the remaining US$6bn has not been arranged.

Vietnam is looking to change this. In November 2011, the NPT announced that Vietnam will develop

300-350 power transmission projects in the period up to 2015. This would require an annual investment of

US$1bn and the country is seeking foreign investment. The Asian Development Bank (ADB) has since

agreed to provide some of the financing.

In February 2012, the ADB and the State Bank of Vietnam signed documents for the first tranche of a US

$730mn loan facility to be provided by the ADB to improve the electricity transmission network of

Vietnam. The loan will be used to finance the Power Transmission Investment Programme, which is

designed to fulfil the increasing electricity demand of the industrial sector and households. The ADB is

expected to provide the funds in four tranches, with the programme scheduled to be completed in June

2020. The first payment of US$120.5mn will be provided through ordinary capital resources and will have a

term of 25 years. The funds from the first tranche will be utilised to build 648km transmission lines with a

voltage of 500 kilovolt (kV), and 100km transmission lines with 220kV voltage.

In May 2012, Vietnamese state-operated power company Ho Chi Minh City Power Corporation (HCMC

Power) has asked the Saigon municipal government to allow it to install power lines underground, reports

The Saigon Times. HCMC needs to invest VND17tn (US$816mn) in development by 2015, but has an

annual budget of just VND600bn (US$28mn). The company has therefore proposed to install underground

power lines in order to cut costs, comprising 18km of medium-voltage power lines and 43km of low-voltage

power lines. The entire city's power network is expected to be underground by 2025. However, structural

changes need to be made before there is sufficient investment to meet the long-term demand for grids.

Vietnam's electricity transmission price remains low, averaging 6.58% of electricity prices during the

2008-2012 period. This is much lower than the global average price and needs to be raised to 10-12% of

electricity prices.

In July 2012, NPT started implementing a US$215mn power transmission line project which involves: the

437km, 500kV Pleiku-My Phuoc-Cau Bong transmission line; the 15.94km, 220kV Cau Bong-Hoc Mon-

Binh Tan line in HCM City; and the 13.4km 220kV Cau Bong-Duc Hoa line in HCM City. The project is

financed by ADB (US$115mn) and by the French Development Agency (US$100mn). The project aims to

transmit electricity from power plants in the central region, imported electricity from Laos and Cambodia,

coal-fired power plants in Northern Vietnam to the southern provinces.



In January 2013, the Southern Electricity Corporation announced that it would invest nearly VND4.5trn

(US$225mn) for major power projects in 2012. These projects include a 56km sea cable system from Ha

Tien to Phu Quoc island - the EPC contract for the project was awarded to Italy's Prysmian Powerlink Sri

and power transmission networks in areas inhabited by Khmer people in Kien Giang, Soc Trang and Tra

Vinh provinces.

Water Treatment: Droughts Driving Demand For Services

Vietnam has significant potential for large-scale water treatment facilities and we are forecasting real

growth in the water infrastructure industry to average 6.0% per annum between 2013 and 2017. Despite the

presence of the Mekong River, Vietnam faces severe droughts periodically, with the drought in early 2010

reportedly one of the country's worst in 100 years, according to Time Magazine.

We believe that these droughts have the potential to increase in severity over the long term. Rapid

industrialisation throughout Vietnam is polluting the country's water supply at an increasing rate and

reducing the availability of potable water.

Driving Demand For Water Treatment Services

Vietnam - Real GDP And Organic Water Pollutant Emissions Data

f= BMI forecast. Source: BMI, World Bank, Vietnam General Statistics Office



Many countries located along the Mekong River, such as China and Laos, are also keen to utilise the river's

hydropower potential for electricity generation, damming up major tributaries further up the Mekong River.

These countries have questionable environmental licensing regulations; thus, it is unclear if water resources

used for electricity supply are environmentally sustainable. This creates significant potential for severe

environmental consequences and further reduces the availability of clean water supply to Vietnam.

Consequently, large-scale water treatment facilities are needed to make up for this decline in water supply,

and we have seen the country offer several projects under a PPP framework.

Urbanisation in major Vietnamese cities is also rapidly contaminating their water sources, while at the same

time increasing their demand for potable water. Hanoi, for example, is reliant on ground water to meet its

water needs, with clean water demand estimated to be around 550,000m3 per day according to local media

reports. With urbanisation and economic growth, this demand for potable water is expected to surge to

1.0-1.5mn m3 per day. This would create a deficit in clean water resources and necessitate the use of surface

water resources, which are potentially contaminated.

Various multilateral financial institutions are keen to finance these water utility projects, with the ADB

having already agreed to provide US$1bn in funds to improve the country's water supply system between

2011 and 2020. Indeed, the urban water supply projects in Vietnam are now mainly funded by ODA capital

and developed by local state-owned water supply companies, said Tran Tuong Lan, head of the Department

for Infrastructure and Urban Centers under the Ministry of Planning and Investment.

Most of the country's large-scale water utility projects are located near the main cities, Hanoi and Ho Chi

Minh City.

Vietnam has also recognised the need to improve its water infrastructure, and we have seen Vietnam offer

several large-scale water utility projects (mainly water treatment facilities) under a PPP framework.

According to the Vietnam Ministry of Construction, there are around 15 large-scale urban water supply

projects worth US$500mn that are in need of investment across Vietnam.

In addition, there is also a significant deficit in wastewater treatment facilities among Vietnam's industrial

parks. In August 2012, the Vietnam Department of Environmental Crime Control (under the Ministry of

Public Security) said that only 143 out of the 232 industrial parks in Vietnam have wastewater treatment

facilities. With Vietnam set to take a tougher stance on pollution, this could prompt companies to develop

the necessary wastewater treatment facilities.



Under the law on administrative sanctions to come into force on July 2013, the maximum penalty for

environmental violations will quadruple from the current VND500mn to VND2bn. In addition, the Ministry

of Public Security is coordinating with the Ministry of Natural Resources and Environment to revise the

2005 Environment Protection Law and map out an Ordinance on the Vietnam Environment Police. This is

expected to be issued in the third quarter of 2013.

Several foreign investors have expressed an interest in Vietnam's water utilities sector, particularly Japan-

and Philippines-based companies. For example, Japan-based clean water companies Metawater and TSS

are believed to be building the Bay Mau wastewater treatment plant in Hanoi, a project financed by Japan's

ODA coordinator, Japan International Cooperation (JICA). Another notable example is the recent

acquisitions by Philippine conglomerate Ayala Group. In May 2012 Ayala, through its subsidiary Manila

Water, had acquired stakes in two Vietnamese water utility companies. The company bought a 10% stake

in Nha Be Water Supply, a company that supplies potable water to a district in Ho Chi Minh. Manila

Water also bought a 49% stake in Kenh Dong Water Supply, the owner of the 300,000m3/day Thu Duc

Water Treatment Plant. This makes Manila Water the largest foreign investor in Vietnam's water utilities

sector.

There are, however, many investors still deterred from Vietnam's water utilities sector, and we believe some

of the reasons are:

■ The inability for investors to determine the price of water sold to customers, which is currently set byVietnamese authorities. Given that most countries do not allow the private sector to set the price of water,we believe this issue has more to do with Vietnam's lack of regulatory capacity to address and managedownside risks for private investors.

■ The lack of incentives to attract investors to the sector. According to the HCMC Institute of DevelopmentStudies (cited by the Saigon Times), private companies enjoy corporate income tax reductions andexemptions, but unlike state-owned enterprises, they do not have priority access to preferential loans.This is particularly important at the moment due to poor credit conditions globally.

■ The lack of clarity regarding the PPP framework for water utility projects. The Vietnamese governmenthad launched a pilot PPP mechanism in November 2010, but specific regulations for the different types ofinfrastructure (including water) have yet to be completed by their respective agencies.

Table: Table: Major Projects - Energy & Utilities


$mn)Capacity/


Oil & Gas Pipelines

B-O Mon natural gaspipeline 800 400km

Vietsovpetro Joint Venture Co,PetroVietnam Construction Joint

Stock Corp and PetroVietnam 2009-2011Construction started

(November 2009)



Table: Major Projects - Energy & Utilities - Continued


$mn)Capacity/

Length Companies Timeframe StatusTechnical Services Joint Stock

Corp

2nd Nam Con Son gaspipeline na 400km PetroVietnam 2010-2014

PetroVietnam toprepare feasibility

study (March 2010)

Nam Con Son 2pipeline project,southern Vietnam 441 293km

PetroVietnam Construction andPetroVietnam Equipment

Assembly, Metal Structure 2011-2013

Contract awarded byPetroVietnam Gas

(July 2011)

Power Plants & transmission grids

Danang hydropowerplant 74 170MW Geruco Song Con Hydropower 2010-2013 Under construction

Kien Luong Coal-firedPower Complex (Phase1), Kien LuongProvince 2,500 1,200MW

Tan Tao Energy Corporation,China Harbour Engineering

Company [EPC]Q1 2010 -end-2013 Under construction

Nhon Trach 2 gas-based power plant,Ong Keo IndustrialPark, Dong Naiprovince 470 760MW PetroVietnam

mid-2009 -November

2011Completed

(November 2011)

Vinh Tan 2 thermalpower plant, part ofVinh Tan ElectricCentre, Tuy Phongdistricts, Binh Thuanprovince 1,300 1,244MW

EVN, Shanghai ElectricityCorporation-China [EPC]

August 2010- late-2013

(first turbine);June 2014

(secondturbine)

Under construction,financing secured

(January 2013)

Two wind farms, BinhThuan Province 440 200MW Saigon Invest Group

August 2010-

Project approved inprinciple (August

2010)

Coal power plant BOTproject, Binh Thuanprovince 1,750 1,200MW

China Southern Power GridCorp

September2010 - 2014 Under construction

Muong Kimhydropower plant 37 13.5MW Hanoi Electrical Equipment -2010

Completed - Startedcommercialoperations

(September 2010)

Wind farm in ThuanBac district, NinhThuan Province 500 200MW

Trung Nam Investment andConstruction 2010-2012


Coc San hydropowerplant 41 29.7MW Colben Energy JSC 2010-2013


Dak R'Tih hydropowerplant, Gia Nghia town,Dak R'Lap district, DakNong province 192 144MW

Dakdrinh Hydropower JointStock Company, Construction

Corp No 1

2007 -December

2011

Completed withoutforeign guidance (Oct

2011)

Dak Sepay hydropowerplant in Bai Tho spring 3 3MW Duc Long Gia Lai Group (DLG) 2010- Currently under way

Ninh Thuan 1 nuclearpower plant 10,600 2,400MW

Russian Government [Sponsor],EVN, Rosatom,

Atomstroyexport, E4 Group ,Kiev Scientific Research and 2014-2020

Feasibility studycompleted by end-

July 2013, VTB





$mn)Capacity/

Length Companies Timeframe StatusDesigning Institute (JSC KIEP),EnergoProjectTechnology (LLC

EPT), VTBoffered a US$1bn

loan (February 2013)

Song Hau 2 coal-firedpower plant (Song HauThermo PowerComplex), Hau Giangprovince 2,500 2,000MW PetroVietnam, Toyo Ink Group

January2012 - 2018

BOT project receivedgovernment approval

(April 2013)

Ninh Thuan 2 nuclearpower plant 14,400 2,000MW

International Nuclear EnergyDevelopment Corporation ofJapan, Japan Atomic Power 2014-2022

US$26mn feasibilityand environmental

study completed byMarch 2013

(December 2012)

Mong Duong 2 coal-fired BOT power plantproject, Quang Ninhprovince 2,100 1,200MW

AES, Posco Power, ChinaInvestment Company (CIC),Doosan Heavy Industries &

Construction, Hoa BinhConstruction and Real EstateTrading Joint Stock Co (HBC)

September2011 -

December2014 (firstturbine); -

June 2015

Under construction,28% completed

(November 2012)

Wind power project inVinh Tan and VinhPhuoc, Soc TrangProvince na 300MW EAB Group, Trasesco 2011-

At the developmentstage

Huoi Quanghydropower plantproject na 520MW

Electricity of Vietnam, FrenchDevelopment Agency (AFD) 2010-2015

Received US$100mnfinancing from AFD

Phu Quy wind powerplant, Binh ThuanProvince 17 6MW

PetroVietnam PowerCorporation, Electronics and

Informatics Corp (VEIC),Viettronics Construction JSC

(VIETCT), Amec TechnologiesJoint Stock Co 2010-

First phase underconstruction;

Financing securedwith OceanBank and

HSBC

Dak Mi 2 Hydropowerplant 128 96MW Song Da 9.01 2010- 2013

Contract signed -First turbine expected

2013

Song Chay 5hydropower plantproject, Then PhangCommune, Xin ManDist, Ha Giang province 21 16MW

Song Da 5 Investment,Construction and Energy

Development Joint Stock Co 2010-2012Construction

under way

Son La hydropowerpower plant, Muong Ladistrict, Son Laprovince 2,900 2,400MW

Electricity of Vietnam (EVN)[Sponsor]

2005 -August 2012 Completed

Long Phu 1 coal-firedpower plant, Soc TrangProvince 1,200 1,200MW

PetroVietnam, PetroVietnamTechnical Services Corp 2011-2014


Lai Chau hydropowerplant, Lai Chauprovince 1,831 1,200MW EVN, Song Da Group 2011-2017

