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Q1 2013www.businessmonitor.com

infrastructure report

issn 1750-5593published by Business Monitor international Ltd.

VietnaM INCLUDES BMI'S FORECASTS

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VIETNAM INFRASTRUCTURE REPORT Q1 2013 INCLUDES 10-YEAR FORECASTS TO 2021

Part of BMI's Industry Report & Forecasts Series

Published by: Business Monitor International

Copy deadline: October 2012

Vietnam Infrastructure Report Q1 2013

© Business Monitor International Ltd Page 2



CONTENTS

BMI Industry View ............................................................................................................................................ 5

SWOT Analysis ................................................................................................................................................. 6 Vietnam Infrastructure SWOT ............................................................................................................................................................................... 6

Market Overview ............................................................................................................................................... 7 Vietnam ....................................................................................................................................................................................................................... 7 Competitive Landscape ............................................................................................................................................................................................... 9

Table: Vietnam EQS Data ..................................................................................................................................................................................... 9

Building Materials .......................................................................................................................................... 10 Asia ........................................................................................................................................................................................................................... 10 Cement Forecasts ..................................................................................................................................................................................................... 16

Table: Vietnam Cement Production and Consumption Data, 2010 – 2016 .......................................................................................................... 16 Table: Vietnam Cement Production and Consumption Long Term Forecast, 2017 – 2021 ................................................................................. 16

Industry Forecast Scenario ........................................................................................................................... 17 Table: Vietnam Construction And Infrastructure Industry Data, 2010 – 2016 .................................................................................................... 17 Table: Vietnam Construction And Infrastructure Long Term Forecast, 2015 – 2021 .......................................................................................... 18

Construction And Infrastructure Forecast Scenario ................................................................................................................................................. 20

Transport Infrastructure ................................................................................................................................ 26 Table: Vietnam Transport Infrastructure Industry Data, 2010 – 2016 ................................................................................................................ 26 Table: Vietnam Transport Infrastructure Long Term Forecasts, 2015-2021 ....................................................................................................... 28

Transport Infrastructure Outlook and Overview ....................................................................................................................................................... 30 Title: Competitiveness Of Vietnam's Infrastructure ............................................................................................................................................. 30 Table: Vietnam Railway Corporation’s Main Targets ......................................................................................................................................... 34

Major Projects Table – Transport ............................................................................................................................................................................ 39 Table: Major Projects – Transport ...................................................................................................................................................................... 39

Energy And Utilities Infrastructure ............................................................................................................... 54 Table: Vietnam Energy and Utilities Infrastructure Industry Data, 2010 – 2016 ................................................................................................ 54 Table: Vietnam Energy and Utilities Infrastructure Industry Long Term Forecast, 2015-2021 .......................................................................... 56

Energy And Utilities Infrastructure Outlook and Overview ...................................................................................................................................... 58 Major Projects Table – Energy And Utilities ............................................................................................................................................................ 68

Table: Major Projects – Energy and Utilities ...................................................................................................................................................... 68

Residential/Non-Residential Construction and Social Infrastructure ...................................................... 80 Table: Vietnam Residential and Non-residential Building Industry Data, 2010 – 2016 ...................................................................................... 80 Table: Vietnam Residential and Non-residential Building Long Term Forecasts, 2015 – 2021 ........................................................................... 80

Residential/Non-Residential Building Outlook and Overview ................................................................................................................................... 81 Major Projects Table – Residential/Non-Residential Construction And Social Infrastructure ................................................................................. 84

Table: Major Projects – Residential/Non-Residential Construction And Social Infrastructure ........................................................................... 84

Risk/Reward Ratings ...................................................................................................................................... 86 Vietnam’s Risk/Reward Ratings ................................................................................................................................................................................ 86

Rewards ............................................................................................................................................................................................................... 86 Risks .................................................................................................................................................................................................................... 86

Regional Overview .................................................................................................................................................................................................... 87 Asia Pacific Infrastructure Risk/Reward Ratings ................................................................................................................................................. 87 Table: Asia Infrastructure Risk/Reward Ratings .................................................................................................................................................. 93



Company Monitor ........................................................................................................................................... 94 Cavico Corporation ............................................................................................................................................................................................. 94 Electricity of Vietnam Group (EVN) .................................................................................................................................................................... 97

Global Overview ........................................................................................................................................... 100

Source: Bloomberg ......................................................................................................................................... 106

Methodology ................................................................................................................................................. 107 Industry Forecasts ...................................................................................................................................................................................................107

Construction Industry .........................................................................................................................................................................................108 Data Methodology ..............................................................................................................................................................................................108 New Infrastructure Data Sub-sectors ..................................................................................................................................................................108 Construction .......................................................................................................................................................................................................110 Capital Investment ..............................................................................................................................................................................................111 Construction Sector Employment ........................................................................................................................................................................111

Infrastructure Risk/Reward Ratings .........................................................................................................................................................................112 Table: Infrastructure Business Environment Indicators .....................................................................................................................................113



BMI Industry View

BMI View: Construction activity in Vietnam continued to contract in the third quarter of 2012,

prompting us to pencil in a mild contraction for our 2012 construction forecasts. Real growth is now

expected to come in at a negative 0.2% in 2012, compared to our previous forecast of 0.1% real growth.

Despite this downward revision, we remain convinced that a near-term recovery is still on the cards for

Vietnam's construction industry – construction real growth is projected to reach 7.1% in 2013 – as

monetary conditions remain conducive for construction. This recovery will be led by the residential and

non-residential building construction sector as we expect the infrastructure sector to continue facing

difficulties in securing project financing.

The major developments in Vietnam’s infrastructure sector are:

In September 2012, Thailand-based Italian-Thai Development signed a memorandum of

understanding (MoU) to draw out the investment plan and technical design for phase 2 of the

Halong-Mong Cai expressway project in the Quang Ninh province. The 134km project, which is

part of the Noi Bai-Halong-Mong Cai expressway project, is expected to cost a total of

US$2.1bn. The expressway is expected to take three years to be completed. In September 2012,

A consortium led by South Korea's engineering and construction company Daelim Industrial

has entered into a contract with Cantho Thermal Power Company Limited for the

construction of a thermal power plant in the south of Vietnam. The contract has a value of

US$335mn, with construction work to be completed by October 2015. The power plant is to be

located in the O Mon district on the Mekong Delta. Daelim Industrial possesses a stake in the

project worth US$285mn, with the plant to have the capacity to generate 330MW of electricity.

Daelim Industrial will be responsible for the plant's design and construction, while its Japanese

partner Sojitz Corporation will supply steam turbines.

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 Vietnam National Railway

Administration to be developed under the forms of BOT, build-transfer and build-transfer-

operate, and this list of projects was submitted to the Ministry of Transport in early 2010;

although a lack of investors prevented from starting them. 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.



SWOT Analysis

Vietnam Infrastructure SWOT

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 2021 will rise in tandem with urbanisation.

Severe drought is driving demand in electricity generation sources besides hydropower; i.e. 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.

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, tighter credit conditions and aggressive monetary tightening 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.



Market Overview

Vietnam

Vietnam's emergence as one of the most promising economies in Asia, if not the world, stems largely

from the Communist Party of Vietnam's (CPV) adoption of the Doi Moi market reform policies in 1986.

The gradual but steady shift from a largely agrarian country with a high degree of state ownership and

government intervention to a market economy has stimulated a flow of foreign investment and domestic

entrepreneurship, which are now the prime drivers of growth. For instance, Vietnam attracted foreign

direct investment (FDI) of almost US$14.7bn in 2011, according to Vietnam’s Ministry of Planning and

Investment, although this was a 21% drop from 2010’s recorded figure.

However, Vietnam’s poor infrastructure has long been an impediment to the country’s growth, as its

developing industry is highly dependent on sound infrastructure (especially power and road) to operate.

This infrastructure deficit is expect to worsen further as the combination of rising urbanisation and steady

population and GDP growth is expected to exert considerable pressure on Vietnam's urban transportation

systems. 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. It is estimated that the country has an urbanisation rate of 30%.

This urbanisation trend is felt acutely in Hoh Chi Minh City (HCM City) and Hanoi – the country's

largest cities and chief commercial hubs. The capital demand for transport infrastructure development in

HCM CITY is estimated to be US$3-4bn per annum between now and 2020, but the city's budget can

only provide US$500mn per annum, according to a statement from the HCM City government in July

2012. For Hanoi, the city authorities released the city's infrastructure development in July 2012. Under

this plan, the city would need about VND584trn (US$28bn) by 2020, VND324trn (US$15.6bn) of which

would be capital from the central budget and the city budget, with the remainder to be raised from social

resources.

Vietnam does not have the fiscal means to meet its infrastructure deficit. According to the Vietnamese

Ministry of Planning and Investment, there remains a huge deficit between the annual requirement for

infrastructure investment capital, which is estimated at about US$15bn, and the annual mobilised fund of

US$7-8bn.

Vietnam has been making noteworthy efforts to address this shortfall in investment, and the government

has made infrastructure a priority investment area. This has been demonstrated through various demand-

side policies aimed at boosting macroeconomic growth and a variety of infrastructure spending initiatives.

The use of official development assistance (ODA) to finance infrastructure projects has also achieved

success, with Europe, Japan and the Asian Development Bank becoming frequent co-financers in several

infrastructure projects.



Improved contract agreements between the Export-Import Bank of the United States (US Exim Bank)

and the Vietnam Development Bank (VDB) are also helping to provide financing for infrastructure

development. In February 2012, the US Exim Bank concluded a business-development mission into

Vietnam and is looking to invest up to US$1.5bn in infrastructure projects such as satellite, thermal power

and renewable energy projects.

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. However, progress on these tasks are proceeding very slowly,

and are still uncompleted as of July 2012.

This inability to complete its PPP plans and the poor credit conditions globally were causing project

delays. According to the Ministry of Planning and Investment, 4436 projects were delayed in 2011. These

projects accounted for 11.55% of the total amount of projects being implemented in Vietnam, with most

of them belonging to projects with more than 30% of state-owned investment capital. A total of 3568

projects had to adjust their investment capital; this does not include projects that, according to investment

management laws, are not allowed to adjust their total investment capital, due to price fluctuations and

policy changes.

These difficulties were also pushing the Vietnamese government to seek funds from non-banking sources,

such as project bonds and sovereign wealth funds. This trend is starting to take place, with the

Vietnamese government having granted approval for HCM City to issue bonds for infrastructure projects

in Q212. Meanwhile, the Association of South East Asian Nations (ASEAN), of which Vietnam is a

member, signed a shareholder agreement in April 2012 for the ASEAN Infrastructure Fund, a special

purpose vehicle aimed at providing member countries up to US$4bn for infrastructure development.

A regulatory and legal framework to nurture the development of concessions is also largely absent,

although there are regulatory frameworks under construction. Law firm Duane Morris has identified four

main obstacles that are limiting the participation of the private sector in Vietnamese infrastructure. These

are:

The weak governance structures of the state-owned companies that dominate the construction

and utilities sectors;

Difficulty in accessing domestic capital;



Costly delays for projects, due to the weak regulatory environment;

The often uncertain support of the government.

Competitive Landscape

Table: Vietnam EQS Data

Name Latest FY Earnings

Market Cap

(US$mn)

Revenue Growth

(% y-o-y)

Operating Profit

Growth (% y-o-y)

Total Debt/

Ebitda

Interest Coverage

Ratio PE Ratio

Vietnam Construction & IMPO 12/2011 232.9 -4.0 39.8 6.5 1.4 7.1

Songda Urban & Industrial Zo 12/2011 154.3 -86.3 NA -45.8 -30.1 NA

HCM City Infrastructure INV 12/2011 100.4 0.4 -8.4 21.7 0.3 15.8

Becamex Infrastructure Devel 12/2011 139.3 276.8 117.5 1.5 15.5 8.7

Petrovietnam Construction Co 12/2011 182.1 26.9 -29.4 10.5 1.0 14.3

Development Invest Construct 12/2011 104.8 -35.5 -80.9 8.7 2.3 20.4

Kinh Bac City Development SH 12/2011 152.8 -30.7 -47.4 21.2 0.7 392.9

Cotec Construction JSC 12/2011 70.9 36.5 11.6 0.0 NA 5.1

*exchange rates accurate as of 13/07/2012. Source: Bloomberg

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.



Building Materials

Asia

BMI View: Asia will continue to outperform in the production and consumption of building materials,

expanding its share of the global market as regional construction sectors exhibit strong levels of growth

across the board. Although we note that macroeconomic fundamentals and demographic trends will

support long-term growth, the risks weighing on our forecast are increasing in line with the increasingly

muted picture for the world-leading Chinese building materials sector.

Key Views:

Sound fundamentals - rising per capita incomes, demographic growth, industrialisation and

robust urbanisation - will be the key drivers of Asia's building materials consumption story.

Bearing in mind the continued weakness that we see in Europe (see our online service,

September 28 2012, 'Eurozone Weakness Still Depressing Market'), we forecast that Asia will

continue to expand its share of global total cement and steel production.

Growth in regional competition will intensify as small firms compete for market share. Over the

long term, this trend will switch to one of increasing consolidation.

Reflecting these trends, global building materials manufacturers will increasingly look to

enhance their operations to diversify against a slump in developed markets. In the cement

market, this will trigger the emergence of a number of Asian majors - China's Anhui Conch,

Thailand's Siam Cement and Indonesian firms Indocement and Semen Gresik continue to

improve sales volumes vis-a-vis established players such as Holcim and Lafarge.

Demand for building materials continues to weaken in China as the country faces a systemic re-

evaluation of fixed capital spending plans. Despite this, we believe growth rates will remain

relatively robust and will benefit in the immediate term from a new round of infrastructure

spending announced by local governments and supported by Beijing.

However, we note that chronic overcapacity and local government indebtedness pose significant

long term risks to our China forecast, and that these factors may work to drag down demand for

materials through 2013. A heavy landing in China - a scenario which is supported by our country

risk team - would cause a significant downward revision to our Asia building materials forecast.

Demand in India will support robust growth in the building material consumption over the

medium term, yet challenges such as rising input costs and significant overcapacity will mean

that the outlook for firms in the sector will remain challenging.



India's cement market will continue to face issues of surplus capacity as smaller firms begin to

undercut the profits of national majors. Over Q212, major firms were fined by the Competition

Commission of India (CCI) for engaging in cartelism and price fixing. Since then the price of

cement has slumped as new firms have entered the market.

Asia Forging Ahead

India/China - BMI's Steel Forecast - Production/Consumption ('000 tons)

Source: BMI, WSA

China - Slowing Yet Consumption Still Strong

We expect a slump in demand for cement and steel to continue to weigh on the country's building

materials sector for the foreseeable future. Both official and private sector data point to a deceleration in

construction spending over 2011, and we expect that, due to deterioration in macroeconomic

fundamentals, this trend will largely continue over 2012, despite the renewed efforts of the government to

bolster infrastructure spending.

Although we believe that the stimulus may support levels of growth experienced over H112 into 2013 as

the government looks to construct a further 7mn housing units, new rail projects get under way and local

governments such as Changsha and Nanjing announce ambitious spending plans, we do not believe that

investments will facilitate a rise in demand sufficient to return the ailing building materials sector back to

peak levels.

We believe that Chinese equities will continue to feel the brunt of a softening in demand, despite market

cement warming towards cement majors on announcement of market warming measures. Although

manufacturers may experience a slight rebound off the back of a renewed round of infrastructure

spending, the longer-term picture remains bleak.

Despite our forecast for a slowing steel production due to a fall in investment in real estate and fixed

capital, figures from the China Iron & Steel Association suggest that output grew by 1.2% month-on-



month (m-o-m) in August 2012. This is despite the fact that, according to Citigroup, China's steel

stockpiles stand at almost 100m tons. We believe that, if proven true, this trajectory is unsustainable and

reflects structural inefficiencies within China's steel market. If the pattern continues over the long term,

we believe that an increasing surplus of inventories may facilitate a shock leading to a production slump

and a period of painful readjustment for the industry. Previous rounds of stimulus, such as that

implemented in 2008, have only worked to exacerbate the issue of stock-piling, as producers have

historically upped output in excess of actual demand. As we believe that the most recent round of

stimulus spending will have a far smaller impetus on the construction sector, this issue poses a significant

threat to the medium-term performance of firms. According to China Daily, 83% of the nation's steel

producers ran loses over H112. With this in mind, and reflecting a trend that we believe will continue

over the long term, Boashan Iron & Steel Co, China's biggest listed steelmaker, has idled a three million

tonnes per annum (mtpa) plan in Shanghai.

Indian And Chinese Equities Diverging

Anhui Conch Cement & Asia Cement (HK) vs Ultratech Cement & Madras Cements (India) - 2-Year Share Price Performance (% Change, Rebased October 2010)

Source: Bloomberg

India - Much Demand To Be Met

Overall, it is our view that India will emerge as a regional outperformer over 2012. According to World

Steel Association (WSA) estimates, steel production in the country grew by 5.7% year-on-year (y-o-y) in

2011. In line with robust economic growth, steel production in India has grown by an average of nearly

8% y-o-y since 2007, and in November 2011, India's steel ministry estimated that demand for the metal

could increase by around 9% y-o-y over the following five years.



The outlook for cement consumption is equally robust, and we expect growth to average nearly 10% y-o-

y between 2012 and 2016. The country currently has 137 large and 365 mini cement plants, according to

the Cement Manufacturers Association.

Our optimistic outlook is weighed to the upside and could be further buoyed if the government is

successful in gaining the US$1tn in infrastructure investments by 2017 - a sum required to fulfil the goals

outlined by its National Planning Committee. However, risks are abound, and we note that the operating

environment for firms will remain challenging over the medium term.

Over Q212, major firms, such as UltraTech Cement and Shree Cement were fined by the Competition

Commission of India (CCI) for engaging in cartelism and price fixing and, since then, the price of cement

has slumped as new firms have entered the market and undercut the majors.

According the Economic Times, the price of cement in Andhra Pradesh - India's second largest producer

of the material - fell 10% over the first few weeks of September, and is down 25% from the industry's

peak levels of Rs 300 per bag. Overcapacity in the state is now at 60%, and production continues to be

disrupted by poor access to inputs such as sand and the increasing activity of the Telangana independence

movement, which has caused deadlock over the state budget. Across the country, margins have been

further squeezed by a rise in the price of inputs such as gypsum and diesel. However, a fall in the price of

imported coal has gone some way to curb loses.

However, over the medium term, we expect firms to benefit from a renewed infrastructure drive and a

softening of interest rates. We forecast that India's building material consumption growth will overtake

that of all other regional competitors over 2012, and with this in mind believe that the medium term will

witness the expansion of a number of global majors into the country.

An example of this is the expansion of HeidelbergCement in central India. The company has announced

that the firm is to increase its grinding capacity from 3.1 mtpa to 6 mtpa and clinker output capacity from

1.2 mtpa to 3.1 mtpa. The expansion is scheduled to begin in November 2012 and represents the

attraction of central areas such as Uttar Pradesh and Madhya Pradesh, which consistently offer higher

realisation rates to firms.

In contrast to Andhra Pradesh, according to TET utilisation rates in the region stand at around 90-95%.

Fast-growing Indian manufacturer India Cement is also looking to diversify its operations away from

established regions of Andhra Pradesh, Tamil Nadu and Rajasthan and open new plants in Madhya

Pradesh.

Despite growing demand for steel, the land clearance obstacles facing foreign steel players such as

POSCO and ArcelorMittal continue to stall a vast pipeline of projects. Reports in January 2012 that

POSCO may build a smaller steel plant than the mega 12 mpta mill originally planned in India's eastern

state of Orissa are a direct result of the long-running land and environmental disputes that have paralysed



the project since 2008. While the introduction of a new land bill could, if approved, bring much-needed

speed and clarity to the acquisition process, there remains much opposition to the proposed bill.