Under construction;Facing payment

delays (June 2011);First phase completed

by March 2016





$mn)Capacity/


Thang Long coal-firedcirculating fluidisedbed power plant,Guangninh province 303 600MW

Wuhan Kaidi Electric Power,Thang Long Thermoelectric,

Vinacomin 2012-2015EPC contract signed

(Dec 2011)

Vung Ang 2 coal-firedpower plant, Ky AnhDistrict, Ha TinhProvince 1,700 1,200MW

Vapco, Hung Nghiep FormosaHa Tinh Co.

early-2013 -2020

At tendering stage,BOT contract signed

by end-2012 (October2012)

1.1mn-volt ultra highvoltage (UHV) electricpower transmissionproject near Ho ChiMinh City na na Tokyo Electric Power (TEPCO) 2011-

Feasibility studycompleted in

February 2011

Nam Cong 2 and NamCong 3 power plants inAttapeu, Laos 135 111MW Hoang AnhAttapeu Electric 2011-2013 Licence granted

Hydropower plant 62.5 na

Sumitomo Mitsui FinancialGroup [Sponsor], Nippon Export

and Investment Insurance ofJapan [Sponsor], Chugoku

Power CoFebruary

2011 -

Sumitomo MitsuiFinancial Group

agreed to US$51mnloan (February 2011)

Nghi Son 2 coal firedpower plant 25-yearBOT project, ThanhHoa province 2,300 1,200MW

Marubeni Corp, VietnamNational Coal-Mineral Industries

Group (Vinacomin), KoreaElectric Power Corp (KEPCO),Korea EximBank, Japan Bankfor International Cooperation

(JBIC) 2011-2018Contract awarded toKEPCO (April 2013)

Phu My 2.2 thermalpower station na 715MW Electricity of France (EDF) 2011-

EDF selected asinvestor

Cong Thanh coal-fuelled power plant,Nghi Son EconomicZone, Thanh Hoa 619 600MW Cong Thanh Corporation 2011- 2014 Under construction

Da M'bri plant, LamDong province 2 75MW

Southern Region Hydropower,Mien Dong 2011-2012

Construction contractawarded

Tidal energy farm 40 10MW ScottishPower Renewables naPlans approved - May

2011

A Luoi Hydropower,Thua Thien HueProvince 155.5 170MW Cavico, Central Hydropower

2007 - May2012

First unit completed,Second unit

completed byend-2012 (May 2012)

Hua Na hydropowerplant, Que Phongdistrict, Nghe Anprovince 286 180MW

Hua Na Hydropower Joint StockCo, Lilama 35 Joint Stock Co

2008 -late-2012 Completed

A solar and wind powerdevelopment, NinhThuan province 249 124.5MW na 2011-

Received investmentlicences

2 wind power projects -Nhon Hoi EconomicZone, Binh Dinhprovince 60 51MW

Central Region Wind-Power,Phuong Mai Windpower Q2 2011- Under construction





$mn)Capacity/


Thermo power plant,Nhon Hoi EconomicZone, Binh Dinhprovince 972 1,400MW STFE 2012-2014

At planning stage;Document submitted

to Vietnamesegovernment

Thermoelectric powerplant, Hau Giang 2,500 2,000MW TOYO 2011-2019

Seeking formalgovernment approval

Waste-to-powertreatment plant, BinhPhuoc 60 na Suc Song Xanh 2011-

Constructionapproved - Planned

production capabilityof 124mn kWh of

electricity per annum

Mao Khe coal-firedpower plant, QuangNinh province 577 440MW

Vinacomin, BNP Paribas[Sponsor], Bank of China

[Sponsor], Wuhan Kaidi ElectricPower Company, Wuhan Kaidi

Electric Power EngineeringCompany, WULFF 2009 - 2013

Completed (April2013)

Duyen Hai 2 coal-firedpower plant, Tra Vinhprovince 1,500 1,200MW Janakuasa 2011-2014

To start constructionin 2011; Project fullyfinanced by Huadian

Engineering

Quang Trach 1 coal-fired power plant,Quang Binh province 2,250 1,200MW

PetroVietnam, EPF Power,JPAWORR, Sumitomo [Sponsor]

early-2013 -2015

Under construction,seeking funds,

selected to use localpower equipment

(July 2012)

Song Tranh 4hydropower plant,Quang Nam province 77 48MW na 2011-2014 Under construction

Trung Son hydropowerproject, Quan HoaDistrict, Thanh Hoaprovince 411 260MW

World Bank [Sponsor], 47Construction JSC (C47),

Samsung C&T Corporation

October2012 - Q42016 (1stturbine); -


(November 2012)

Hai Phong 1 thermopower plant na 300MW na - Q2 2011

Generator No 1 and 2joined national grid

(Q211)

Hai Phong 2 thermopower plant na 300MW

Hai Phong Thermo Power JointStock Co

-September2013

Third generation tostart in April 2013;Fourth generator,September 2013

Dadrinh hydropowerplant, along Tra KhucRiver, Quang NgaiProvince 170 125MW

Dakdrinh Hydropower JointStock Co., Petrovietnam 2011 - 2014

Under construction;US$178 credit

contract signed withCredit Agricole Corp.

Solar power generationplant, Quang Binhprovince 14 na na 2011 - 2013

US$12mn loanapproved from Korea

Eximbank (June 2011)

Undersea (110kV)power cable project(Ha Tien Township -Phu Quoc Island), KienGiang province 112 56km

EVN Southern Power [Sponsor],World Bank [Sponsor], Prysmian

Powerlink SRL Group [EPC]May 2012 -

late-2013EPC contract

awarded (May 2012)





$mn)Capacity/


Hai Duong coal-firedpower plant BOTproject, northernVietnam 2,260 1,200MW

Jaks Resources Berhad, WuhanKaidi Electricity Power

Engineering Company (EPC),Sanjung Merpati (SMSB-

Malaysia)

Q1 2014 -Q3 2017

(first turbine);- Q1 2018

Jaks terminatecontract with existingpartners, signed with

new partners (January2013)

Wind Farm, Bac Lieu,Cuu Long province,Mekong Delta 247 99.2MW

Cong Ly Construction, GeneralElectric (GE) [Equipment], Trade

and Tourism

September2010 -

September2013

Under construction,first phase (15MW)

completed (October2012)

Wind power plant,Duyen Hai District, TraVinh province. na 30MW

EAB Group, General TradingProduction and Services Joint

Stock Co (Trasesco 2011 -

In discussion with TraVinh province

People's Committee(July 2011)

Wind power project,Tram Hanh Commune,Da Lat City, Lam Dongprovince na 300MW na 2011-2013


Ninh Loan wind powerplant, Duc TrongDistrict, Lam Dongprovince na na na 2011-2013

Under construction(July 2011)

Dakrinh hydropowerplant, Kon Turnprovince 205 125MW

Dakdrinh Hydropower JointStock Co, PV Power,

PetroVietnam 2011-2013

BOO agreementsigned; US$15.5mnequipment contract

awarded to DongfangElectric (July 2011)

Song Hau 1 coal-firedpower plant, Hau Giangprovince na 1,200MW

PetroVietnam, PetrovietnamTechnical Services Corp 2011-2015

Under construction,selected to use local

power equipment(July 2012)

Duyen Hai 3 coal-firedpower plant, Mu Uhamlet, Dan Thanhcommune, Tra Vinhprovince, southernregion of Vietnam 1,300 1,245MW

EVN [Sponsor], Bank of China[Sponsor], Industrial and

Commercial Bank of China[Sponsor], China DevelopmentBank (CDB) [Sponsor]; Thanh

Dat China [EPC], EasternElectrification [EPC], Southwest

Design Institute and ZhejiangPower Construction [EPC],

Powe

December2012 -

December2016 (1st

turbine); - Q22017 (2nd

turbine)Under construction

(December 2012)

Vung Ang 1 coal-firedpower plant, Ha Tinhprovince 1,600 1,200MW

Petrovietnam, LILAMACorporation [EPC], Toshiba,

Sojitz, JBIC [Sponsor],Sumitomo Mitsui [Sponsor]

August 2011- July 2012

Under construction;Steam turbine

generators fromToshiba, Sojitz

(November 2011)

Mong Duong 1 coal-fired power plant, nearCam Pha Town,northern Quang NinhProvince 1,700 1,080MW

Hyundai Engineering &Construction [EPC], Vietnam

Machine Installation Corporation(Lilama) [Equipment], Vietnam

Electricity Corporation[Sponsor], Korea Eximbank

[Sponsor], ADB [Sponsor]

October2011 - Q12015 (first

turbine); - Q22016

(Secondturbine)

Under construction,US$510mn fromKorea Eximbank(February 2013)

Srepok 4A hydropowerplant na 64MW

Buon Don Hydropower JointStock Co

2011 -late-2012

Under construction(Sep 2011)





$mn)Capacity/


Son My Power Centre(LNG) BOT project,Ham Tan District 4,670 3,000MW

International Power, Sojitz,Pacific

October2011 - 2019

Feasibility studyprepared for

1,950MW Son My 1power plant (Oct

2011)

Thermoelectric plant,Ganh Dau Commune 344 200MW

Phu Quoc Investment andDevelopment Management

BoardOctober

2011 -Received government

approval (Oct 2011)

Hydropower plant,Song Bac River, HaGiang province 50 42MW Song Bac Hydroelectric

November2011 -

end-2012

Under construction(Nov 2011); US$50mn

loan from SumitomoMitsui Bank

O Mon 4 combinedcycle gas-based powerplant, part of O Monthermal powercomplex, Can Tho city 793.5 720MW

Can Tho Thermal PowerCompany, ADB

2011 - June2016

US$309.9mn loanfrom ADB, US$370mn

from KfWBankengruppe (Nov

2011)

Integrated gasificationcombined cycle systemcoal-fired power plant,Hai Lang District,Quang Tri EconomicZone, central Vietnam na 3,600MW PHI Group, Sao Nam Group

December2011 -

MoU signed (Dec2011);

Power TransmissionInvestment Program(involves building648km of transmissionlines in first tranche) 730 860km

ADB, National PowerTransmission Corporation

December2011 - June

2020

US$730mn loan fromADB, first tranche of

US$120.5mnapproved (Dec 2011)

Coal-fired power plant,Dung Quat EconomicZone, Binh Dongcommune, Binh Sondistrict, Quang NgaiProvince 2,000 1,200MW Sembcorp Utilities

Q2 2016 -2020

At planning stage,Feasibility study

under way (October2012)

Waste plasma-converted gas-firedpower plant first phase,Ho Chi Minh City 400 na

Trisun InternationalDevelopment, Kien Giang

Composite KGC CompanyMarch 2012

-Project awarded

(Mar-12)

O Mon 1 gas-basedpower plant, part of OMon thermal powercomplex, Can Tho city na 660MW

Can Tho Thermal PowerCompany Limited, Daelim

Industrial [Design andConstruction], Sojitz Corporation

[Steam Turbines], JICA[Sponsor], Mitsubishi Heavy

Industries [Equipment]

September2012 -

October2015

Under construction(September 2012)

Pleiku-My Phuoc-CauBong 500kVTransmission Line 447 437km

National Power TransmissionCorp (NPT), ADB, AFD

Q3 2011 -end-2012

Under construction(February 2013)

Dak Nong-PhuocLong-Binh Long 220KVTransmission Line 67 na

National Power TransmissionCorp (NPT)

September2011 -

end-2012Under construction;

US$45mn from BIDV

Ba Thuoc 2hydropower plantproject 72 na

Hoang Anh-Thanh HoaHydropower Joint Stock Co,

Hoang Anh Gia Lai GroupSeptember

2009 - 2012 Under construction





$mn)Capacity/


Song Bung 4hydropower EPCproject, Bung River 24 156MW

Alstom, Hydrochina HuadongEngineering Corp

February2012 - 2014

Contract awarded(February 2012)

Dong Nai 5hydropower plant 310 154MW

Vinacomin, Alstom , HydrochinaHuadong Engineering

2013 -August 2015

Contract awarded(February 2013)

An Khanh 2 coal-firedpower plant, Tan PhuCommune, Pho YenDistrict, Thai Nguyenprovince 481 300MW

An Khanh Thermo Power JointStock Co., Bank of China

[Sponsor]early-2012 -

2016

Investment licencereceived (October

2011); Site clearanceunder way

An Khanh 1 coal-firedpower plant, An KhanhCommune, Dai TuDistrict, Thai Nguyenprovince. na 100MW

An Khanh Thermo Power JointStock Co. 2011 -

Under construction(December 2011)

Kien Luong Coal-firedPower Complex (Phase2), Kien LuongProvince na 1,200MW


Company [EPC]June 2010 -

early-2014Contract awarded in

2010

Kien Luong Coal-firedPower Complex (Phase3), Kien LuongProvince na 2,000MW


Company [EPC] June 2010 -Contract awarded in

2010

Thermal power plant,Ly Son Island, QuangNgai province na na na - April 2012

Project suspendeddue to environmentalconcerns (April 2012)

Phuong Mai WindPower Plant No 1,Nhon Hoi IndustrialPark, Binh DinhProvince 60.25 30MW