Overcapacity And Increased Competition Driving Regional Shift

India - Cement Consumption, Production & Capacity By Region (mn tons)

Source: Cement Manufacturers' Association, BMI

Dynamic and Increasingly Competitive

Indonesia - the continent's third most populous country - the Philippines, Thailand and Vietnam will also

be key growth markets for the consumption of building materials in the region over the coming years.

Moreover, the high interest rates implemented by various Asian countries in 2011 are likely to fall in

2012 as disinflationary, rather than inflationary, pressures take precedence in the face of softening global

activity. This could make it increasingly tenable for cement and steel companies to finance their capital

expenditures through debt and take on new projects in 2012.

We expect cement consumption in the country to grow by an average of 6.2% y-o-y between 2012 and

2016, but note that the robust outlook for infrastructure investment over the coming years, combined with

ongoing improvements in the business environment creates upside risks. Through passing a much-delayed

land bill at the end of 2011 (see our online service, December 16 2011, 'Land Acquisition Bill A Big First

Step'), Indonesia took a major step towards removing a long-term obstacle to investment in the sector.

This growth potential is attracting the attention of foreign cement companies within the region. In July

2011, Siam Cement announced plans to spend US$219mn on developing its ceramic and construction

material businesses in Indonesia, whilst Anhui is reportedly planning to build plants in South Kalimantan,

East Kalimantan and Papua - investing in a new capacity of 10mtpa. In August 2012, Mexico's Cemex



announced that it was raising the cement production capacity of its APO plant in the Philippines by

1.5mtpa.

These investments will add welcome new capacity and stimulate increased competition in a market where

significant potential for consolidation exists. Vietnam is another market that looks set for increasing

consolidation. We expect over-capacity, together with high energy and transportation costs, to put

increasing pressure on many of the less competitive and inefficient cement companies.

Finally, we believe that Semen Gresik's announcement in March 2012 that it is in talks with Myanmar's

foreign investment body over plans to build a 1.5mn to 2.5mn tonnes/year cement plant in the country

could provide the firm with an important foothold in the resource-rich frontier market. Myanmar's

reliance on imported cement and the potential for growth driven by demand for mining-related

infrastructure projects could generate significant rewards for foreign players prepared to brave the

political and industry-specific risks (see our online service, March 20 2012, 'Semen Gresik's Seeks

Frontier Foothold').

South East Asia Picking Up Chinese Slack

Asia - BMI's Cement Consumption Forecast (% y-o-y Growth)

Source: USGS, BMI



Cement Forecasts

Table: Vietnam Cement Production and Consumption Data, 2010 – 2016

2010 2011 2012e 2013f 2014f 2015f 2016f

Cement production (including imported clinker), tonnes 50,816,923 45,837,500 47,694,500 50,348,760 53,206,724 56,336,812 59,607,235

Cement production (including imported clinker), tonnes, % y-o-y 6.1 -9.8 4.1 5.6 5.7 5.9 5.8

Cement consumption, tonnes 49,633,422 45,223,301 47,012,275 49,574,510 52,340,442 55,374,453 58,544,698

Cement consumption, tonnes, % y-o-y 11.3 -8.9 4.0 5.5 5.6 5.8 5.7

Cement net exports, tonnes 1,183,500 614,199 682,225 774,251 866,282 962,359 1,062,537

Cement net exports, tonnes, % y-o-y -64.1 -48.1 11.1 13.5 11.9 11.1 10.4

e/f = BMI estimate/forecast. Source: BMI Research, USGS, UN.

Table: Vietnam Cement Production and Consumption Long Term Forecast, 2017 – 2021

2015f 2016f 2017f 2018f 2019f 2020f 2021f

Cement production (including imported clinker), tonnes 56,336,812 59,607,235 63,076,952 66,637,578 70,344,120 73,995,195 73,995,195

Cement production (including imported clinker), tonnes, % y-o-y 5.9 5.8 5.8 5.6 5.6 5.2 0.0

Cement consumption, tonnes 55,374,453 58,544,698 61,912,829 65,367,031 68,963,121 72,495,987 72,495,987

Cement consumption, tonnes, % y-o-y 5.8 5.7 5.8 5.6 5.5 5.1 0.0

Cement net exports, tonnes 962,359 1,062,537 1,164,124 1,270,547 1,380,999 1,499,207 1,499,207

Cement net exports, tonnes, % y-o-y 11.1 10.4 9.6 9.1 8.7 8.6 0.0

e/f = BMI estimate/forecast. Source: BMI Research, USGS, UN.



Industry Forecast Scenario

Table: Vietnam Construction And Infrastructure Industry Data, 2010 – 2016

2010 2011 2012e 2013f 2014f 2015f 2016f

Construction Industry Value, VNDbn 139,162.0 162,620.0 176,907.1 200,669.0 226,016.2 252,303.6 281,090.3

Construction Industry Value, US$bn 7.3 7.9 8.4 9.6 11.0 12.4 14.0

Construction Industry Real Growth, % chg y-o-y 10.1 -1.0 -0.2 7.1 6.4 6.4 6.4

Construction Industry, % of GDP 7.0 6.4 6.1 6.1 6.0 5.9 5.9

Total Capital Investment, VNDbn 704,401.0 745,494.0 847,631.6 954,642.1 1,075,165.7 1,201,771.8 1,338,833.9

Total Capital Investment, US$bn 36.8 36.1 40.3 45.9 52.3 59.1 66.6

Total Capital Investment, % of GDP 35.6 29.4 29.1 28.9 28.5 28.2 27.9

Capital Investment Per Capita, US$ 419.1 406.5 449.1 506.3 571.0 639.5 714.0

Real Capital Investment Growth, % y-o-y 10.9 -10.4 4.3 5.9 6.0 6.2 6.1

Construction Industry Employment, '000 2,707.8 2,687.2 2,682.5 2,831.2 2,974.8 3,127.4 3,290.6

Construction Industry Employment, % y-o-y 7.7 -0.8 -0.2 5.5 5.1 5.1 5.2

Total Workforce, '000 61,842.0 62,824.3 63,694.6 64,449.1 65,116.8 65,719.2 66,294.0

Construction Industry Employees as % of total labour force 4.4 4.3 4.2 4.4 4.6 4.8 5.0

Infrastructure Industry Value As % of Total Construction 46.1 47.0 46.9 46.4 45.9 45.3 44.6

Infrastructure Industry Value, VNDbn 64,157.4 76,431.4 83,010.8 93,124.8 103,648.6 114,283.7 125,419.9

Infrastructure Industry Value, US$bn 3.4 3.7 3.9 4.5 5.0 5.6 6.2

Infrastructure Industry Value Real Growth, % chg y-o-y 17.6 0.5 -0.4 5.8 5.1 5.0 4.7

Infrastructure Industry Value as % of GDP 3.2 3.0 2.9 2.8 2.7 2.7 2.6



Table: Vietnam Construction And Infrastructure Industry Data, 2010 – 2016

2010 2011 2012e 2013f 2014f 2015f 2016f

Residential and Non-Residential Building Industry Value As % of Total Construction 53.9 53.0 53.1 53.6 54.1 54.7 55.4

Residential and Non-Residential Building Industry Value, VNDbn 75,004.6 86,188.6 93,896.4 107,544.2 122,367.6 138,019.9 155,670.4

Residential and Non-Residential Building Industry Value, US$bn 3.9 4.2 4.5 5.2 6.0 6.8 7.7

Residential and Non-Residential Building Industry Value Real Growth, % chg y-o-y 16.5 -3.8 -0.1 8.2 7.5 7.5 7.8

Residential and Non-Residential Building Industry Value as % of GDP 3.8 3.4 3.2 3.3 3.2 3.2 3.2

f = BMI forecasts. Sources: Census and Statistics Department/ILO

Table: Vietnam Construction And Infrastructure Long Term Forecast, 2015 – 2021

2015f 2016f 2017f 2018f 2019f 2020f 2021f

Construction Industry Value, VNDbn 252,303.6 281,090.3 313,160.2 348,229.7 386,859.6 428,148.3 472,493.5

Construction Industry Value, US$bn 12.4 14.0 15.7 17.4 19.3 21.4 23.6

Construction Industry Real Growth, % chg y-o-y 6.4 6.4 6.4 6.2 6.1 5.7 5.4

Construction Industry, % of GDP 5.9 5.9 5.8 5.7 5.7 5.6 5.5

Total Capital Investment, VNDbn 1,201,771.8 1,338,833.9 1,491,527.9 1,658,504.4 1,842,432.5 2,039,020.1 2,250,160.6

Total Capital Investment, US$bn 59.1 66.6 74.6 82.9 92.1 102.0 112.5

Total Capital Investment, % of GDP 28.2 27.9 27.6 27.3 27.0 26.6 26.1

Capital Investment Per Capita, US$ 639.5 714.0 792.4 873.9 963.2 1,058.1 1,159.6

Real Capital Investment Growth, % chg y-o-y 6.2 6.1 6.1 5.9 5.8 5.4 5.1



Table: Vietnam Construction And Infrastructure Long Term Forecast, 2015 – 2021

2015f 2016f 2017f 2018f 2019f 2020f 2021f

Construction Industry Employment, '000 3,127.4 3,290.6 3,464.2 3,642.9 3,829.4 4,013.6 4,197.5

Construction Industry Employment, % y-o-y 5.1 5.2 5.3 5.2 5.1 4.8 4.6

Total Workforce, '000 65,719.2 66,294.0 66,773.8 67,197.2 67,607.8 68,026.5 68,431.5

Construction Industry Employees as % of total labour force 4.8 5.0 5.2 5.4 5.7 5.9 6.1

Infrastructure Industry Value As % of Total Construction 45.3 44.6 43.9 43.2 42.5 41.8 40.9

Infrastructure Industry Value, VNDbn 114,283.7 125,419.9 137,594.6 150,536.8 164,441.9 178,861.3 193,385.6

Infrastructure Industry Value, US$bn 5.6 6.2 6.9 7.5 8.2 8.9 9.7

Infrastructure Industry Value Real Growth, % chg y-o-y 5.0 4.7 4.7 4.4 4.2 3.8 3.1

Infrastructure Industry Value as % of GDP 2.7 2.6 2.5 2.5 2.4 2.3 2.2




Residential and Non-Residential Building Industry Value Real Growth, % chg y-o-y 7.5 7.8 7.8 7.6 7.5 7.1 7.0


f = BMI forecasts. Sources: Census and Statistics Department/ILO



Construction And Infrastructure Forecast Scenario

In Decline

Construction Industry Value And Infrastructure Share

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

BMI View: Construction activity in Vietnam continued to contract in the third quarter of 2012,

prompting us to pencil in a mild contraction for our 2012 construction forecasts; Real growth is now

expected to come in at -0.2% in 2012, compared to our previous forecast of 0.1% real growth. Despite

this downward revision, we remain convinced that a near-term recovery is still on the cards for Vietnam's

construction industry – construction real growth is projected to reach 7.1% in 2013 – as monetary

conditions remain conducive for construction. This recovery will be led by the residential and non-

residential building construction sector as we expect the infrastructure sector to continue facing

difficulties in securing project financing.

Construction activity in Vietnam is still in negative territory for the third quarter of 2012. The latest data

from the Vietnam General Statistics Office showed that real growth for the construction sector contracted

by 0.9% year-on-year (y-o-y) in Q312, compared with a growth of 5.0% y-o-y in Q311. However, the rate

of decline slowed down significantly in Q312, suggesting that construction activity was picking up for the

quarter. Construction activity in Vietnam had contracted earlier in the year by 3.8% y-o-y in Q212 and

8.3%y-o-y in Q112.

Therefore, even though the lack of growth in Q312 has prompted us to pencil in a mild contraction for our

2012 construction forecasts – construction real growth is forecast to reach a negative 0.2%, compared to

our previous forecast of 0.1% growth – we remain convinced that a robust recovery in Vietnam's



construction sector is just around the corner, with construction real growth expected to reach double-digit

levels in Q412.

On The Path To Recovery

Vietnam – Construction Real Industry Value Data (At 1994 Constant Prices), By Quarters, VNDbn And % chg y-o-y

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

Our optimistic outlook for Vietnam's construction sector remains primarily driven by the country's

conducive monetary conditions. The benchmark interest rate in Vietnam has stayed at around 10.00%

since July 2012 and this should be favourable for construction activity. Indeed, we believe two indicators

are already suggesting that construction activity is picking-up in Vietnam.

Firstly, inflation for construction materials bottomed out in July and remains on the rise at the end of

September. This, in our opinion, indicates a growing demand for materials to carry out construction work.

Secondly, industrial production expanded by 9.7% y-o-y in September, a significant increase from 4.4%

y-o-y in August and the fastest rate of expansion since February. Industrial production is a measure of

output of the industrial sector (ie, manufacturing, mining, and utilities) and this increase in production

could boost the demand for non-residential buildings such as mining-related facilities and industrial

buildings (ie, factories, warehouses).



Monetary Conditions Conducive

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

Source: General Statistics Office, State Bank of Vietnam

2013: Infrastructure Underperformance

We believe that the recovery in Vietnam's construction sector will last well into 2013, with real growth

for the sector forecast to come in at 7.1% for 2013. This recovery will be led by the residential and non-

residential buildings construction sector. Real growth for the building industry is forecast to reach 8.2% in

2013, compared to 5.8% for the infrastructure sector in the same year.



Residential And Non-Residential Leads

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

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

This underperformance of the infrastructure sector is primarily due to difficulties in securing financing.

We continue to see evidence of infrastructure projects being delayed by financing shortages. The latest

statistics from the transport ministry's department of planning and investment showed that in mid-2012,

there were around 107 road upgrading projects in need of funds, while only six of the 14 expressways

projects to be developed in Vietnam had reached financial closure by mid-2012. These financing

shortages are not confined to the transport sector. Vietnam's state utility EVN reported in late-June that

they faced a funding gap of around VND185trn (US$8.9bn) for power plant projects between 2011 and

2015.

In our opinion, these financing issues will not be resolved anytime soon due to three factors.

Firstly, 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. Vietnam's budget for capital investment, which is primarily channelled towards infrastructure

development, contracted in September, the first time in seven months. Although the Vietnamese

government plans to raise funds by privatising several SOEs and raising electricity prices, these measures

would require several years of implementation before they could have an impact on project financing.



Limited By Debt

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

Source: Bloomberg, BMI, General Statistics Office of Vietnam

Secondly, we believe that poor global economic conditions will dampen the demand for riskier assets

such as infrastructure projects in Vietnam. The sector remains fraught with business environment issues

such as slow land clearances, poor planning, corruption, significant red tape, and lack of regulatory

clarity. These issues are a deterrent to foreign investment as they have led to severe delays and cost

overruns for many infrastructure projects in recent years. In September 2012, the transport ministry stated

that in the past three to six years, the implementation cost for transport projects jumped by an average of

180% against their approval cost.

The demand for infrastructure projects in Vietnam is also dampened by a lack of financial viability. Over

the course of 2012, we have noticed several transport infrastructure projects struggle to be financially

viable. A number of airports in Vietnam, particularly in the central provinces, are currently operating way

below capacity despite the rapid rise in the number of visitors in Vietnam, while certain toll roads in

HCM City are forced to reduce their toll fees to attract sufficient commuters to stay viable. While cost

overruns have contributed to this lack of viability, we believe that the transport infrastructure sector could

be oversaturated, as economic activity within Vietnam has not reached levels that are financially viable

for such infrastructure.



In Decline

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

Source: Bank For International Settlements (October 2012), BMI

Lastly, Vietnam relies significantly on European banks to finance its infrastructure and residential

development. With European banks set to face difficult economic conditions and stricter capital controls

over the coming years, funds from these European 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.

For instance, lending growth from European banks to Vietnam continues to be in decline, falling from

10.5% y-o-y in Q411 to 9.4% y-o-y in Q112, according to data from the Bank Of International

Settlements. Although the Vietnamese government is trying to seek funds from non-banking sources such

as project bonds and sovereign wealth funds, it remains to be seen if they will be sufficient to cover the

decline in credit from European banks.



Transport Infrastructure

Table: Vietnam Transport Infrastructure Industry Data, 2010 – 2016

2010 2011 2012e 2013f 2014f 2015f 2016f

Transport Infrastructure Industry Value As % Of Total Infrastructure 71.2 68.6 67.8 67.6 67.6 67.5 67.3

Transport Infrastructure Industry Value, VNDbn 45,677.4 52,406.5 56,306.6 62,908.2 70,077.4 77,147.0 84,380.8

Transport Infrastructure Industry Value, US$bn 2.4 2.5 2.7 3.0 3.4 3.8 4.2

Transport Infrastructure Industry Value Real Growth, % chg y-o-y 21.2 -3.9 -1.6 5.4 5.1 4.8 4.4

Transport Infrastructure Industry Value As Percent Of Total Construction (%) 32.8 32.2 31.8 31.3 31.0 30.6 30.0

Roads and Bridges Infrastructure Industry Value As % of Transport Infrastructure 34.2 48.5 48.3 49.2 49.9 50.4 50.8

Roads and Bridges Infrastructure Industry Value, VNDbn 15,621.7 25,394.5 27,223.8 30,946.4 34,943.5 38,856.7 42,852.4

Roads and Bridges Infrastructure Industry Value, US$bn 0.8 1.2 1.3 1.5 1.7 1.9 2.1

Roads and Bridges Infrastructure Industry Value Real Growth, % chg y-o-y 34.3 43.9 -1.8 7.3 6.7 5.9 5.3

Roads and Bridges Infrastructure Industry As % of Total Infrastructure 24.3 33.2 32.8 33.2 33.7 34.0 34.2

Roads and Bridges Infrastructure Industry As % of Total Construction 11.2 15.6 15.4 15.4 15.5 15.4 15.2

Railways Infrastructure Industry Value As % of Transport Infrastructure 31.1 20.7 20.4 20.0 19.5 19.2 19.0

Railways Infrastructure Industry Value, VNDbn 14,205.7 10,843.3 11,493.3 12,594.1 13,699.1 14,824.7 16,015.9

Railways Infrastructure Industry Value, US$bn 0.7 0.5 0.5 0.6 0.7 0.7 0.8

Railways Infrastructure Industry Value Real Growth, % chg y-o-y 25.2 -42.3 -3.0 3.2 2.5 3.0 3.0



Table: Vietnam Transport Infrastructure Industry Data, 2010 – 2016

2010 2011 2012e 2013f 2014f 2015f 2016f

Railways Infrastructure Industry As % of Total Infrastructure 22.1 14.2 13.8 13.5 13.2 13.0 12.8

Railways Infrastructure Industry As % of Total Construction 10.2 6.7 6.5 6.3 6.1 5.9 5.7

Airports Infrastructure Industry Value As % of Transport Infrastructure 17.9 11.7 11.9 11.4 11.1 10.7 10.5

Airports Infrastructure Industry Value, VNDbn 8,176.3 6,113.6 6,687.2 7,190.5 7,758.5 8,284.5 8,854.0

Airports Infrastructure Industry Value, US$bn 0.4 0.3 0.3 0.3 0.4 0.4 0.4

Airports Infrastructure Industry Value Real Growth, % chg y-o-y -19.3 -43.9 0.4 1.2 1.6 1.5 1.9

Airports Infrastructure Industry As % of Total Infrastructure 12.7 8.0 8.1 7.7 7.5 7.2 7.1

Airports Infrastructure Industry As % of Total Construction 5.9 3.8 3.8 3.6 3.4 3.3 3.1

Ports Harbours and Waterways Infrastructure Industry Value As % of Transport Infrastructure 16.8 19.2 19.4 19.4 19.5 19.7 19.7

Ports Harbours and Waterways Infrastructure Industry Value, VNDbn 7,673.8 10,055.1 10,902.3 12,177.2 13,676.4 15,181.1 16,658.5

Ports Harbours and Waterways Infrastructure Industry Value, US$bn 0.4 0.5 0.5 0.6 0.7 0.7 0.8

Ports Harbours and Waterways Infrastructure Industry Value Real Growth, % chg y-o-y 62.1 12.4 -0.6 5.3 6.1 5.8 4.7