Clean Energy, CP Phuong MaiWind Power

April 2012 -April 2013

Under construction(April 2012)

Grid revamping project;8km of medium-voltagepower lines and 43kmof low-voltage powerlines 816 na HCMC Power Corporation

May 2012 -2015

At planning stage(May 2012)

Thai Binh 2 coal-firedpower plant, Thai Binhprovince 1,700 1,200MW

PetroVietnam PowerCorporation, PetroVietnam

Construction Joint StockCorporation [EPC], Toshiba,

Sojitz [Equipment], DaelimIndustrial [Equipment], Babcock

& Wilcox Beijing Company(BWBC)

August 2012- end-2015

Power connectionagreement signed(December 2012)

Mekong Delta WindPower Centre, VinhTrach Dong Commune 1,000 500MW

Vietnam Development Bank[Sponsor], Export-Import Bankof the United States [Sponsor]

June 2012 -2015

Under construction(June 2012); US$1

loan received(October 2011)

Undersea power cableproject (Sa Ky Port - LySon Island), QuangNgai Province 14.4 26km

Power Engineering ConsultingJoint Stock Company 2 June 2012 -

Surveying activitiescompleted (June

2012)





$mn)Capacity/


Solar farm, Binh Thuanprovince na 50MW ACO Group July 2012 -


Quynh Lap 1 coal-firedpower plant, CentralNghe An province 1,500 1,200MW

Vinacomin, No 1 ConstructionConsultancy JSC

January2012 - 2016

Under construction,selected to use local

power equipment(July 2012)

Da Nhim hydropowerplant expansion project na 80MW

Da Nhim-Ham Thuan-Da MiHydropower JSC

Q1 2013 -Q42015


Vinh Tan 1 thermalpower plant BOTproject, part of VinhTan Electric Centre,Tuy Phong districts,Binh Thuan province 1,900 na China Southern Group July 2012 -

At documentationstage, BOT contract

yet to be signed (July2012); Undergoing

land acquisitionprocess (August 2012)

Waste powergeneration project,Hanoi 29.5 na

Hitachi Zosen Corporation,Japanese New Energy and

Industrial TechnologyDevelopment Organisation

[Sponsor], Hanoi government[Sponsor]

August 2012-

Contract awarded(August 2012)

Vinh Tan 3 thermalpower plant BOTproject, part of VinhTan Electric Centre,Tuy Phong districts,Binh Thuan province na na Vinacomin

August 2012-

At planning stage,undergoing land

acquisition process(August 2012)


Can Tho Thermal PowerCompany

August 2012- 2015

At planning stage(August 2012)


Can Tho Thermal PowerCompany

August 2012- 2015

At planning stage(August 2012)

Nam Chien hydropowerplant BO project, SonLa province na 200MW

Song Da Group, Bharat HeavyElectricals

August 2012-

Under construction;First 100MW unit

commissioned(February 2013)

Geothermal powerplant, Dakrong District,Quang Tri province na 25MW na

September2012 -

Received governmentapproval (September

2012)

Nong Son coal-firedpower plant, Nong SonDistrict, Quang Namprovince 253.3 na

China National Heavy MachineryCorporation (CHMC), Vinacomin

[Sponsor] 2008 -

Construction halted,56% completed

(January 2013)

Pleiku-Phu Lam 500kVtransmission line, partof North-South powertransmission na 500km

Power Transmission CompanyNo. 4, General Electric (GE), US

Exim Bank [Sponsor]2012 - Q3

2013

US$16.5mnequipment supply

contract signed (July2012)

Vietnam distributionefficiency project 800 na EVN, World Bank

November2012 -

Project financingclosed; US$449m

loan from World Bank(November 2012)





$mn)Capacity/


Dong Nai 6/6Ahydroelectricity plant na 135MW Duc Long Gia Lai Company

December2012 - end

2015

At planning stage,undergoing

environmental impactstudy (December

2012)

Miyar hydropowerplant, HimachalPradesh 165 120MW Moser Baer Projects April 2013 -

Received government(CEA) approval

(December 2012)

Duyen Hai 1 coal-firedpower plant, Tra Vinhprovince 1,200 1,200MW EVN 2012 -

Under construction,financing secured

(January 2013)

Water

Thanh My Loiwastewater treatment na na na -2015

Site selected (August2010)

Song Hau 1 watertreatment plant PPPproject, Can Tho City na na PetroVietnam 2011 -

Contract awarded;Construction due to

begin (May 2012)

Song Hau 2 watertreatment plant, AnGiang Province na na na 2011 -

Plan approved by thegovernment in 2010

Song Hau 3 watertreatment plant, AnGiang Province na na na 2011 -

Plan approved by thegovernment in 2010

Wastewater treatmentplant, Binh Duong 95

6mn m3/year na

2011-mid2013 Under construction

Water supply andirrigation systemproject, south ofVietnam 329 na Asian Development Bank (ADB) 2011-2014

US$85mn loan fromADB and French

government; The restfrom Vietnamese

government

Yen So PPPwastewater treatmentplant, Hoang MaiDistrict, Hanoi 300

200,000m3/day

Gamuda, Gamuda Land VietnamCo., Japan International

Cooperation Agency (JICA),Hanoi Water Drainage Company 2008-2012

Under construction,almost completed

(June 2012)

Water pipeline systemproject (Binh Thaiintersection [Thu DucDistrict] - Dien BienPhu Street near SaigonBridge), Ho Chi MinhCity 154 10km

Asian Development Bank[Sponsor], Saigon Water

Corporation (Sawaco)June 2012 -

late-2014US$138mn loan from

ADB (June 2012)

Phuc Hoa waterresource project 60 na na 2011-2014

US$60mnsupplementary

financing provided byADB

Bay Mau PPPwastewater treatmentplant under SecondHanoi Drainage ProjectFor EnvironmentalImprovement, Vietnam 29

13,300 m3/day

JICA, Metawater, TSS, HanoiWater Supply, Sewerage,Environment Investment

ConstructionOctober

2011 -

US$192.4mn loansigned with JICA (Jul

2011); To form JVwith Vietnam

company (Sep 2011)





$mn)Capacity/


Phu Do wastewatertreatment plant, Hanoi 144

84,000m3 /day Hanoi Water Drainage Company July 2012 -


Yen Xa water treatmentplant, Hanoi 288

275,000m3/day

Hanoi Water DrainageCompany, ODA [Sponsor] July 2012 -


Seven water supplyprojects, Ho Chi MinhCity 240 na

Saigon Water SupplyCorporation (Sawaco)

September2011 - 2015

Under construction(September 2011)

Sewage treatmentplant, Ben Rongcommune, Go Daudistrict, Tay Ninh 14.4

300 tonnes/day

Vietnam Green EnvironmentCompany

September2011 -

late-2012

Received approvalfrom Tay Ninh

provincial People'sCommittee

(September 2011)

Binh Hung wastewatertreatment plant secondphase, Binh ChanhDistrict, Ho Chi MinhCity na

512,000m3/day

Center of Urban Flood Control,JICA July 2011 -

MoU for secondphase signed with

JICA (July 2011)

Hoa Lien Wastewatertreatment PPP project,Da Nang city 190 na

JFE Engineering, Nihon SuidoConsultants, JICA [Sponsor]

November2011 -

US$2mn from JICAfor feasibility study

(December 2012)

Tra Bong water supplyproject, Binh Sondistrict, Quang Ngaiprovince 197

200,000m3/day

Anh Phat Water Supply GroupJoint Stock Co

April 2012 -Q4 2013

Under construction(April 2012)

Nhieu Loc-Thi NgheCanal Basinenvironmentalsanitation project 787 na

World Bank [Sponsor], AsianDevelopment Bank [Sponsor]

2003 - June2012 (first

phase)

US$317mn first phaseunder construction

(April 2012); Secondphase to cost US

$470mn

Kenh Dong watertreatment BOT project,Ho Chi Minh City na

200,000m3/day

Kenh Dong Water Supply JointStock Co, Ayala Corp, Manila

Water2003 - H2


(April 2012)

Water pipeline systemproject (Binh Thaiintersection - Thu Ducwater plant), Ho ChiMinh City na 12.4km

Asian Development Bank (ADB),Saigon Water Corporation

(Sawaco) - June 2012Completed (June

2012)

Thu Duc 3 watertreatment plant, LinhTrung Ward, Thu DucDistrict, Ho Chi MinhCity 58

300,000m3/day

Passavant-Roediger [EPC],Construction Corporation No. 1

[EPC]; Commerzbank [Sponsor],Saigon Clean Water and

Investment Joint StockCompany

December2012 - July

2014

EPC contractawarded (November

2012)

Nhieu Loc-Thi Nghewastewater treatmentplant (second phase),Thanh My Loi Ward,District 2, Ho Chi MinhCity na

850,000m3/day na July 2012 -

Received HCM Cityapproval (July 2012)

Western West Lakewaste water treatmentplant, Hanoi 144

61,400m3/day na July 2012 -






$mn)Capacity/


Ha Dong waste watertreatment plant (firstphase), Hanoi 20

20,000m3/day ODA [Sponsor] July 2012 -


Green waste treatmentplant, Thu Thua district,Long An Province 700

40,000tonnes/yr

Vietnam Waste Solutions Co.(VWS)

August 2012- 2022

At planning stage;Design, feasibility,

geological studycompleted (August

2012)

water supply project,Pleiku, Gia Lai province 9

30,000m3/day

Saigon Infrastructure RealEstate Investment (SII), HFIC

Investment Joint StockCompany, Tuan Loc Company 2013 - 2014


(August 2012)

Water supply project,Van Phong EconomicZone, Khanh HoaProvince 4.8

30,000m3/day na

September2012 -

At planning stage(September 2012)

Son Tay watertreatment plant, Hanoi 12

9,000m3/day na July 2012 -


Tan Hiep 2 watertreatment plant, Ho ChiMinh City 100

300,000m3/day

Saigon Clean Water andInvestment Joint Stock

Company 2013-2024At planning stage

(April 2013)

Thu Duc 4 watertreatment plant, Ho ChiMinh City 130

300,000m3/day



(April 2013)

Tan Hiep 3 watertreatment plant, Ho ChiMinh City 162

300,000m3/day



(April 2013)

Thu Duc 5 watertreatment plant, Ho ChiMinh City 176

500,000m3/day



(April 2013)

na = not available/applicable. Source: BMI Key Projects Database



Residential/Non-Residential Building - Outlook And Overview

Table: Table: Vietnam Residential And Non-residential Building Industry Forecasts, 2011-2016

2011 2012e 2013f 2014f 2015f 2016f

Residential and Non-residential BuildingIndustry Value As % of TotalConstruction 67.3 67.3 67.7 68.0 68.3 68.7

Residential and Non-residential BuildingIndustry Value, VNDbn 109,392.6 120,647.8 135,707.8 151,876.7 170,011.8 189,630.4

Residential and Non-residential BuildingIndustry Value, US$bn 5.3 5.8 6.5 7.4 8.4 9.4

Residential and Non-residential BuildingIndustry Value Real Growth (%) -1.9 1.0 6.0 6.1 6.7 6.5

Residential and Non-residential BuildingIndustry Value as % of GDP 4.3 4.1 4.1 4.1 4.1 4.0


Table: Table: Vietnam Residential And Non-residential Building Long-Term Forecasts, 2017-2022

2017f 2018f 2019f 2020f 2021f 2022f

Residential and Non-residentialBuilding Industry Value As % of TotalConstruction 69.0 69.4 69.7 70.0 70.3 70.6

Residential and Non-residentialBuilding Industry Value, VNDbn 211,442.4 235,580.2 261,512.2 289,606.5 320,694.0 355,108.5

Residential and Non-residentialBuilding Industry Value, US$bn 10.6 11.8 13.1 14.5 16.0 17.8

Residential and Non-residentialBuilding Industry Value Real Growth(%) 6.5 6.4 6.0 5.7 5.7 5.7

Residential and Non-residentialBuilding Industry Value as % of GDP 4.0 4.0 3.9 3.9 3.8 3.8




We expect the residential and non-residential building sector to see a significant recovery in 2013. Real

growth for the sector is forecast to reach 6.0% in 2013, compared to growth of 1.0% in 2012. Our optimistic

outlook for Vietnam's buildings sector is primarily driven by the country's conducive monetary conditions.

The government is seeking to boost economic growth and brought the policy rate down to 7.00% in May

2013; the lowest policy rate since December 2009. Given the lagged impact of monetary easing, this means

that the positive implications of this easing will only start to translate in H213.

Recovering After 2012

Residential And Non-Residential Building Industry Forecasts

e/f = BMI estimate/forecast. Source: BMI, Vietnam General Statistics Office

We believe that this recovery will be driven by the non-residential buildings sector, rather than the

residential building sector. Large inflows of foreign capital into the real estate market, poor economic

conditions in Vietnam and loose monetary policy in recent years have led to an oversupply in the residential

building sector. According to a report from the Vietnam Ministry of Construction, 34,000 apartments and

15,300 houses across 55 provinces and cities were unsold at the end of March 2013, and they had an

estimated combined value of around VND125trn. This oversupply is particularly severe in the mid- and

high-end segment of the housing market.



This oversupply of units has prompted a sharp decline in land and real estate prices as investors aggressive

lower their asking prices to offload their units. For example, Vietnam's Hoang Anh Gia Lai Joint Stock

Company had released a new apartment project in Ho Chi Minh (HCM) City's District 7 at prices that are

30-50% lower than those of similar projects in the area in October 2012 (cited from Intellasia).

Recovery Not To Last

Vietnam - Real Estate Index

Source: BMI, Bloomberg

To compound the problem, many of the real estate companies have taken on large amounts of debt to fuel

their building activity in previous years. With a sizeable part of their real estate stock unsold, many of them

are facing difficulties repaying their loans and are unable to take on new projects. Indeed, Vietnamese banks

are wary about providing credit to real estate developers as they already account for a significant portion of

their debts - 13% of total bad debts in the banking system according to the State Bank of Vietnam in

December 2012.

Although the aggressive rate cuts taken by the government in recent months could reignite demand for

housing, the scale of the oversupply makes this unlikely. According to Vietnamese investment group

Dragon Capital in September 2012, the current apartments in stock could take seven years to be fully

absorbed by the market unless demand stimulus measures are executed.



During a real estate conference in June 2012, the Vietnamese government is planning to increase public

investment disbursements that will indirectly revive the real estate sector. The government is also planning

to launch a fund subsidised by the state budget for the poor to buy houses, and a fund for middle- and

higher-income earners to save their own money to buy houses. The government is also considering halting

the development of new residential projects that have not completed their site clearances. The government

is also considering tax-incentives to spur demand for housing.

On top of this, the Vietnamese government is also reviewing the regulations - Resolution 19 - to allow

foreigners who invest, work and live in Vietnam to buy and own real estate as of March 2013. At present,

only 427 out of 80,000 expats in Vietnam are eligible to own properties in Vietnam, but there is growing

demand to ease this regulation and allow all foreigners to own properties in Vietnam.

The Ministry of Construction (MoC) is also seeking approval from the government in April 2013 to turn

commercial housing into houses for lease. This could ease financial pressures on real estate companies and

allow low-income people to secure housing. At present, rented houses account for more than 6.3% of people

who own houses in Vietnam, according to the MoC. Around 14% and 19% of all housing in Hanoi and in

HCM City are for rent respectively, with the rest of the cities around 5%. A national housing strategy

approved in 2011 had aimed to raise the proportion of rental housing to 20% by 2015 and 30% by 2020. As

of June 2013, the MoC was still finalising the rental housing plan.

In June 2013, the Vietnamese government approved a VND30trn stimulus package to provide loans for

purchasing and completing low-cost housing, though the impact of the stimulus package is expected to be

limited given its relatively small scale.

Besides government measures, other upside risks for the residential sector are Vietnam's attractive

macroeconomic and population fundamentals. Rising incomes among Vietnamese consumers and rapid

urbanisation rates will boost demand for housing and commercial construction projects, such as malls and

hotels, over the coming years. Meanwhile, the country's private consumption growth is expected to remain

resilient, while the unemployment rate will remain at historical lows over the long term. These factors

would also ensure that the demand for housing and commercial projects remains robust.

Foreign investors could also remain interested in the real estate sector due to its long-term growth potential.

According to Vietnam's Foreign Investment Agency under the Ministry of Planning and Investment (cited

from Intellasia), foreign direct investment (FDI) inflows to the real estate sector amounted to US$1.85bn in

2012, more than doubled the figure in 2011 (US$850mn). FDI inflows to the real estate sector were also the



largest among the various sectors, accounting for 14.2% of total FDI in Vietnam. These large FDI inflows

are due to investments made by Japan's Tokyu Corporation and Singapore's Keppel Land.

Lastly, the demand for affordable houses is still robust, as residential development in the past has largely

focused on high-end customers. The Vietnamese government is keen to meet this demand. For example,

there are plans to build 2.7mn m2 of social housing by the end of 2015 in HCM City. The social housing

programme is expected to provide accommodation for 100,000 college students and 93,000 workers, as well

as 17,500 apartments for low income earners. In Hanoi, city authorities have announced in July 2013 that

they will supply 15,500 apartments for low-income people by 2015. The project, which is in its first phase,

is expected to cost US$402mn.

The MoC had also introduced Circular No 02/2013, which allows companies to convert the apartment

structure of commercial housing projects to low-cost housing. As of April 2013, 12 housing projects had

been given permission to convert to low-cost housing.

Non-Civil Building To Outperform

We believe that the main driver of growth for the residential and non-residential building sector is non-

residential. Although the lack of external demand for Vietnam's manufacturing goods is set dampen the

demand for industrial buildings (such as factories and warehouses) over the coming years, the demand for

Vietnam's resources could remain robust and this could drive demand for energy-related facilities and non-

residential buildings. A key sector is the petrochemicals industry. Around nine petrochemicals projects are

at the planning stage and are expected to be completed by 2025, with foreign investment to be sought for six

of the plants managed by PetroVietnam. The country is racing to meet growing demand for petrochemicals

- to reach about 5.4mn tonnes per annum by 2020 - and a supply shortfall is expected to remain, even after

the completion of the planned projects. The projects include a facility with 1mn tonnes per annum (tpa)

polyethylene, 500,000tpa polypropylene and 400,000tpa PVC capacity, according to the director of

PetroVietnam's Research and Development Centre for Petroleum Processing, Phan Minh Quoc Binh, as

quoted by Plastics News.

One of the largest projects is the Long Son petrochemical complex. In February 2012, Siam Cement

Group (SCG), QPI Vietnam, PetroVietnam and Vietnam National Chemical Corporation (Vinachem)

signed a joint venture agreement to invest in a US$4.5bn petrochemical complex in Southern Vietnam.

Under the deal, SCG is to acquire a 46% stake in the project. The company has said that the complete

details regarding investment in the project and how it will be financed are scheduled to be finalised in 2013.

The fully integrated complex, which will use ethane, propane and naphtha as feedstock, will be situated on



Long Son Island at Ba Ria-Vung Tau province. The complex, which is likely to start commercial operations

within four years, will have an annual production capacity of 1.4mn tonnes of olefins.

Another key project is the US$8bn Nghi Son oil refinery in the central province of Thanh Hoa. The US

$2.1bn engineering, procurement and construction (EPC) contract for the project was awarded to GS

Engineering and Construction and SK Engineering & Construction making it Vietnam's largest ever

EPC contract for the oil and gas sector. Under plans first unveiled in 2008, Nghi Son refinery is a joint

venture between PetroVietnam with a 25.1% stake, Kuwait Petroleum International with 35.1%, Japan's

Idemitsu Kosan with 35.1% and Mitsui Chemicals with 4.7%. The project is expected to be completed by

2017 and have an annual capacity of 10mn tonnes of crude oil, or 200,000, 1.5 times greater than Dung

Quat's current capacity.

Vietnam's relatively low cost of labour could also still attract investors to develop manufacturing capacity in

the country. In March 2013, Samsung started building a US$3.2bn high-tech complex in the Thai Nguyen

province, which will house Samsung's largest mobile phone factory in the world.

Tourism - Gambling On A Trend

Another key driver of growth in the non-residential buildings sector is the tourism sector. We expect

tourism - both domestic and regional - to become a growing source of value creation for the sector, as

disposable income levels rise across the Asia Pacific region and short-haul travel becomes more accessible

to an expanding middle-class population. As such, there is a growing demand for hotel rooms. For

example, Ho Chi Minh City's tourism authority had projected an additional supply of 27,000 hotel rooms by

2020 as part of its master plan. As of April 2013, Ho Chi Minh City had 49,900 hotel rooms, with 27% of

them three- to five-star units.

The rising popularity of integrated gaming resorts across the region also epitomises this growing desire to

travel, with casinos fast becoming a pre-requisite for many would-be tourism developments. In August

2011, foreign investors were invited to bid for a planned US$4bn tourism complex on Phu Quoc Island,

having been given the go-ahead by the Vietnamese government, with the government aiming to transform

the island into a trade and tourism hub. While there are casinos in many Vietnamese hotels that are open to

foreign tourists, these are deemed too small in scale to attract the kind of numbers required to compete with

the likes of Macau's multi-billion dollar developments.

The Vietnamese government has therefore set a US$4bn minimum investment threshold for its 135 hectare

(ha) project, which will include a 30,000m2 casino with a 30-year operating licence, as well as five- or six-



star hotels. The government plans to make the island a special administrative and economic region - Macau

has a similar status bestowed upon it - which will presumably allow it to function outside the country's

gambling laws. The island is expected to attract two to three million visitors per annum by 2020.

However, it has not been all smooth-sailing. In September 2012 Genting Malaysia, a subsidiary of

Genting Group, withdrew from a US$4bn resort project in the Quang Nam province. The project was to be

jointly developed with VinaCapital, but the Malaysian gaming conglomerate chose to pull out because the

Vietnamese government does not allow Vietnamese to enter gaming facilities.

Meanwhile, a US$1bn hotel project site invested by Vietnam's Kinh Bac City Development in Hanoi

remains a wasteland. The project has been in a limbo since 2009, where Japan's Riviera Group pulled out

of the project due to financial difficulties and Kinh Bac stepped in to take over the investment. As of

December 2012, the project is used for agriculture, parking and football pitches.

In June 2013, Vietnamese media reported that local authorities had cancelled 93 projects on Phu Quoc

Island - including a EUR2.6bn luxury resort project proposed by Swiss Trustee Group - because the

investors of these projects were unable to find sufficient financing

The US$4.2bn Ho Tram Strip is also facing a delay in its opening due to the pull-out of its first resort's

operator and financing problem. In March 2013, the developer of the Ho Tram Strip - Asian Coast

Development (Canada) Limited (ACDL) - announced that MGM Resorts International (MGM) would

no longer be able to manage the first of the Ho Tram Strip's five resorts in Ba Ria-Vung Tau province.

ACDL had signed an agreement with MGM for the first resort in November 2008. The Ho Tram Strip,

valued at US$4bn, is the largest tourism complex in Vietnam, with five five-star hotels, two of which

have casinos and golf courses. ACDL is building the second hotel tower of the first resort, with 559 five-

star rooms, while an eight-hole golf course designed by Greg Norman is under construction.

The lack of proper planning and delays in the development of the Ke Ga seaport has also adversely affected

resort investors in the Binh Thuan Province. The construction of the Ke Ga seaport required the land of 12

resorts, which the government prompted requested to be shut down for the seaport. The resort investors

were expected to be compensated, but Vinacomin delayed their disbursement of compensation, resulting in

losses for the resort investors.



There are also concerns about the potential for an oversupply in hotel rooms. Room rental rates in Hanoi

had decline in H113 and this could worsen over the near term as the hotel room supply in Hanoi is expected

to reach nearly 10,000 rooms by the end of the year, up 13.5% from the previous year.

Major Projects Table - Residential/Non-Residential Construction AndSocial Infrastructure

Table: Table: Major Projects - Residential/Non-Residential Construction And Social Infrastructure


$mn)Capacity/


Commercial Construction

Eight ibis hotels in Vietnam'smajor cities na na Accor, Benthanh Group 2010-

At planning stage -first hotel to open in

2012

Six tourism constructionprojects, Nhon Hoi economiczone, Binh Dinh 518 na na 2011-

Projects approvalreceived

South Hoi An resort project,Chu Lai Open Economic Zone(OEZ), Quang Nam 4,000

21,000,000m2

Genting Group,VinaCapital July 2011 -

At planning stage,Genting withdraws

from project (October2012)

Happyland VietnamEntertainment Complexproject (includes US$600mnHappyland theme park projectand US$140mn Movie World),Ben Luc District, Long AnProvince 2,000

35,000,000m2 Sanderson Group

November2011 - April


(Nov 2011)

SSG Tower, Ho Chi Minh City 11 na

Ryobi Kiso Holdings,Ryobi Kiso Holdings, Phu

Cuong 2011 -Contract (foundation

works) awarded

Empire Residences andResort project (include 5-starhotel), Ngu Hanh Son District 476 na

Thanh Do Constructionand Investment 2011 - -2012

Under construction(August 2011)

Casino resort (including30,000m2 casino and five-starhotels), Phu Quoc Island 4,000

1,350,000m2 na

August 2011 -2020

At tendering stage(August 2011)

Three condominiums, Ho ChiMinh City 57.9 549 units

Ssangyong Engineering,Keppel Land

September2011 -


Wonderland World Vung Taucomplex (includes a five-starhotel, four four-star hotels, anentertainment centre), NguyenAn Ninh Ward, Vung Tau city 1,300 na Good Choice

January 2007- October

2011Investment licencerevoked (Oct 2011)

Ecotourism centre (includes20km bridge), Southern HonKhoai Island, Ngoc HienDistrict, Ca Mau Province 143 na na July 2012 -


(July 2012)

Tokyu Binh Duong GardenCity (includes 7,500apartments, and commercial/ 1,200 na

Tokyu Corporation,Becamex IDC

January 2013-

Under construction(January 2013)



Table: Major Projects - Residential/Non-Residential Construction And Social Infrastructure - Continued


$mn)Capacity/

Length Companies Timeframe Statusentertainment facilities), BinhDuong province

Long Thanh internationalairport area development plan(including tourism complexand condominiums), Dong Naiprovince na 210sq km na 2012-2025