Ports Harbours and Waterways Infrastructure Industry As % of Total Infrastructure 12.0 13.2 13.1 13.1 13.2 13.3 13.3

Ports Harbours and Waterways Infrastructure Industry As % of Total Construction 5.5 6.2 6.2 6.1 6.1 6.0 5.9

e/f = BMI estimate/forecast. Source: BMI Research



Table: Vietnam Transport Infrastructure Long Term Forecasts, 2015-2021

2015f 2016f 2017f 2018f 2019f 2020f 2021f

Transport Infrastructure Industry Value As % Of Total Infrastructure 67.5 67.3 67.0 66.6 66.2 65.7 65.4

Transport Infrastructure Industry Value, VNDbn 77,147.0 84,380.8 92,186.3 100,318.4 108,892.0 117,562.2 126,407.3

Transport Infrastructure Industry Value, US$bn 3.8 4.2 4.6 5.0 5.4 5.9 6.3

Transport Infrastructure Industry Value Real Growth, % chg y-o-y 4.8 4.4 4.3 3.8 3.5 3.0 2.5

Transport Infrastructure Industry Value As Percent Of Total Construction (%) 30.6 30.0 29.4 28.8 28.1 27.5 26.8

Roads and Bridges Infrastructure Industry Value As % of Transport Infrastructure 50.4 50.8 51.1 51.4 51.6 51.7 51.8

Roads and Bridges Infrastructure Industry Value, VNDbn 38,856.7 42,852.4 47,104.8 51,516.1 56,145.4 60,796.8 65,508.9

Roads and Bridges Infrastructure Industry Value, US$bn 1.9 2.1 2.4 2.6 2.8 3.0 3.3

Roads and Bridges Infrastructure Industry Value Real Growth, % chg y-o-y 5.9 5.3 4.9 4.4 4.0 3.3 2.8

Roads and Bridges Infrastructure Industry As % of Total Infrastructure 34.0 34.2 34.2 34.2 34.1 34.0 33.9

Roads and Bridges Infrastructure Industry As % of Total Construction 15.4 15.2 15.0 14.8 14.5 14.2 13.9

Railways Infrastructure Industry Value As % of Transport Infrastructure 19.2 19.0 18.8 18.7 18.6 18.6 18.6

Railways Infrastructure Industry Value, VNDbn 14,824.7 16,015.9 17,322.8 18,723.5 20,238.6 21,816.8 23,471.3

Railways Infrastructure Industry Value, US$bn 0.7 0.8 0.9 0.9 1.0 1.1 1.2

Railways Infrastructure Industry Value Real Growth, % chg y-o-y 3.0 3.0 3.2 3.1 3.1 2.8 2.6

Railways Infrastructure Industry As % of Total Infrastructure 13.0 12.8 12.6 12.4 12.3 12.2 12.1

Railways Infrastructure Industry As % of Total Construction 5.9 5.7 5.5 5.4 5.2 5.1 5.0



Table: Vietnam Transport Infrastructure Long Term Forecasts, 2015-2021

2015f 2016f 2017f 2018f 2019f 2020f 2021f

Airports Infrastructure Industry Value As % of Transport Infrastructure 10.7 10.5 10.4 10.3 10.3 10.4 10.5

Airports Infrastructure Industry Value, VNDbn 8,284.5 8,854.0 9,577.0 10,373.0 11,255.3 12,207.7 13,240.2

Airports Infrastructure Industry Value, US$bn 0.4 0.4 0.5 0.5 0.6 0.6 0.7

Airports Infrastructure Industry Value Real Growth, % chg y-o-y 1.5 1.9 3.2 3.3 3.5 3.5 3.5

Airports Infrastructure Industry As % of Total Infrastructure 7.2 7.1 7.0 6.9 6.8 6.8 6.8

Airports Infrastructure Industry As % of Total Construction 3.3 3.1 3.1 3.0 2.9 2.9 2.8

Ports Harbours and Waterways Infrastructure Industry Value As % of Transport Infrastructure 19.7 19.7 19.7 19.6 19.5 19.3 19.1

Ports Harbours and Waterways Infrastructure Industry Value, HKDbn 15,181.1 16,658.5 18,181.7 19,705.7 21,252.7 22,740.9 24,186.8

Ports Harbours and Waterways Infrastructure Industry Value, US$bn 0.7 0.8 0.9 1.0 1.1 1.1 1.2

Ports Harbours and Waterways Infrastructure Industry Value Real Growth, % chg y-o-y 5.8 4.7 4.1 3.4 2.9 2.0 1.4

Ports Harbours and Waterways Infrastructure Industry As % of Total Infrastructure 13.3 13.3 13.2 13.1 12.9 12.7 12.5

Ports Harbours and Waterways Infrastructure Industry As % of Total Construction 6.0 5.9 5.8 5.7 5.5 5.3 5.1

e/f = BMI estimate/forecast, Source: BMI Research



Transport Infrastructure Outlook and Overview

Roads Dominant

Transport Infrastructure Value, By Industry, VNDbn

e/f = BMI estimate/forecast, Source: BMI, Local news sources, industry sources, BMI Research (Major Projects Database)

BMI View: The transport sector forms the majority of infrastructure investment in Vietnam throughout

our 10-year forecast period, accounting for 65% in 2021. 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 4.8% year-on-year (y-o-y) between 2013 and 2017.

Title: Competitiveness Of Vietnam's Infrastructure

Rank/133 in

2009/10* Rank/139 in

2010/11** Rank/142 in

2011/12*** Rank/144 in 2012/13****

Quality of Roads 102 117 123 120

Quality of Railroad Infrastructure 58 59 71 68

Quality of Port Infrastructure 99 97 111 113

Quality of Air Transport Infrastructure 84 88 95 94

Quality of Overall Infrastructure 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 Dominate With....

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

to the total transport infrastructure industry value, accounting for 49% of total value in 2013. Although

most of Vietnam’s national road network is paved (only 26%, or 45,603km out of 171.392km, 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 well-being, 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 to be

developed in Vietnam:

In July 2012, the Ministry of Transport said that construction work on 24 new roads is expected

to start soon. They include: Ho Chi Minh roadway La Son-Tuy Loan section, Long Thanh-Dau

Giay highway, Da Nang-Quang Ngai highway, BOT and BT highway tunnel over Ca mountain

pass on National Road 1A, Tan Vu- Lach Huyen motorways.

In August 2012, Transport Engineering Design Incorporated (TEDI) presented detailed planning

report of the ring road 5 in Hanoi. The 385km project is expected designed in detail between

2012 and 2015, with the US$4.7bn project fully completed by 2030. Ring road 5 is expected to

be divided into four parts: Son Tay-Phu Ly, Phu Ly-Bac Giang; Bac Giang-Thai Nguyen and

Thai Nguyen-Son Tay.

In September 2012, Thailand-based Italian-Thai Development signed a MoU to draw out the

investment plan and technical design for phase 2 of the Halong – Mong Cai expressway project

in the Quang Ninh province. The 134km project, which is part of the Noi Bai – Halong – Mong

Cai expressway project, is expected to cost a total of US$2.1bn. The expressway is expected to

take three years to be completed.

However, there are concerns about the viability of toll roads in Vietnam over the near-term. In July 2012,

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

trucks using the Ho Chi Minh City (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 tolls 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 anecdotal evidence from the Vietnamese

Business Times, the cost of constructing an expressway in Vietnam is about 1.5-2 times higher than

neighbouring countries such as China, Indonesia, Malaysia and Thailand. 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:

High inflation and domestic interest rates.

The lack of project management expertise to complete road projects within budget, resulting in

site clearance delays and cost overruns.

Corruption, with anecdotal evidence suggesting that 30% of a project's value is pocketed by the

contractor in order to pay bribes to relevant parties.

Deficiency in regulations and government institutions that effectively balance the need to

safeguard the public interest with the need for expeditious provision of land for infrastructure

development. The current regulation – Decree 69/2009/ND-CP – only gives district-level

people's committees, not the central government, the right to hire companies to settle site

clearance and compensation issues.

A lack of specialised government institutions that can mediate between developers and

landowners about compensation. Combined with the perceived potential for corruption at the

district level, these deficiencies do not provide landowners with the assurance that they are

receiving the fair amount of compensation for their land. As a result, they are unwilling to sell

their land, causing delays in site clearances and cost overruns for road projects. Site clearances

have been repeatedly reported by local media sources as the key reason for holding up major

road projects in Ho Chi Minh City, and they include the 14km Tan Son-Nhat Binh Loi outer ring

road project, the 245km Noi Bai-Lao Cai expressway, the 55km HCM City-Long Thanh-Dau

Giay Highway and the widening of the Hanoi Highway.

This lack of viability, combined with poor global economic conditions, makes it difficult for Vietnam to

raise financing for its road projects. These projects include the Ben Luc-Long Thanh expressway, the

Danang-Quang Ngai expressway, the Dau Giay-Phan Thiet expressway project, the National Highway 1

expansion project, the Trung Luong-My Thuan expressway project, the La Son – Tuy Loan expressway

project, the Rach Chiec Bridge No 2 on the Eastern Ring Road and the road linking the East-West

Highway with the HCM City-Trung Luong Expressway.

....Railways

Railways accounted for around 20% of Vietnam's total transport infrastructure industry value in 2013,

according to BMI. Vietnam’s rail network stretches for 2,347km, but only 178km is standard gauge

(1.435m gauge). The network has 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. BMI views this as a positive and

encouraging move in light of the serious concerns regarding the prohibitive price tag and worries about

the misallocation of resources. The hefty cost and potential inflationary effects on Vietnam's foreign debt

were the main grounds for opposition. Having said that, Japan announced in September 2012 that it

remains keen to assist Vietnam in building this north-south high-speed railway line by 2030.

Table: Vietnam Railway Corporation’s Main Targets

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

Upgrading west-east railway corridor so that the maximum speed of passenger trains and freight trains is 80-100kph and 60-80kph, respectively.

Paying more attention to the development of new routes between Ho Chi Minh City-Vung Tau, Ho Chi Minh City-Can Tho, 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 missing links such as Ho Chi Minh City-Phnom Penh city and Cambodia-Vietnam.