At planning stage(April 2013)

Education

Ayunpa secondary school, CaMau general Hospital na na Korea Eximbank 2010- US$6mn loan signed

Healthcare

Social development project(educational and healthcarebuildings), Ho Chi Minh City 138 na AFD 2011-

US$29mn loan fromFrench AFD agreed

Orthopedic hospital BTproject, Binh ChanhDistrict,Ho Chi Minh City 54 500 beds

Clearance CompensationCorporation

April 2012 -mid-2014

BT contract signed(April 2012)

Industrial Construction

Nghi Son oil refinery, ThanhHoa province 9,000

200,000b/d

PetroVietnam Construction[Sponsor], Mitsui

Chemicals [Sponsor],Idemitsu Kosan [Sponsor],

Kuwait PetroleumInternational (KPI)

[Sponsor]; JGCCorporation [EPC],

Chiyoda [EPC], TechnipCoflexip [EPC], GS

Engineering &Construction [EPC], SK

E&C [EPC], GS, Q3 13 - 2017

Contract signed,Construction contract

awarded to GS, US$5bn funding from

JICA and Korea EXIMBank (June 2013)

Solar cell factory, Dong NamIndustrial Park, Hoa PhuCommune, Cu Chi Dist, HCMCity 1,000 238MW

First Solar Group, FirstSolar Vietnam

Manufacturing Co Ltd 2011-H2 2012

Under construction;commission of US

$300mn modulefactory postponed

(Nov 2011)

Solar modules manufacturingplant, Chu Lai Open EconomicZone 390 120MW

120MW per annum -Indochina Energy &

Industry Company Limited(ICE) May 2011 -

Under construction;First to have capacityof 30MW per annum

Solar panel manufacturingplant, Quang Nam province na 120MW

Indochinese EnergyCompany 2011- 2013

120MW/year - Underconstruction

Petrochemical complex, LongSon Island, Ba Ria-Vung Tauprovince 4,500

1.4mntonnes/yr

Siam Cement Group(SCG), QPI Vietnam,

PetroVietnam, VietnamNational Chemical

Corporation (Vinachem) 2013-2016

Vinachem to withdrawfrom project, Land

acquisition and EPCtender to be

completed byend-2012 (July 2012)

Residential Construction

Residential developments andmanufacturing projects 291 na

CapitaLand, Keppel Land,PepsiCo 2010- contract signed



Table: Major Projects - Residential/Non-Residential Construction And Social Infrastructure - Continued


$mn)Capacity/


Development of 60mn squaremetres of residential space(public housing) 19,700

600,000units na 2015-2020 At planning stage

Commercial-residentialcomplex, Hanoi 188 na

Daewoo Engineering &Construction, Hi Brand

Vietnam, Inpyung 2011-2013 Contract awarded

na = not available/applicable. Source: BMI Key Projects Database



Industry Risk Reward Ratings

Vietnam - Infrastructure Risk/Reward Ratings

Vietnam has achieved a score of 54.2 in BMI's Asia Pacific infrastructure Risk/Reward Ratings (RRRs). It

remains firmly in the lower half of the rankings and is ninth out of 13 countries; however, the country is

actually one of the fastest-moving business environments in the region. Rapid expansion has raced ahead of

the regulatory environment and the country is a clear outperformer among emerging South East Asian

countries in terms of rewards. That said, corruption and heavy delays to project development continue to

represent significant downside risk.

Rewards

Industry Rewards

Vietnam's score in this category is higher than the regional average. This is indicative of a dynamic market

and reflects our view that Vietnam will continue to be one of the most active and attractive infrastructure

markets in the region. The long-term risks to the market are generally to the upside. Based on BMI's Key

Projects Database, around 200 infrastructure projects with a combined value of around US$200bn are

currently listed as under construction or under consideration in Vietnam. The country achieves a relatively

high score for sector growth in this category.

Country Rewards

In terms of country structure components, which include financial and labour market infrastructure,

Vietnam wallows with middling scores, still below the regional average. The predominant cause is a lack of

sufficient financial infrastructure. Lending in Vietnam is characterised by poor lending standards and

dominated by the four state-owned banks, while gaining access of foreign capital can be difficult. These

poor lending standards have also resulted in very high loan-to-deposit ratios in Vietnam's banking sector. In

the event of a liquidity shortage, or insolvency triggered by economic stress, a financial crisis would be a

plausible scenario, further restricting funding to the construction sector. There are some risks to the upside,

as the banking sector witnesses a raft of privatisations and increased involvement from foreign development

banks - something that may liberalise the sector.



Risks

Industry Risks

Industry Risks represent the largest hurdle for Vietnam at present, scoring only 40 in this category. This is

indicative of structural weaknesses in the infrastructure sector, which in turn pose long-term risks to

investors. The transparency of the tendering process is rated very poorly, scoring only three out of 10. The

competitiveness in the infrastructure and construction sector remains limited and road building, as well as

the energy & utilities sector, is dominated by state-owned firms. The ports and urban railways sector is

where there is the greatest level of foreign investor penetration in the infrastructure sector and we have seen

growing foreign private participation in the power plant and transmission sector.

Vietnam has also been pushing for the faster implementation and development of public-private

partnerships (PPPs) for upcoming infrastructure projects. While PPPs have the potential to address the

country's infrastructure needs, this method is wholly predicated upon the creation of a regulatory PPP

framework to govern the sector. This has not been achieved due to an inability by sub-sovereign

governments and state agencies to carry out the necessary project assessments. In November 2010, the

prime minister had launched a mechanism piloting PPP investment model via Decision 71/QD-TTg, which

came into force from January 15 2011. Under this legislation, concerned agencies were tasked to craft

regulations that allow projects to be developed under a PPP model and to evaluate and award projects for

investment under a PPP model. Companies under the PPP model would enjoy corporate tax reductions and

exemptions, as well as land use fee or land rental exemptions. Companies are also allowed to buy foreign

currencies for project execution. Investors under the PPP model would ask not have to worry about site

clearance as it would be done by the local officials, according to Nguyen Danh Huy, deputy head of the

planning and investment department, in a seminar in mid-2012.

However, progress on these tasks is proceeding very slowly and the PPP framework for areas such as

payments for land rental, land clearance and compensation remained unclear. The Ministry of Planning and

Investment has since introduced draft amendments to Decision 71/QD-TTg, but it remains to be seen if they

are effective. Over 20 projects have been proposed for development under the PPP format, but only the Dau

Giay-Phan Thiet expressway is at a tendering stage, with the rest in the pre-feasibility study stage.

Country Risk



Corruption is prevalent in Vietnam, resulting in poor scores within the Country Risk ratings. Investors see

official corruption as one of the biggest hindrances to running a business in Vietnam, with anecdotal

evidence suggesting that 30% of a project's value is pocketed by the contractor to pay bribes to relevant

parties. For example, at the end of 2011, the World Bank banned Vietnam's Social and Environmental

Development and its Managing Director, Nguyen Xuan Doan, for five years, following allegations of fraud

among World Bank-financed water supply projects. Joint ventures with state-owned enterprises are

particularly prone to corruption and graft, though surveys indicate that while corruption affecting businesses

is fairly prevalent, the amounts involved are usually quite small. Rapid economic growth provides

opportunities for graft to grow more quickly than government systems evolve. Vietnam scored 2.7 out of 10

in BMI's rating for corruption and also rates poorly for its external risks and legal framework.

Asia - Infrastructure Risk/Reward Ratings

BMI View: The average Risk/Reward scores for the Asian infrastructure sector remain largely unchanged

from the previous quarter. However the composition has changed slightly, with greater rewards being

offered in emerging South East Asian countries and poorer rewards being offered in the most populous and

more developed economies in Asia. Overall, the potential for returns in Asia's infrastructure sector remains

considerable, reinforcing the region's status as the world's most attractive and concentrated infrastructure

and construction market.

The average Risk/Reward scores for Asia's infrastructure sector this quarter remain relatively unchanged

from the previous quarter. There is still a substantial disparity in the demand for infrastructure throughout

Asia, translating into a significant divergence in rewards and risks among the Asia Pacific (excluding Japan)

infrastructure markets. A sizeable 40-point differential exists between the top- and bottom-ranked countries

in our Risk/Reward infrastructure regional ratings table. This wide dispersion presents investors with a

range of rewards for different risk appetites.

The key findings from this quarter's update can be summarised as follows:

■ The most populous countries in the region continue to present sufficient scope in rewards to overcomerisks, but there are growing threats to these rewards. Policy inertia and continuity are a problem in Indiaand Indonesia, suggesting that risks at a grass-roots level will remain considerable for these countries.

■ Emerging South East Asian (SEA) countries (particularly Malaysia and Thailand) are offering greaterrewards for their level of risk, as they push forward with their multi-billion dollar infrastructure-buildingprogrammes.

■ The more developed countries in the region continue to present the most attractive business environment,but the decline in external demand and structural problems in their investment climate (particularly forTaiwan and Singapore) are dampening rewards in their respective infrastructure markets.



A Mixed Bag

Asia - Infrastructure BE Risk/Reward Ratings, Scores out of 100

Source: BMI

Nearly Developed Markets: Affected By Export Environment

A general malaise in economic activity continues to befall Asian countries that are nearing developed

market status in terms of their infrastructure market maturity (i.e. Singapore, South Korea, Hong Kong and

Taiwan). Their export-oriented economies leave them highly vulnerable to the deleterious effects of a

languorous global economy, which negatively affects the demand for infrastructure. This is highlighted by

the steady decline in their respective manufacturing purchasing managers' indexes. With latest economic

data indicating that China, the largest export partner for most of these countries, is on course for an

economic slowdown in H213, this non-conductive economic environment for infrastructure is expected to

continue over the near-term.



Ominous Signs For H213

Exports To China, % of Total & Selected Purchasing Managers' Index

Source: BMI, HSBC, Markit, DOTS

This quarter, we have revised down our rewards score for Taiwan from 50.3 to 45.4. This is because the

potential rewards in Taiwan have not only affected by the adverse trade environment, but also by the

structural problems in its business environment for infrastructure - namely the lack of major regulatory

changes to maximise the potential for greater cross-strait economic integration with China, and Taiwan's

worsening demographic profile. These issues cap the potential rewards for infrastructure as they lead to

slower economic growth, which reduces the demand for electricity and transport links such as urban

railways, ports and airports. Taiwan's worsening demographics picture could also impose greater fiscal

constraints on the government (i.e. a decline in tax revenues due to shrinking working population and an

increase in public welfare expenditure), making it more difficult to justify and finance new infrastructure

projects.

We have also revised down our rewards score for Singapore from 56.2 to 54.6. That is because, besides

poorer demand for infrastructure, we are expecting a near-term cyclical drop (i.e. in 2014, 2015) in project

opportunities in the city-state. Most of the major infrastructure projects to be developed this decade

(2011-2020) have either started construction (such as the 42km Downtown Line urban railway project), are

scheduled to start construction in 2013 (such as the fourth terminal in Singapore's Changi airport) or are



expected to be awarded in 2013 (such as the 30km Thomson Line urban railway project) or in 2017 (such as

a fifth airport terminal).

Greatest Potential To Realise Rewards

Nearly Developed Countries In Asia - Infrastructure Rewards (LHS) And Risks (RHS) BER, Scores outof 100

*Higher Score = Lower Risks. Source: BMI

That said, these markets continue to offer the best business environments for realising investment returns as

they are highly developed in terms of their legislative and regulatory environments and present very little in

the way of risks to sponsors and financiers. The average score for risks in these developed markets is 78.3

out of 100, significantly higher than the other nine Asian markets (higher scores indicate lower risks) which

have an average of 50.7. These optimal risk scores reflect a high degree of policy continuity - a major

criterion to project execution and viability - and is the key factor allowing South Korea and Singapore to

secure the first and second spots in our Asia Infrastructure Risk/Rewards Ratings table.



Giants Of Asia: Sizeable Rewards, Sizeable Risks

These developed markets however, do not offer the highest rewards to investors. Asia's largest emerging

economies - China, India and Indonesia - continue to head the group in terms of rewards, securing first,

second and third place respectively for rewards among the Asia markets. The combination of high industry

values, positive long-term macro fundamentals, large fiscal expenditure on infrastructure and expectations

of relatively high growth in construction and infrastructure industry value underpin the high scores in this

category. However, they also present numerous risks, as indicated by their below-average risks scores.

Below Average Risks

China, India And Indonesia - Infrastructure Rewards (LHS) And Risks (RHS) BER, Scores out of 100

*Higher Score = Lower Risks. Source: BMI

China, for example, is expected to increasingly present greater threats to its rewards. The country's

infrastructure market still presents considerable opportunities, but these opportunities are increasingly

located in tier-two and tier-three cities - areas where the economic viability for some of these projects are

highly questionable. In addition, the new government has been quick to implement changes to the

infrastructure programmes in China, starting with the break-up of the powerful Ministry of Railways and

greater considerations towards environmental issues. These changes suggest to us that the new government

is re-thinking several of the previously announced infrastructure projects in transport (especially railways)

and power generation, and we could see a severe scale down in infrastructure investment. Lastly, the

structural deficiencies within the Chinese economy (shaky financial system, overvalued property market,



expensive infrastructure build-up, and huge industrial overcapacity) still remain and are starting to flare up.

This creates the potential for a deep slowdown in China's economic activity, which could cap infrastructure

demand over the near-term.

India is also experiencing greater threats to its rewards and this is reflected by our downward revision of its

rewards score from 66.3 to 64.6. Some of these threats are: the relatively high cost of capital in India; a

weak rupee, costlier overseas equipment and raw materials for Indian infrastructure companies ; and the

numerous business environment issues that continue to delay infrastructure development (e.g.

environmental clearances, land acquisition, convoluted bureaucracy).

Most importantly, it is becoming increasingly difficult for the government to push forward regulatory

reforms that improve India's investment climate for infrastructure. This is due to its weakening political

position and the upcoming parliamentary elections. The ruling government, the United Progressive Alliance

(UPA) coalition, has been politically weakened by the withdrawal of several coalition members - namely

the All-India Trinamool Congress in September 2012 and the Dravida Munnetra Kazhagam in March 2013.

Without their support, the ruling party, the Indian National Congress (INC), is forced to rely on the fickle

support of smaller regional parties for policy execution. The UPA government is also constitutionally

obliged to hold parliamentary elections by 2014. These two events not only increase the difficulty for the

UPA to carry out market-friendly reforms, but could also push the UPA to take a more populist stance in the

months preceding the elections.

As for Indonesia, the country continues to present vast opportunities across the entire infrastructure

spectrum - the central government announced in March 2013, that the next phase of Indonesia's 2011-2025

economic master plan (MP3EI) has 40 'priority' infrastructure projects worth INR337trn between 2014 and

2017.

However, the country's political landscape is hindering the push for regulatory reforms, mirroring the

situation in India. President Susilo Bambang Yudhoyono is constitutionally prohibited from standing for the

presidential elections in 2014, and the prospects of his Democratic Party for the upcoming elections are

shrinking due to successive corruption scandals. This creates the potential for a more populist regime to rise

in prominence as the Democratic Party and other presidential candidates could seek to secure popular

support by increasing subsidies, watering down pro-business reforms, and enacting nationalistic polices.

South East Asia: Better Rewards

South East Asian countries on the other hand, are offering greater rewards for their level of risk as they push

forward with their multi-billion dollar infrastructure-building programmes. This quarter, the average score



for rewards among the South East Asian countries in our Asia Infrastructure Risk/Rewards Ratings table

increased from 50.3 to 51.7, with Malaysia, Thailand and Vietnam the main contributors for this increase.

SEA Offers More

Asia - Q412 & Q113 Infrastructure Rewards Ratings, Scores out of 100

Higher Score = Higher Rewards. Source: BMI

In Malaysia, uncertainties surrounding Malaysia's economic investment plans - namely the country's 10-

year Economic Transformation Programme (ETP) - are dissipating following the electoral victory by the

ruling Barisah National coalition. Although the ruling party has conceded a greater number of seats to the

opposition as compared to the previous election in 2008, it continues to hold a simple majority in

parliament, ensuring policy continuity. This is a major tailwind for infrastructure development as the ETP is

very much focused on creating project opportunities in roads, ports and urban railways.

In Thailand, the government's plan to finance its ambitious THB2.0trn infrastructure plan via debt continues

to move up the gears, with the government set to start borrowing and disbursing funds for the plan in

FY2013/14 (October - September). The likelihood for the plan to be implemented is very high as the

government is very keen to spur infrastructure development, as highlighted by the recent approval for the

loan and contractors to carry out the projects under its long-term water management and flood prevention



scheme. In addition, access to financing and project execution for infrastructure development in Thailand

has improved markedly, with the country successfully launching its first infrastructure fund and a new

public-private partnership act in April 2013.

In Vietnam, economic conditions in the country are slowly improving, creating greater demand for

infrastructure. In addition, the cost of capital remains relatively low, making it more financially viable to

carry out infrastructure projects. Having said that, we highlight that this recovery is still at an early stage

and fraught with numerous hurdles. Investor sentiment remains stubbornly depressed by uncertainties over

the build-up of bad debt in the banking sector and a lack of confidence in the government's ability to

address its deteriorating fiscal position and steer the economy amid the challenging global economic

environment. This makes it difficult for infrastructure projects in Vietnam to reach financial closure.

Table: Asia Infrastructure Risk Reward Ratings

Rewards Risks

Industry

RewardsCountry

Rewards RewardsIndustry

RisksCountry

Risk RisksInfrastructure

RR RatingRegionalRanking

SouthKorea

47.5 88.9 62.0 70.0 78.2 74.9 65.91

Singapore 37.5 86.2 54.6 90.0 88.6 89.2 64.9 2

China 72.5 60.9 68.4 40.0 67.8 56.7 64.9 3

India 75.0 45.4 64.6 55.0 54.2 54.5 61.6 4

Hong Kong 35.0 90.1 54.3 85.0 72.3 77.4 61.2 5

Malaysia 55.0 64.3 58.2 55.0 62.3 59.4 58.6 6

Indonesia 67.5 48.2 60.8 35.0 60.7 50.4 57.7 7

Thailand 47.5 72.3 56.2 50.0 61.4 56.9 56.4 8

Vietnam 52.5 60.4 55.3 40.0 59.7 51.8 54.2 9

Taiwan 30.0 74.0 45.4 75.0 69.9 71.9 53.4 10

Philippines 42.5 55.1 46.9 35.0 58.8 49.3 47.6 11

Pakistan 25.0 43.6 31.5 35.0 45.4 41.3 34.4 12

Cambodia 32.5 25.9 30.2 25.0 45.3 37.2 32.3 13

RegionalAverage

47.7 62.7 53.0 53.1 63.4 59.3 54.9 -

Scores out of 100, with 100 highest. Source: BMI



Market Overview

Competitive Landscape

Construction companies in Vietnam are fairly small and are confined to urban and roads infrastructure

projects. The inland waterway transport sub-sector is managed by two state corporations affiliated with the

Ministry of Transport, a state-owned enterprise (SOE) affiliated with the Vietnam Inland Waterway

Authority and some enterprises managed by other ministries, which are operating in support of the power

generation, cement and paper industries.

Table: Table: Vietnam EQS Data

NameLatest FYEarnings

Market Cap(US$mn)

RevenueGrowth (% y-

o-y)

OperatingProfit Growth

(% y-o-y)Total Debt/

EBITDA

InterestCoverage

RatioPE

Ratio

VietnamConstruction &IMPO 12/2012 239.3 -13.7 -43.5 7.3 0.9 28.8

Songda Urban &Industrial Zo 12/2012 66.7 -64.5 -472.1 na -131.1 na

HCM CityInfrastructure INV 12/2012 101.5 19.3 na 43.4 0.0 5.6

BecamexInfrastructure Devel 12/2012 105.9 -53.6 -38.9 2.0 6.9 14.9

PetroVietnamConstruction Co 12/2012 96.1 -51.8 na na -2.7 na

Development InvestConstruct 12/2012 69.4 -0.2 -66.8 19.6 0.5 na

Kinh Bac CityDevelopment SH 12/2012 107.8 -55.6 na na -0.3 na

Cotec ConstructionJSC 12/2012 71.5 -0.7 -12.5 0.0 451.3 7.0

na = not available/applicable. Source: Bloomberg



Company ProfileCavico Corporation

SWOT Analysis

Strengths ■ It is diversified across a number of inter-related sectors.

■ A portfolio of completed projects sets a precedent for the company in Vietnam's

construction and infrastructure sectors.

Weaknesses ■ According to the company, 'Cavico's business growth is correlated to Vietnam's

economic and infrastructural development' - this endangers the company's

operations and revenue streams in the current downturn.

■ The small size of the company means that competition from domestic state-owned

companies and foreign majors could erode its market share.

■ The value of contracts is very small for a construction and infrastructure company,

typically below US$10mn.

Opportunities ■ Vietnam is one of the best-placed Asian economies to weather the global financial

crisis.

■ The government's willingness to improving infrastructure seems undiminished.

Threats ■ The procedures for project start-ups are bureaucratic in Vietnam (administrative

burdens and inefficiency).

■ Regional contraction in the Asian markets poses threats to Cavico's planned

expansion in the region.

Company Overview Cavico Corp. is the largest private infrastructure and mining company based in Vietnam

(while mining activities are at the heart of the company's operations, for the purpose of

this report we will only focus on Cavico's infrastructure operations). Through its various

subsidiaries, Cavico operates in the power, transport and urban development sectors.

In the power generation sector, Cavico mainly focuses on hydropower and dam

construction, although lately it has also made its first venture in wind power generation.



Transport is the largest, or most active, segment of the company, with operations in

tunnels, bridges and highways. The company also has a presence in commercial and

residential construction in Hanoi, and other regional centres with large-scale mixed-use

projects under way.

Strategy According to the company's declared business strategy, the key points that will guide

investment decisions are: prioritising the key businesses of industrial engineering,

infrastructure construction and mining; investing in strategic industries for the economy

of Vietnam (infrastructure, energy, mining, tourism); diversifying further; widening the

company's portfolio abroad; and increasing joint ventures and partnerships with

international majors.

Hitherto, Cavico has kept to its strategic guidance and has managed to expand into

new sectors (such as wind power generation) and abroad, most recently in

neighbouring Laos.

The company's aim is to increase its current backlog of projects within Vietnam and to

cement its presence in the country's infrastructure sector. BMI believes that Cavico is

well placed in its operations in Vietnam. Its presence in the country has set a precedent

and it has a history of partnerships with local state-owned contractors. Vietnam's

planned infrastructure investments in the power and transport sectors present

significant opportunities that could allow Cavico to achieve its aim of increasing its

order backlog. This rose by 33.8% year-on-year (y-o-y) to reach US$304.6mn as of

June 30 2010.The firm also saw a loss of US$1.8mn in the second quarter of 2010.

According to the company, this was due to the fact many of its hydropower

construction projects were in the early stages, and not generating sufficient revenue to

offset their initial construction costs. Once these projects progress further into

completion, net income will increase as more revenues are generated.

Recent

Developments

■ In April 2011, Cavico Corporation announced that its subsidiary, Cavico Mining, hadreceived an investment licence for the Tan My Hydropower Plant. The licence grantsCavico the right to build-own-operate (BOO) a hydropower plant downstream fromthe Tan My Irrigation Reservoir. The plant will be built in the Phuoc Tan Village, NinhThuan Province. The plant has a designed capacity of 6 megawatts (MW) and isestimated to cost US$6.7mn.

■ In March 2011, Cavico Corporation announced that its subsidiary, CavicoConstruction Manpower & Services, signed a contract to construct the tunnel roofand grout the arch consolidation of a 1.4-mile-long rock transport tunnel at the NghiSon cement plant, Thanh Hoa Province. The contract was valued at approximatelyUS$1.3mn. Cavico expected to complete the project within seven months from thestart of construction.

■ In January 2011, Cavico Corporation announced that its subsidiary, CavicoHydropower Construction, signed a US$7.75mn tunnel construction contract withSong Giang Hydropower Joint Stock Company for the Song Giang 1 hydropowerplant in Khanh Vinh District, in central Vietnam's Khanh Hoa Province. The twin-unitplant, which is located 31 miles from Nha Trang city, will have a 24MW annual



capacity once it becomes operational. Song Giang Hydropower Joint Stock Companyexpects to invest a total of US$23.2mn in the plant.

■ In December 2010, Cavico Corporation announced that its subsidiary, Cavico Bridgeand Tunnel, had signed a US$6mn construction contract with Vietnam's state-ownedelectricity company, EVN, for the100MW Song Bung 2 hydropower plant project.Under the contract, Cavico will be responsible for the construction of three tunnels, asurge tank and a power house. Cavico expects to complete construction by 2014.

Financial Data In Q210, revenues rose by 7.9% y-o-y to reach US$14.7mn. Net profit for Q210 was a

loss of US$1.8mn, compared to net income of US$37,445 in the same period of 2009.

Order backlog as of June 30 2010 was US$304.6mn, an increase of 33.8% y-o-y.

For 2010, the company expected revenues of between US$65mn and US$70mn, while

overall the company expected to see a net loss in the range of US$4-5mn.



Electricity Vietnam Group (EVN)

SWOT Analysis

Strengths ■ EVN's power companies account for 55% of Vietnam's total electricity generation.

■ EVN has outlined ambitious plans to build 74 new power stations by 2020, in line with

the country's power sector development.

• EVN has a diversified portfolio and is involved in all types of power plant projects.

Weaknesses ■ Tightening credit conditions in the domestic banking sector are a key source of funds

for the company. These, together with rising construction costs, have severely

hindered EVN's ability to implement its investment mandate.

■ High debt levels are inhibiting plans for expansion.

Opportunities ■ The Vietnamese government is committed to energy sector development visible in its

ambitious plans to increase Vietnam's total installed generating capacity from 20GW

in 2011 to 75GW by 2020.

Threats ■ Vietnam's Electricity Law (2005) might make operating in the electricity sector more

complex, especially in relation to transitional procedures.