Source: Vietnam Railways

The government has since looked at improving its existing railway network, In June 2012, the

Vietnamese government approved Vietnam Railway Corporation 's railway development plan for the

2012-2015 period. The plan will involve a total investment of VND200trn (US$9.5bn), with VND195trn

(US$9.28bn) to be directed towards the upgrading and construction of new railway lines and connecting

them to major ports, industrial zones and tourist attractions. The plan entails the upgrading of the north-

south Thong Nhat railway. Preparations are to be concluded to build railway routes connecting Hanoi-

HCM City, and the double tracking of the Lao Cai-Hanoi-Hai Phong and Hanoi-Dong Dang corridors.

The detailed plan for the construction of a new 191km railway line from HCM City to Can Tho is also

expected to be completed in 2013.

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 Vietnam National Railway Administration to be developed under the

forms of BOT, build-transfer and build-transfer-operate and this list of projects was submitted to the

Ministry of Transport in early 2010, but a lack of investors prevented from starting them. 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 urban railways

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 the US$2.25bn Ben Thanh-Suoi Tien

Metro line 1 in Ho Chi Minh City), but just like the roads sector, several have also faced delays despite

generous financing from foreign countries and multinational development banks. These projects are

mainly suffering from slow site clearances (such as the Cat Linh Street-Ha Dong District railway line in

Hanoi) and cost overruns (such as the Nhon-Hanoi Station urban railway line No. 3).

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 it’s port infrastructure is poor by international standards. 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. In June 2011, the Vietnam Marine Department stated that

the country was home to 266 large and small-scale seaports, but was only able to handle 100mn tonnes of

cargo and no large vessels.

BMI anticipates increasing investment into Vietnam's port infrastructure, 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's export led-growth and investment. Vietnam's port infrastructure ranked only 111th out

of 142 countries in the 2011/12 competitiveness report published by the World Economic

Forum.

Vietnam is becoming increasingly important, not just to growing Intra-Asian trade, but also on

the global stage. An increasing number of shipping companies are choosing Vietnam as their

port of call as they ply the east-west trade route. Vietnam's ports are gradually graduating from

feeder stop-offs on the major routes 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. As such, it is looking to public-private partnerships (PPPs) to develop its port sub-sector.

Vietnam’s Ministry of Planning and Investment has been tasked with submitting draft regulations on

PPP-infrastructure projects. There are 23 proposed PPP projects relating to seaport development and

services, involving a total investment of US$3.3bn. Twelve of the proposed projects involve seaport

construction. PPPs could make Vietnam's master plan for port development, which calls for total cargo

volume throughput to increase to 500-600mn tonnes a year by 2015 and 800-1,100mn tonnes by 2020,

more achievable.

Under the plan, Vietnam needs about US$4bn to build an additional 15-20km of wharves by 2020.

According to Nguyen Chi Hung of the Vietnam Maritime Administration, the development of projects

that allow ports to handle larger vessels and meet international-standards will take priority. These include

the Van Phong Port, which can handle 9,000-15,000 20-foot equivalent units (TEU) container ships, and

Ba Ria-Vung Tau Port, which can handle 4,000-8,000TEU 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.

The Vietnamese government also has major plans to boost the combined port capacity in the Mekong

Delta provinces, from 15.7mn tonnes in 2010 to 28mn tonnes in 2020. According to plans developed by

the government in September 2011, the expansion in capacity will focus on river ports and seaports

located on the Tien and Hau rivers, which are the main tributaries of the Mekong River.

New sea ports will also be constructed in the Ca Mau peninsula (part of the Mekong Delta region) and in

the Gulf of Thailand. These include the Nam Can seaport in the Ca Mau province, as well as the Hon

Chong, Bai No and Binh Tri ports in the Kien Giang province. These ports, once completed, will also be

able to receive vessels of 5,000-10,000DWT.

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 foreced

the government to suspend the project in September 2012. The Transport ministry has since directed the

Vietnam Maritime Administration to set up plans to call for domestic and foreign investments in the

construction of the port under any appropriate forms.

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.

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.

Lastly, access to financing remains an issue, despite a sharp decline in Vietnam's interest rates. 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. This lending limitation comes under the Law on Credit Institutions, which became

effective on January 1 2011. Formosa Ha Tinh, which is also the investor of the US$8.9bn project, is

working on the first phase, which entails the construction of a 14-berth Son Duong port, a hotel for

workers, a 427-room guest house and office buildings. The investor requires US$3bn to be mobilised



from a foreign bank outside Vietnam and US$3bn from foreign bank branches in Vietnam. The investor,

which is using its own capital for the construction work, is planning to start commercial operations by

end-2015.

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. This willingness by the government to get projects under way provides grounds

for optimism, and this has attracted foreign investors to the sector. In April 2011, US-based ADC-HAS

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.

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.

In March 2012, Vietnam 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 Airports Corporation

of Vietnam, foreign investors have already expressed interest in the Van Don airport. However, he did

not provide specific details of investors.

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 year, 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, are 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 difficult in securing financing for its airport projects and is still seeking

investment capital from different sources.

Major Projects Table – Transport

Table: Major Projects – Transport

Project Name Value

(US$mn) Capacity/

Length Companies Timeframe Status

Airports

Quang Tri Airport – Gio Linh District Airport 27 na na 2009-2015

Planning stage – Approved in

February 2009

Passenger terminal, Danang International Airport 74

6mn passengers

/year

Middle Airports Corp., Louis Berger Group,

Airport Consultants B.V. and National

Construction Consultants

2006 – December

2011

Completed, Two years behind

schedule (December 2011)

Cam Ranh International Airport expansion 590

5.5mn passengers/

yr na 2009 – 2020

Project approved, US$9.5mn terminal

completed in late-2009 (Nov 2011)

Noi Bai International Airport extension (includes T2 terminal) 960

10mn passengers

/year

Northern Airports Corporation (NAC),

Taisei, Hoa Binh Construction and Real

Estate Corporation

September 2012 –

November 2014

Contract awarded (September 2012);

US$759mn ODA loan from Japan

Phu Quoc International airport, Duong To Commune 810

7mn passengers/

yr Southern Airports

Corporation 2009 – Q4

2012

Under Construction, Construction on

terminal started in end-Jan 2012

Chu Lai International Airport 1000

4mn passengers

/year Garuda Asea, Airis

International -2025 MoU for feasibility

study approved

Long Thanh international airport (Passenger terminal, runway, parking place), Dong Nai province 6700

100mn passengers

/year

Japan Airport Consultants, Airports

Corporation of Vietnam 2015-2020

At planning stage, finalising investment

plan (August 2012)

Phu Bai International Airport upgrade, Thu Thien-Hue Province 595

5mn passengers/

year Middle Airports Corp. 2011 – 2020

At planning stage, government to

arrange financing for 2012 (Nov 2011)




Project Name Value

(US$mn) Capacity/


Tien Lang International Airport, Hai Phong na

80mn passengers

/year na 2010- At planning stage

Pleiku Airport (two-phase upgrade), Gia Lai 105

500000 passengers

/year na 2011-2030

(first phase) At planning stage

Da Nang International Airport terminal expansion 64.5

6mn passengers

/year Da Nang International

Airport na

Completed; Opening in May

2011

Seven PPP airport projects (Chu Lai, Phu Bai, Da Nang, Tuy Hoa, Quy Nhon, Pleiku and Cam Ranh) na na na 2011-

Proposal for projects send to

Vietnamese Ministry of Planning and

Investment (MoPI) by ADC-HAS

International airport, Haiphong, Northern Vietnam na

100mn passengers/

yr na 2011- Project announced

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

2-5mn passengers/

yr Joinus, Korea Airports

Corporation 2013 – 2015

Preparation to be finalised by 2012,

Project site moved to Doan Ket

commune (Jan 2012)

Vung Tau airport expansion na na na 2011 -

At planning stage, received approval

for new project site (September 2011)

Van Don International airport, 45km from Ha Long Bay, Quang Ninh province 1200 na

Airports Corporation of Vietnam

March 2012 -

Project announced, at planning stage,

Foreign interest expressed (Mar-12)

Lao Cai international airport 62.6 na na

January 2012 – 2020

At planning stage, project announced

(January 2012)

Ports

Cai Cui port project 32 60000 tonnes

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

(Vinalines) 2009-2015 Second phase

under construction

Saigon International Terminal, Phu My 1 Industrial Park 163 na

China Harbour Engineering Company 2009-2011 Completed

Deep water Port at Khe Ga Cape, Binh Thuan Province 250

35mn tonnes /year Vinacomin 2009-2020 At planning stage




Project Name Value

(US$mn) Capacity/


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

10mn tonnes /year

Trai Thien Sea Transport Investment and

Development Joint Stock Company April 2009 -

Licence awarded (April 2009);

Delayed due to disputes (April

2010)

Saigon-Hiep Phuoc port 337 8.7mn

tonnes /year na 2009-2020 Under Construction

Hai Phong International port 800

50000 tonnes Vinalines 2012-2016

Japanese-Vietnam agreement for the

port's development signed in November

2010

Van Phong International Entreport, Khanh Hoa Province 3600

12,000-15,000TEU

Vietnam National Shipping Lines

(Vinalines), Portcoast, Nippon Koei, Rotterdam

Port , SK E&C October

2009 – 2015

Construction suspended;

Seeking investors (September 2012)

Cai Mep-Thi Vai International Port (includes roads connecting National Highway 51 to the Cai Mep port) 700

100000 tonnes

Civil Engineering Construction Joint Stock

Co. No.6 and Truong Son Corp

October 2008 –

December-2012

Under construction (March 2012);

My Thuy deep water port 1100 50000 tonnes

Marine Consultant Co. and Quang Tri province 2010-2020

Approved in October 2008

Son Duong deep water port, part of Vung Ang Economic Zone, Ha Tinh Province 1200

30mn tonnes/yr

Formosa Plastics Group, Formosa Ha Tinh Steel,

Samsung C&T

November 2008 – end-

2015

Under construction, facing financing difficulties (June

2012)

Gemalink Cai Mep Container Terminal (first phase) 300

1.2mn TEU/yr

Gemalink, CMA-CMG, Dealim-SAMWHA

2010 – 2013 (first phase)