Company Overview Electricity Vietnam (EVN) was founded in 1995 as a state-owned utility engaged in the

generation, transmission, trading and distribution of electricity. EVN owns five limited

liability power companies: Electricity North Vietnam (EVN NPC); Southern Electricity

Corporation (EVN SPC); Central Electricity Corporation (EVN CPC); TP Power

Corporation Hanoi (EVN HANOI); and the Electricity Corporation TP. Ho Chi Minh City

(EVN HCMC). In addition, the subsidiary in charge of EVN's transmission grids is the

National Power Transmission Corporation (NPT).

As of 2010, EVN's power companies accounted for 60% of total electricity generation in

the country and had around 98,000 employees. EVN is managing almost all plant

groups, except for some independent power plants (IPP) and some other build-operate-

transfer (BOT) power plants. Despite further privatisation plans, power transmission

companies and hydropower plants - including Hoa Binh, Tri An and Yaly - as well as the

nuclear power programme, are expected to remain under the management of EVN.



EVN has also played a role in Vietnam's successful rural electrification programme by

implementing power projects financed by the World Bank.

Strategy EVN is expected to face many major changes over the coming years due to the launch

of the Electricity Law in 2005. The law sets out a phased introduction of a competitive

generation market, followed by a competitive wholesale market and finally a competitive

retail market. While there are target dates for the realisation of each phase, important

detail is lacking, especially in relation to transitional procedures. EVN, which is currently

the monopoly off-taker and controller of the electricity transmission and distribution

network, is expected to face increasing competition in the future. As the largest utility

and electricity wholesaler in Vietnam, EVN is the main force driving the development of

Vietnam's power sector. It has taken up this mantle by launching and financing

numerous power projects throughout Vietnam, and has plans to continue to do so. In

July 2011, EVN announced that it will invest US$39bn in building an additional 95 power

plants with a total capacity of around 49,000 megawatts (MW) over the next 10 years,

38 of which will be built between 2011 and 2015. To meet this target by 2015, EVN

would need to invest US$3bn a year in new power plants and transmission

infrastructure between 2011 and 2015.

However, this target appears to be difficult to achieve. EVN is suffering from crippling

debts and is unable to raise sufficient capital to meet its investment needs. In late-June

2012, EVN said that it faced a funding gap of around VND185trn (US$8.9bn) for power

plant projects between 2011 and 2015, while its overdue payments reached

VND10.15trn (US$488mn) at the end of 2011.

One reason for EVN's high debt levels is artificially low electricity prices in the past, and

a lack of sophistication in setting electricity prices. Electricity prices in Vietnam were at

levels below the cost of electricity production, making it unprofitable for power utilities

to sell electricity. Meanwhile, these electricity prices are not allowed to fluctuate, thus a

rise in the cost of basic inputs such as energy commodities cannot be passed on to the

consumer. Consequently, EVN is forced to incur additional losses to absorb these

costs.

In addition to electricity prices, diversification into non-core businesses such as the

Vietnamese telecoms sector is another contributing factor which has damaged EVN's

profit-generating ability. EVN had invested significant capital in setting up a Vietnamese

telecoms subsidiary, EVN Telecom, despite the presence of several established

players - VinaPhone, MobiFone and Viettel Telecom. EVN has found it difficult to

compete in such a challenging market and was reported to have generated revenues of

just VND2.8trn (US$135.9mn) in 2010, equivalent to 61% of its target. We believe that

this is because EVN Telecom lacks the financial capacity to invest in networks; it also

incurs substantial rental costs due to infrastructure leasing. EVN was looking to divest

EVN Telecom, but plans to sell the subsidiary to the Corporation for Financing and

Promoting Technologies fell through in April 2011, with Vietnam Multimedia Corporation



now the most likely candidate to acquire the telecoms subsidiary, according to local

media reports.

Weather conditions have also played a part in damaging EVN's profit-generating ability.

A sizeable portion of its portfolio is hydropower and severe droughts across the country

have reduced water levels for hydropower reservoirs, hampering their ability to generate

electricity. As a result, EVN has to rely on expensive oil-based generation sources and

electricity imports from China to meet the shortfall.

In a bid to ease EVN's current financial difficulties and meet its investment targets, the

Vietnamese prime minister has directed commercial banks to extend credit to carry out

projects under the six power planning scheme. EVN will also be granted guarantees by

the Ministry of Finance (MoF) for domestic credit loans to pay for electricity purchases

from thermo power plants under the direction of the prime minister. This has taken

place in January 2013, where EVN secured a US$120mn loan from Vietnam

Development Bank for two new thermal power plants (Vinh 2 and Duyen Hai 1). The

utility was also seeking a government guarantee for its loan to build Duyen Hai 3

thermal power plant in mid-December 2012.

EVN would also be allowed to issue domestic bonds in 2013 to meet its funding gap,

but it remains to be seen if investors would be interested given the bond scandals with

several state-owned companies such as Vinashin.

Lastly, the government had allowed EVN to hike electricity prices twice (5% in July, 5%

in December) in 2012, increasing electricity prices by a total of 10%. Electricity prices

averaged VND1.437 (US$0.07) at the end of December 2012 and the hike in December

could potentially allow EVN to earn an additional VND7trn (US$330mn) in 2013. There

are also plans (as of March 2013) to adjust electricity prices if input costs increase by

2-5% over the current average power price, according to a draft decision about the

mechanism for retail power price management and adjustment.

Recent

DevelopmentsIn June 2013, EVN reported that it aims to have six new generators with a combined

capacity of 1420MW operational in 2013. They are two generators in Nghi Son 1 thermo

power plant, a generator in Quang Ninh power plant, a generator in Hai Phong power

plant and two generators in Ban Chat hydropower plant. According to EVN's seventh

power plan, the utility will put 20 generators with a combined capacity of 6,366MW into

operation between 2013 and 2015.

In March 2013, the Vietnam Ministry of Industry and Trade issued a decree stating that

EVN's CEO will be dismissed if the utility fails to maintain the expected return on equity

or suffer losses for two consecutive years. In return, EVN will be given permission to

adjust the electricity prices within the regulated price limits.

In January 2013, EVN announced that it plans to issue VND10trn (US$483mn) worth of

bonds in the domestic market, while converting its debt to PetroVietnam into bond debt

via a VND14trn (US$673mn) issuance.



In December 2012, EVN pulled out from the US$800mn Lower Se San 2 hydropower

plant project in Cambodia. China's Hydrolancang International Energy is expected to

purchase EVN's stake in the project, with the electricity produced from the dam to be

used in Cambodia.

In November 2012, EVN signed an agreement with the World Bank to finance an US

$800mn project aimed at ensuring stable power supply in Vietnam. The World Bank will

provide a loan worth US$449mn with an annual interest rate of 1.25% over a 25-year

period, with a five-year grace period. Meanwhile, a US$30mn loan will be provided by

the Clean Technology Fund, carrying an annual interest rate of 0.75% over a 20-year

period, with a 10-year grace period. Technical assistance estimated to be worth US

$8mn will be provided by the Australian Agency for International Development.

In June 2012, Vietnam granted approval to establish three power generation

companies: Genco 1, Genco 2 and Genco 3. These companies are to take over power

generating plants directly under EVN. Genco 1 will manage hydropower plants, such as

Dai Ninh, Ban Ve and Song Tranh. Genco 2, which is the upgrade of Can Tho Thermal

Power, will manage the Quang Tri and An Khe KaNak hydropower plants and the Thu

Duc, Hai Phong and Pha Lai thermal power plants. The establishment of Genco 3 is

based on Phu My Thermal Power and 11 affiliates, including the Vinh Tan thermal power

plant and the Buon Kuop hydropower plant. These three companies will remain under

EVN, which will also appoint their personnel.

In June 2012, EVN SPC and Prysmian Powerlink SRL Group signed a US$112mn

engineering, procurement and construction (EPC) contract for an undersea cable

system in Vietnam. The cable system, which will be the longest of its type in South East

Asia, will connect Ha Tien Township and Phu Quoc Island in the southern province of

Kien Giang. The cable system is scheduled to be completed by late-2013 and will be

funded by the World Bank and EVN SPC.

In January 2012, VnExpress reported that the acquisition of EVN Telecom by mobile

operator Viettel would be completed by end-Q112. In December 2011, the government

granted approval for the transfer of EVN Telecom to Viettel from January 1, according to

earlier reports. In October 2011, Viettel expressed interest in acquiring EVN Telecom,

which posted around VND2.43trn (US$114mn) in turnover in 2011.

Financial Data In January 2013, EVN announced a profit of VND6trn in FY2012, a reversal from the loss

of VND3.5trn in FY2011. This return to profitability was attributed to the company's

hydropower business and electricity price hikes. However, the company still had debts

amounting to an estimated VND34trn at the end of 2012.



Global Industry Overview

Industry Trend Analysis

We do not believe that rising yields will have a detrimental effect on infrastructure investments, which have

benefited in various ways in the low bond yield environment in Europe and North America. The most

widespread effect has been the diversification of institutional investor's assets into infrastructure. We do not

see this new higher yields environment detracting from the diversification of capital into alternative asset

classes, though we do see changing attitudes on how capital is ultimately deployed into projects. Another

aspect we examine is the proliferation of infrastructure bonds, focusing on Africa, where the model has

been taken up by various governments in the region. Despite the uptick in yields on Sub-Saharan African

Eurobonds, we maintain our view that they will remain an important and growing source of international

capital for governments looking to finance infrastructure.

Infrastructure fund raising has soared in recent years as investors took heed of the asset class' long term

benefits. The primary factor that has fuelled the momentum and galvanised interest from the cash-rich

pension fund community into infrastructure were the low yields on offer in traditional safe-havens, such as

US treasuries. We have been following the trend as new institutional investors came into the market. With

yields now rising -especially in the long term end of the curve- we explore what the outlook is for

infrastructure investments in a rising yield environment.

Our assessment is that, while the diversification of institutional investors' portfolios into infrastructure (inter

alia) was certainly galvanized by the persistently low yields of Treasuries and successive rounds of

quantitative easing, the rise in yields will not change this trend, though it could decelerate it. We consider

three factors behind this view.

■ Firstly, the share of infrastructure assets in portfolios of major pension funds remains low, thereforethere is no major opportunity cost associated with keeping capital within infrastructure funds.

■ Secondly, infrastructure remains a good match for the maturities of liabilities especially of pensionfunds, therefore the underlying merits of such an investment strategy are firmly established.

■ Thirdly, while tapering talk in the US has fuelled the rise in long term Treasury yields, the aggressivemonetary easing in Japan has opened up the prospect of fresh funds flowing into infrastructure(either directly via equity or funds) from Japanese investors who are wary of a new risk environmentin the domestic bond market. The US$100bn Japan Pension Fund Association is already spearheadingthis with one investment nearly completed in the Midland Cogeneration Venture in Michigan and plansto invest up to US$1.5bn in Australia, the US and Europe.



Steeper Curve Raises Long Term Financing Costs

US T-bills Yields, January 2013 versus July 2013

Source: Bloomberg

The main risk we see associated with rising yields is related to the opportunity cost of long term

infrastructure projects. With the US Treasury yield curve becoming steeper, the net present value of projects

will edge downward, deterring long term investments to the benefit of short-term projects. This could be

manifested in lengthier timeframes for project financing to be finalised for larger projects.

It could also accelerate a trend we have seen associated with the rise of institutional investors and pension

funds in the market and the reduction in appetite to go through funds of funds - therefore prompting a

reduction in fund raising.

While infrastructure fundraising has been reaching new highs, this is due to a few major funds concentrating

the majority of capital following large scale fundraising. Global Infrastructure Partners (GIP)

significantly bolstered the 2012 infrastructure funds market with their second fund that raised US$8.25bn in

Q4 2012. According to data by Preqin, unlisted infrastructure funds have secured US$14.5bn in new

commitments in the first half of 2013, nearly 80% higher than the same period the year before. About 40%

of the total raised so far this year. However, it is noteworthy that while the fundraising activity is higher



compared to last year, there are still 144 unlisted funds looking to raise a total of US$93bn by the end of

this year; nearly impossible in our view, and suggesting that not only is competition high, but also that

compared to expectations, what has been raised thus far is about 15% of the target.

This has reinforced our opinion that institutional investors are looking increasingly to by-pass the funds

sector and go straight to the source, like in the case of the Midland Cogeneration Venture. With long-term

cost of financing for projects rising alongside the yields, the traditional 2:20 fee structure, as well as the

five to ten year business model has lost some of its appeal. Although smaller institutional investors who do

not have the in-house capacity to get a "hands-on" approach in projects will continue to be drawn to

infrastructure investment funds, we anticipate large pension funds and institutional investors to continue

their diversification into infrastructure in a more direct way. The unsuccessful attempt of CVC Capital

Partners to raise the targeted US$2.6bn for its infrastructure fund appears to be symptomatic of the

weariness of big institutional players to go through funds to gain exposure to the sector through an

intermediary.

Industry Trend Analysis

BMI View: Despite the uptick in yields on Sub-Saharan African Eurobonds, we maintain our view that they

will remain an important and growing source of international capital for governments looking to finance

infrastructure. Consequently, we anticipate a number of countries to issue infrastructure focused bonds

over the latter half of 2013, allowing them to fund projects already earmarked, thus supporting our bullish

construction growth outlook for the region.