Under construction, construction tempo slowed (June 2012)

Lach Huyen deepwater port PPP project (four container wharves), east of Hanoi 1800

60mn tonnes /yr

Vietnam National Shipping Lines

(Vinalines), Molyto, Mitsui O.S.K. Lines (MOL),

Nippon Yussen Kaisha (NYK), Itochu, Japan

ODA [Sponsor] Q4 2012 –

2016

Under construction, tender for package 6 delayed (August

2012)

Cai Lan International Container Terminal na 720000 TEU

Cai Lan Port Investment Joint Stock Company,

Carrix, Cordiant Capital 2010-2011

Completed; US$127mn funding

secured

Dong Lam cement port 64 71mn tonnes

International Transport Development And

Investment Joint Stock 2010-2017

Licence granted; first phase to be

completed by 2013




Project Name Value

(US$mn) Capacity/


Cua Lo port expansion, Nghe An 490 18mn tonnes

International Transportation

Development and Investment 2010-2030

Ongoing development,

Phase II and III to be completed in 2020 and 2030

Tan Cang-Cai Mep deepwater container trans-shipment terminal, Ba Ria-Vung Tau province 204

1.8mn TEU /year

Mitsui OSK Lines (MOL), Hanjin and Wan Hai

- March 2011 Completed

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

Ke Ga deep-water port (three-phase), Tan Thanh Commune, Ham Thuan Nam District, Binh Thuan Province 1000

3.5mn tonnes /year (first phase)

Vietnam Coal and Mineral Industries (TKV)

April 2012 – 2014 (first

phase)

Undergoing site clearance (Mar-12);

works delayed since Aug-10

Waterway transport (corridors and river ports) upgrade project (includes Viet Tri – Quang Ninh corridor, Lach Giang estuary, Phu Tho port, Ninh Binh port), northern delta, Bac Ninh province 201.5 na Word Bank [Sponsor]

December 2011 -

First two bidding package under

construction, US$171.5bn loan from World Bank

(December 2011)

Deepwater port, Mekong Delta region 1000 na

OGL Mineral and Coal Mining Company May 2012 - At planning stage

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 (second

stage)

US$37.5mn first stage under

construction (May 2012)

Two-phase shipyard project, Thinh Dong Commune, Cam Ranh city 180 na

Oshima Shipbuilding company

June 2012 – 2016

Investment licence granted (June 2012)

Port project, part of Duyen Hai coal-fired power centre, Tra Vinh province 181

12mn tonnes/yr

China Communication Construction [EPC], EVN

June 2012 – Q3 2014

EPC contract awarded (June

2012)

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

Nikken Sekkei Civil Engineering Ltd, Port and

Waterway Engineering Consultants Company

August 2012 -

At design phase, design consultant

contract signed (August 2012)




Project Name Value

(US$mn) Capacity/


Da Nang port upgrading project phase 2 na na

Japan Transport Cooperation Association

(JTCA), Japan Port Consultants Ltd (JPC)

and Japan Overseas Coastal Area

Development Institute (ACDI), JICA [Sponsor]

September 2012 -

At planning stage, seeking ODA funds

from JICA (September 2012)

Rail

Saigon My Tho Railway 445 na Vietnam Railway

Corporation (VRC) 2010-2015 At design stage

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

October 2011 – June

2015

Under construction, delayed by land clearance (July

2012)

Hanoi Urban Railway Line 1 (Gia Lam – Hanoi railway station – Ngoc Hoi), Hanoi 1070 15km na 2010 – 2016

Under construction; ODA loans of

US$386.5mn from France, the

remaining financing from EIB and Hanoi

Metro line 1 (Ben Thanh Market [District 1] – Suoi Tien [outlying District 9]), Ho Chi Minh City 2250

19.7km (2.6km

underground)

Sumitomo [EPC], Traffic Works Construction

Corporation No. 6 (Cienco 6) [EPC], Vincom

Joint Stock Company, Japan [Sponsor],

European Investment Bank [Sponsor], GS E&C

[EPC]

September 2012 – end-

2017

US$420mn contract awarded for surface

works, land acquisition not

completed, Under construction

(September 2012)

Metro line 2 (Ben Thanh [District 1] – Thu Thiem Pennisula [District 2] – Tham Luong [District 12]), Ho Chi Minh City 1370

11.3km (9.3km

underground)

Asian Development Bank (ADB) [Sponsor],

European Investment Bank [Sponsor], Tedi

South [Design], Obermeyer Planen & Beraten [Design], ILF Beratende Ingenieure

[Design], Poyry [Design] August 2013

– 2017

Design and site clearance phases

underway (June 2012); Design

phase: February 2012 – August 2013

North-South (Ho Chi Minh City – Hanoi) railway rehabilitation project 1800 na

Vietnam Railway Corporation, Japan

International Cooperation Agency

August 2012 -

At planning stage (August 2012)

Subway project no 5 (First phase running from the Bay Hien crossroads to the Saigon bridge), Ho Chi Minh City 1850 na

GEV, HCMC's Urban Railway Management

Board, Spanish government –

US$698.7mn [Sponsor] 2011-

Spanish firms pulled out due to financial constraints, lacking

US$239mn (April 2012)




Project Name Value

(US$mn) Capacity/


Monorail line 2 (between East-West Highway and National Road No 50), Ho Chi Minh City 350 14km Italian Thai Development 2011- MOU signed

Monorail line 3 (between Quang Trung street to Tan Thoi Hiep ward), Ho Chi Minh City 200 8.5km Italian Thai Development 2011-

MOU signed (March 2011)

Metro line 4 (Nguyen Van Linh – Ben Cat Bridge [District 12]), Ho Chi Minh City 2500

24km (19km underground

) Italian Thai Development April 2012 -

Pre-feasibility study for BOT project underway (April

2012)

Urban railway line No. 3 project (Nhon [Liem district] – Hanoi railway station [Hoan Kiem district]), Hanoi 1430

12.5 km (8.5km of

aerial track and 4km of

underground track)

Systra, Vietnam Bank for Industry and Trade; ADB

[Sponsor], EIB [Sponsor], France [Sponsor]

September 2010 – Q3

2015

Under construction, potentially delayed

due to lack of financing (July

2012)

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

Hanoi Urban Railway Management Board

October 2011 – 2020

Awaiting government

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

May 2012 – 2017

At tendering stage, land acquisition not

completed (May 2012)

National railway project (involves Hoa Hung railway station and District 3 [Hao Hung] – Binh Chanh District [Tan Kien] track section), Ho Chi Minh City na na na June 2012 -

At planning stage, initial design

rejected by HCM CITY authorities

(June 2012)

Underground MRT Section (Thu Thiem New Urban Area [District 2] – An Suong Coach Station [District 12]), part of Mass Rapid Transit (MRT) line 2 na 9.3km ADB [Sponsor]

April 2013 – 2016

US$500mn loan from ADB received

for underground section (May 2012)

Railway development plan (includes construction of Hanoi – HCM City railway line, Lao Cai – Hanoi – Hai Phong line, Hanoi – Dong Dang line) 9300 na

Vietnam Railway Corporation

June 2012 – 2015

Received government

approval, preparations being

finalised (June 2012)




Project Name Value

(US$mn) Capacity/


Ho Chi Minh City – Can Tho railway line 9630 191km

Southern Transport Design and Consulting

JSC June 2012 -

At planning stage, detailed plan to be

completed by 2013 (June 2012)

Metro line 3A/3B [Ben Thanh Market [District 1] – Tan Kien, Cong Hoa Crossroads [Tan Binh District] – Hiep Binh Phuc [Thu Duc District]), Ho Chi Minh City na 23km na

August 2012 -

At planning stage (July 2012)

Metro line 5 (Sai Gon Bridge [District 2] – Can Giuoc Bus Station [District 8]), Ho Chi Minh City na 17km na

August 2012 -


Metro line 6 (Ba Queo [Tan Binh District] – Phu Lam [District 6]), Ho Chi Minh City na 6km na

August 2012 -


National Highway 20 upgrade BT project (Dau Giay [Dong Nai province] – 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, Construction

Materials No 1

September 2012 – late

2014

At pre-construction stage, seeking financing, first

phase contract signed (September

2012)

Underground interchange/terminals for lines 1, 2, 3A, 4 and, District 1, Ho Chi Minh City 429 na JICA [Sponsor] July 2012 -


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

July 2012 – 2017

Technical design completed (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 (West Lake-Ba Vi District), Hanoi na na JICA July 2012 -

At feasibility study stage (July 2012)

Trang Bom (Dong Nai) – Hoa Hung (HCM City) railway line project, Ho Chi Minh City 528 49km na

September 2012 -

At planning stage, seeking investor

(September 2012)

Bien Hoa-Vung Tau railway line, Ho Chi Minh City 720 114km na

September 2012 -

At planning stage, seeking investor

(September 2012)




Project Name Value

(US$mn) Capacity/


Lao Cai-Hanoi-Hai Phong railway line na 381km na

September 2012 -

At planning stage, seeking investors

(September 2012)

Roads & Bridges

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

1A National Highway (Ngoc Hoi – Cau Gie section) 50 24km

Hanoi Department of Transportation -2009 Completed

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

Approved in January 2009 – To

be completed in 2014

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

September 2008

My Phuoc-Tan Van Expressway 196 42km

Becamex IDC Corporation 2009-2013 Under Construction

Ring Road No. 3, Hanoi, Phase II 280 6

Cienco4, Japan International Cooperation

Agency (JICA) 2011 – 2013 Under construction

(August 2012)

Tan Son Nhat International Airport – Binh Loi – Outer Ring Road BT project, Ho Chi Minh City 383 13.7km

GS Engineering and Construction

June 2008 – late-2013

Project stalled due to delays in site

clearances (June 2012)

Highway to link Cai Mep and Phuoc An ports 350 21.3km na 2009-2015

Construction of the first phase due to

commence in Q409

Nhat Tan Bridge (includes access roads), package No.3, Hanoi 423 3900km

IHI, Sumitomo Mitsui Construction, Import-Export Construction

Corporation (Vinaconex), 2009-2012

Under construction (Third and Final

stage)