In our special report on African Infrastructure, 'Making Sense Of The Infrastructure Deficit' published in

October 2012, we highlighted government bonds as holding the greatest potential for raising international

capital for the infrastructure sector. For those countries in a position to issue Eurobonds, we saw them as a

valuable way to tap into international capital markets, by allowing them to access a wider pool of investors

who feel more comfortable, or have the mandate of, lending to a government than an infrastructure project.

This method of raising capital is more affordable than traditional infrastructure debt (especially over the

past 18 months) and generates funds much quicker with far fewer hurdles than development funding. It also

comes with less strings than loans from China.

Eurobond issuances have taken off over the past 12 months in Sub-Saharan Africa (SSA), with a number of

recent issuances, and more planned before the end of the year. Most include at least a partial allocation for

infrastructure, with many fully earmarked for the sector.



Higher Yields, But Still Worth It

Africa - Selected Eurobond Yields, %

Source: BMI/Bloomberg

Recent Eurobond issuances:

■ In July 2013 Nigeria issued a US$500mn five-year, and a US$500mn 10-year Eurobond to fund powerplants.

■ In April 2013, Rwanda issued a US$400mn Eurobond, the capital will be used to pay for the constructionof the Kigali convention centre, a hydropower plant and funds for the national airline.

Planned Eurobond issuances:

■ Cote d'Ivoire is planning to issue a US$500mn Eurobond by October 2013. The proceeds are planned togo towards funding infrastructure projects.

■ Kenya is planning to issue a US$1bn Eurobond in the second half of 2013. The funds will go towards theconstruction of three berths at the planned Lamu port.

■ Zambia is planning to issue US$750mn in bonds in 2013. 90% of the proceeds will be directed to road,rail and energy infrastructure. Also in Zambia, the power utility (ZESCO) and the country's RoadDevelopment Agency, are looking to issue international bonds.

■ Ghana is planning to issue a US$1bn Eurobond in 2013. The funds will be used for infrastructureprojects, as well as meeting financial obligations.



■ Senegal is planning to issue a US$500mn Eurobond in 2013, the proceeds will be used to fund itsfinancing gap.

We anticipate the majority of these planned bond issuances to go ahead despite rising yields across the

region. Our Africa Country Risk team anticipates that rising yields is a trend that will continue over the

coming months, owing to changing rate expectations in developed markets (see 'Regional Eurobond

Strategy', July 10). The primary cause of the trend reversal which saw Eurobonds begin to sell off over

recent months has been investor perceptions in the US. This has been reinforced by expectations that

Federal easing in the US will be phased out, leading investors to reassess the value of emerging and frontier

market debt.

Factoring In Extra Funds

Sub-Saharan Africa Construction Industry Value And Real Growth

SSA construction industry value, US$bn (RHS)SSA construction industry, real growth % y-o-y (LHS)

2011

2012

2013

f

2014

f

2015

f

2016

f

2017

f

0

50

100

150 10

2.5

5

7.5

e/f=estimate/forecast, Source: National Statistics, UN, BMI

However, whilst we expect yields to continue to rise, we highlight that Eurobonds will remain an attractive

tool for SSA governments to raise capital, given that borrowing costs remain some way below historic

averages and considerably lower than raising capital by other means.



This bodes well for the infrastructure sector as many of these bonds are being targeted at infrastructure

investment (see above bullet points). We believe that access to capital through government debt is a major

support to those countries in a position to do so. Indeed many of those countries have major government

infrastructure investment plans which run into the billions with the expectation that at least in part; they will

be funded by bond issuances. We have factored many of these plans into our forecasts for strong growth in

the region's construction sector, hinged on the access to capital provided by international bonds and the

view that despite rising yields, more Eurobonds will be issued.



Methodology

A number of principal criteria drive our forecasts for each construction and engineering variable:

Construction GDP And Infrastructure Spending

Figures for construction GDP and infrastructure spending are based, where possible, on national accounts as

published by relevant central banks, as well as primary government/ministry sources and official data.

Where these are unavailable, construction GDP forecasts are based on a range of variables including:

■ Stated infrastructure and development programmes;

■ Likely increases owing to related urban or industrial sector developments;

■ Political factors (such as an electorally motivated public works programmes).

Construction as a percentage of GDP is calculated using BMI's own macroeconomic and demographic

forecasts.

Definition of Construction Industry Value

Data Methodology

Infrastructure Data Sub-sectors - BMI Assumptions And Methodology

BMI's Infrastructure data examines the industry from the top down and bottom up in order to calculate the

industry value of infrastructure and its sub-sectors.

For the bottom up country-specific approach, we have made full use of BMI's Infrastructure Major Projects

Databases for each country, in most cases dating back to 2005. This allows us to calculate historical ratios

between general infrastructure industry value and its sub-sectors, which we then use for forecasting. Our

Major Projects Tables are not exhaustive, but they are comprehensive enough to provide a solid starting

point for our calculations.

The top-down approach uses deduction to form the main hypothesis. We have separated the 39 countries

into three Tiers. Each Tier comprises a group of countries that are on a similar economic development

trajectory and have similar patterns in terms of infrastructure spending, levels of infrastructure development

and sector maturity. This methodology enables us to confirm and overcome any deficiencies of

infrastructure-specific data by applying an average group ratio (calculated from the countries for which

official data exists) to the countries for which data is limited.



Tier I- Developed States. Common characteristics: mature infrastructure markets, investments typically

target maintenance of existing assets or highly advanced projects at the top of the value chain. Infrastructure

as percent of total construction averages around 30%.

Tier I countries: Canada, Germany, Greece, UK, US, France, Hong Kong, Taiwan, Singapore, Israel, Japan,

Australia.

Tier II - Core Emerging Markets. Common characteristics: the most rapidly growing of emerging markets,

where infrastructure investments are a strategic government priority. Significant scope for new

infrastructure facilities from very basic levels (eg highways, heavy rail) to more high value projects

(renewables, urban transport). Infrastructure as percent of total construction averages around 45% and

above.

Tier II countries: Colombia, Malaysia, Mexico, South Korea, Peru, Philippines, Turkey, Vietnam, Poland,

Hungary, South Africa, Nigeria, Russia, China, India Brazil, Indonesia.

Tier III- Emerging Europe. Common characteristics: regional socioeconomic trajectories, development

defined by recent or pending accession to European structures such as the EU. Infrastructure development

to a large degree dictated by EU development goals and financed through vehicles such as the PHARE and

ISPA programmes, and institutions such as the EBRD and EIB. Infrastructure as percent of total

construction averages between 30% and 40%.

Tier III countries: Czech Republic, Romania, Bulgaria, Slovakia, Slovenia, Estonia, Latvia, Lithuania,

Croatia, Ukraine.

This methodology has enabled us to calculate infrastructure industry values for states where this was not

previously possibly. Furthermore, it has enabled us to create comparable indicators.

The top down hypothesis-led approach has been used solely to calculate the infrastructure industry value as

a percentage of total construction. For all sub-sector calculations we apply the bottom-up approach, ie

calculating the ratios from our Major Projects Tables where data was not otherwise available.



Definitions

Construction Industry Value

Construction/infrastructure industry value measures the output of the construction/ infrastructure

industry over the reported 12 month period in nominal values (i.e. domestic currency terms).

As it is derived from GDP data, it is a measure of value added within the industry (i.e. the additional

contribution of the construction industry over other industries, such as cement production)

Put simply, Gross Value Added is the value of goods and services produced by an area, sector or producer

minus the cost of the raw materials and other inputs used to produce them. GVA is mainly composed of the

income made by employees (earnings) and the business (profits/surplus) as a result of production.

GVA is often confused with Gross Domestic Product (GDP). The difference is that GVA doesn't include

subsidies and taxes on the products and services produced, notably VAT. The reason GVA is preferred to

GDP for regional statistics is that it is not possible to allocate tax sub-nationally

To calculate industry value by infrastructure sub-sector, such as transport, we use BMI's Major Projects

Database (base year=2005). This allows us to calculate historical ratios between general infrastructure

industry value and its sub-sectors, which we then use for forecasting. While our Major Projects Database is

not exhaustive, they are sufficiently comprehensive to provide a strong starting point for our calculations.

GrowthOur data and forecasts for real construction measures the real increase in output (rather than

nominal growth, which would also incorporate inflationary increases). In short, it is an inflation adjusted

value of the output of the construction industry year-on-year. Consequently, real growth will, in virtually all

instances, be lower than the nominal growth of our 'construction value' indicator.

Construction Industry, % Of GDP/Construction Value (US$)

These are derived indicators. We use BMI's Country Risk team's GDP and exchange rate forecasts to

calculate these indicators.

Capital Investment

Total Capital Investment

Our data is derived from GDP by expenditure data from each country's national statistics office (or

equivalent). It is a measure of total capital formation (excluding stock build) over the reported 12 month

period. Total capital formation is a measure of the net additions to a country's capital stock, so takes into



account depreciation as well as new capital. In this context, capital refers to structures, equipment, vehicles

etc. As such, it is a broader definition than construction or infrastructure, but is used by BMI as a proxy for

a country's commitment to development.

Capital Investment, % Of GDP, Per Capita (US$)

These are derived indicators. We use our Country Risk team's population, GDP and exchange rate forecasts

to calculate them. As a rule of thumb, we believe an appropriate level of capital expenditure is 20% of GDP,

although in rapidly developing emerging markets it may, and arguably should, account for up to 30%.

Government Capital Expenditure

This is obtained from government budgetary data and covers all non-current spending (ie spending on

transfers, salaries to government employees etc). Due to the absence of global standards for reporting

budgetary expenditure, this measure is not as comparable as construction/capital investment.

Government Capital Expenditure, % Of Total Spending (US$bn)

These are derived indicators.

Construction Sector Employment

Total Construction Employment

This data is sourced from either the national statistics office or the International Labour Organization (ILO).

It includes all those employed in the sector.

Construction Employment, % Change Y-o-Y; % Of Total Labour Force

These are derived indicators.

Average Wage In Construction Sector

This data is sourced from either the national statistics office or the ILO.



Infrastructure Risk/Reward Ratings

Risk/Reward Ratings Methodology

BMI's approach in assessing the risk/reward balance for infrastructure industry investors globally is

fourfold. First, we identify factors (in terms of current industry/country trends and forecast industry/country

growth) that represent opportunities to would-be investors. Second, we identify country and industry-

specific traits that pose or could pose operational risks to would-be investors. Third, we attempt, where

possible, to identify objective indicators that may serve as proxies for issues/trends to avoid subjectivity.

Finally, we use BMI's proprietary Country Risk Ratings (CRR) in a nuanced manner to ensure that only the

aspects most relevant to the infrastructure industry are incorporated. Overall, the system offers an industry-

leading, comparative insight into the opportunities/risks for companies across the globe.

Ratings System

Conceptually, the ratings system divides into two distinct areas:

Rewards: Evaluation of sector's size and growth potential in each state, and also broader industry/state

characteristics that may inhibit its development.

Risks: Evaluation of industry-specific dangers and those emanating from the state's political/economic

profile that call into question the likelihood of anticipated returns being realised over the assessed time

period.

For each category and sub-category, each state is scored out of 100 (100 being the best), with the overall

risk/reward rating a weighted average of the total score. Importantly, as most of the countries and territories

evaluated are considered by BMI to be 'emerging markets', our rating is revised on a quarterly basis. This

ensures that the rating draws on the latest information and data across our broad range of sources, and the

expertise of our analysts.



Table: Infrastructure Business Environment Indicators

Indicator Rationale

Rewards

Industry rewards

Construction expenditure,US$bn

Objective measure of size of sector. The larger the sector, the greater the opportunitiesavailable.

Sector growth, % y-o-y Objective measure of growth potential. Rapid growth results in increased opportunities.

Capital investment, % ofGDP Proxy for the extent the economy is already oriented towards the sector.

Government spending, %of GDP Proxy for extent to which structure of economy is favourable to infrastructure/

Construction sector

Country rewards

Labour marketinfrastructure

From BMI's Country Risk Ratings (CRR). Denotes availability/cost of labour. High costs/lowquality will hinder company operations.

Financial infrastructureFrom CRR. Denotes ease of obtaining investment finance. Poor availability of finance willhinder company operations across the economy.

Access to electricityFrom CRR. Low electricity coverage is proxy for pre-existing limits to infrastructurecoverage.

Risks

Industry risks

No. of companies Subjective evaluation against BMI-defined criteria. This indicator evaluates barriers to entry.

Transparency of tenderingprocess

Subjective evaluation against BMI-defined criteria. This indicator evaluates predictability ofoperating environment.

Country risks

Structure of economyFrom CRR. Denotes health of underlying economic structure, including seven indicators suchas volatility of growth; reliance on commodity imports, reliance on single sector for exports.

External risk From CRR. Denotes vulnerability to external shock - principal cause of economic crises.

Policy continuity Subjective rating from CRR. Denote predictability of policy over successive governments.

Legal frameworkFrom CRR. Denotes strength of legal institutions in each state. Security of investment can bea key risk in some emerging markets.

CorruptionFrom CRR. Denotes risk of additional illegal costs/possibility of opacity in tendering/businessoperations affecting companies' ability to compete.

Source: BMI



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VN infrastructure Q4 2013.pdf

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Transcript of VN infrastructure Q4 2013.pdf