Four-lane Noi Bai [Hanoi Airport] – Lao Cai [Chinese border] highway 952 245km

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

[A4, A5], Doosan [A6], Guangxi RBEC,

Vinaconex, Asian Development Bank

[Partial sponsor] 2010 – late-

2013

Under construction, significantly behind

schedule due to land clearances

(September 2012)

Ho Chi Minh City-Long Thanh-Dau Giay (National Highway 1) expressway, part of North South Highway 1180 55km

Vietnam Expressway Corporation (VEC),

Japan Bank for International Cooperation

[Sponsor], Asian Development Bank [Sponsor], Hashin

Construction June 2010 –

2014

Under construction, significantly behind schedule, delayed

due to site clearances (August

2012)




Project Name Value

(US$mn) Capacity/


Six-lane Hanoi [Gia Lam] – Hai Phong [Dinh Vu dam] expressway project 1500 105.5km

Vietnam Infrastructure Development and

Finance Investment Joint Stock Company (VIDIFI)

[BOT], PSJ Holdings, Cienco 1 Company and

Infrastructure Development and

Finance Investment Company, GS E&C,

Citibank Japan [Sponsor], Sumitomo

Mitsui Bank [Sponsor] 2009 – 2014

Under construction, packages 13-55%

completed, significantly behind

schedule (June 2012)

Ca pass tunnel BOT project (Dong Hoa [Phu Yen province] – Van Ninh [Khanh Hoa province] section), part of National Highway 1A 750 13.4km

Hanoi Construction Corp, Mai Linh Group JSC, Hai

Thach Investment JSC. A Chau (Asia) JSC

Q2 2012 – Q2 2016

Received government

approval (January 2012)

Ben Luc-Long Thanh expressway, part of North-South Highway 1600 57.8km

Vietnam Expressway Development Company,

JICA [Sponsor, ADB [Sponsor]

Q2 2013 – 2017

Construction delayed to 2013

due to cost escalations

(September 2012)

Road linking East-West Avenue with the Trung Luong Expressway, part of 217km south coastal corridor project 1 2.7km na 2010 – 2013

Project approved (October 2010);

Seeking financing (June 2012)

Deo Ca tunnel 500 11.125km

Hanoi 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 between uyen Van Cu and Ngoc Thuy Roads in Hanoi 12 3km na 2011-2013

Received government

approval

Fifth bidding package for Ho Chi Minh City – Long Thanh – Dau Giay expressway, part of North-South Highway 43 13.9km

Pumyang-Sungjee Construction 2010-2013 Under construction

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

Investment finalised in Q410

My Thuan-Can Tho Expressway project, Southwest Vietnam 441.6 32.3km

Transport Engineering Design Incorporated, Cuu

Long CIPM November

2011 – 2014

US$441.6mn loan from Vietnamese government (Nov

2011)




Project Name Value

(US$mn) Capacity/


Design and consultancy contract for Ben Luc-Long Thanh expressway 10 na

Katahira, Nippon, Vietnam Expressway

Investment and Development Company 2010-2012 Contract awarded

Upgrading of the provincial road No 39B, Thai Binh province 106 29km

Tasco Joint Stock, Agribank, Maritime Bank,

Southeast Asia Bank 2010-2013 US$92.3mn loan

pledged by banks

New and existing highways, railway, maritime projects 34900 na na 2010-2020

Awaiting government

approval

Ring road No. 4, Hanoi 1970 98km na 2010-2015 Plans submitted

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

Project approved (December 2010)

A 530.5m bridge linking the east side of Hanoi with the Van Giang district across the Bac Hung Hai river 26 0.53km

Viet Hung Urban Development and

Investment, Utracon Overseas, Ultracon Vietnam Company 2010-2012 Contract signed

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

Construction underway

Kon Brai Bridge, Kon Tum province (Part of National Highway No 24) 164 19m

Vietnam Road Corporation [Sponsor]

December 2010 – May

2012 Under construction

(January 2011)

Overhaul of Phap Van-Cau Gie expressway 87 30km

Central Japan Expressway, Vietnam

Expressway Investment and Development

Company (VEC) 2011- Under negotiations

for a JV

National Road No 14 crossing, Dak Nong province 50 na

Duc Long Gia Lai Group, Vietnam Commercial Joint Stock Bank for Industry and Trade (VietinBank-CTG) 2010-2022

Credit contract signed; BOT

contract announced in September 2010

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

Vietnam Expressway, Japan International

Cooperation Agency (JICA) [Sponsor]

2006 – June 2012

Completed (June 2012)

Vam Cong Bridge 500 na na 2011-

US$200mn loan for project by Korea

Eximbank, the rest from Australian and

ADB




Project Name Value

(US$mn) Capacity/


Ring roads 3 and 4, connecting Ho Chi Minh City with the Ben Luc-Long Thanh and Bien Hoa-Vung Tau highways 8000 100km na 2011-

(Ring road 3); 197.6km (Ring road

4) – Vietnamese Ministry of

Transport to start a procedure to call

Road upgrading project, northern provinces 170 300km na 2011 – 2017

First phase to finish in 2017 -US$80mn

loan from ADB

Hoa Vang District (Danang) – Quang Ngai Expressway (involves 65km Danang-Tam Ky section and 74km Tam Ky-Quang Ngai section), part of North-South Highway 1470 139km

Project Management Unit 85, Nippon Koei, Nippon

Engineering Consultants, Chodai and Thai

Engineering Consultants, JICA [Sponsor], World

Bank [Sponsor] Q2 2013 –

2016

Construction delayed due to

costs escalations (September 2012)

Six-lane Ninh Binh – Thanh Hoa [Nghi Son] road project 2800 126.7km na 2011 -

Under tendering process (July 2011); 30% Financing from

government, 70% from private

investors

Rach Gia section, part of 924km southern coastal corridor project, Chau Thanh District, Kien Giang Province 82 na na May 2011 -

Under construction (May 2011);

Financing from ADB, Korea,

Australia, Vietnam

Minh Luong – Thu Bay section 50 21km

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

Under construction (May 2011); –

(including 2 bridges over Cai Lon and

Cai Be rivers), part of 217km

Nhieu Loc-Thi Nghe flyover no. 1 project na na

Bach Khoa Construction Consultant Corporation 2011 -

Initial report submitted to

Transport Ministry (July 2011); Design completed by 2011

Six-lane Dau Giay-Phan Thiet expressway PPP project (parallel to NH-1), Dong Nai Province 1130 101km

Binh Minh Import Export Production and Trading

Group (Bitexco)

end-2012 – 2014 (first

phase); 2020 (second phase)

Feasibility study completed, received

government financing for land

acquisition (September 2012)

Thu Bay – Kenh section, part of 924km Southern Coastal Corridor Project 47.3 31km

Ssangyong Engineering and Construction, Korea

Exim Bank [Sponsor] September

2011 -

Contract awarded (September 2011);

Financing from Korea Exim Bank




Project Name Value

(US$mn) Capacity/


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

800m & 680m

IDICO Investment Consultancy Joint Stock

Company Q411 – mid-

2012

BOT contract signed (September

2011)

Duong Dong – Cua Lap road, connecting Phu Quoc Airport 16 7km

508 Company, Civil Engineering Construction

Company No 5 October

2008 -

50% completed (September 2011);

Originally completed by

November 2009

Four-lane elevated highway, Vinh Binh bridge (Thuan An commune) to My Phuoc town (Ben Cat district), southern Binh Duong province 800 31.5km na 2012 – 2014

Received government

approval (September 2011)

Gia Loc-Tu Ky section, Package EX5 of six-lane Hanoi-Hai Phong expressway project, Hai Duong province 169 15.3km


Finance Investment Joint Stock Company (IDIFI),

Guangdong Provincial Changda Highway

Engineering 2012 – 2015 Contract awarded (September 2011)

Package EX4, EX5 & EX6, part of six-lane Hanoi-Hai Phong expressway project, Hai Duong province na 40km


Finance Investment Joint Stock Company (VIDIFI) 2012 – 2015

EX5 awarded by VIDIFI, EX4 & EX6

awarded by September and

October respectively (Sep

2011)

Noi Bai International Airport to Nhat Tan Bridge connecting road construction project 83 12.1km JICA [Sponsor]

May 2012 – September

2014 At planning stage

(May 2012)

Southern Coastal Corridor Project (Vietnam – Thailand) 47.3 31km

Ssangyong Engineering and Construction 2011 -

Contract awarded (September 2011)

Ring Road No. 2 (from Nhat Tan Bridge to ending point of Cau Giay Crossroad), Hanoi 304.7 2km

World Bank, Global Environmental Facility

March 2012 – 2015

Under construction; US$155mn loan from World Bank

(Mar-12)

Mekong Delta connectivity (first phase) project (includes Vam Cong Bridge, Cao Lanh Bridge and 23.5km of roads) 751 29.3km

Australian Agency for International

Development (AusAID), the Asian Development

Bank (ADB) October

2011-

Technical consultancy service agreement signed;

US$751mn from AusAID, ADB and

Vietnamese government




Project Name Value

(US$mn) Capacity/


Road tunnel beneath Ca mountain pass, between Dong Hoa (Phu Yen province) and Co Ma Pass in the 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. 2 BT project, links Binh Thanh District and District 2 in Ho Chi Minh City 71.5 987m

HCM City Infrastructure Investment Joint Stock

Co (CII)

mid-April 2012 –

October 2012

Under construction (April 2012);

Seeking financing (June 2012)

Six-lane road widening BOT project, Hanoi – Can Tho section, part of 2300km National Highway 1 6000 1760km

Vietnam government [Sponsor]

June 2012 – end-2016

At planning stage, Awaiting

government approval (June

2012)

Ho Chi Minh Road, NH-2 (Pac Bo [Cao Bang province] – Dat Mui [Ca Mau province])

690 (Second

phase) 3183km na

2000 – 2007 (first phase);

2015 (second phase)

First phase completed; Second

phase under construction (Mar-

12)

La Son [Thua Thien-Hue province] – Tuy Loan [Danang city] highway BT project, part of North-South Highway 1000 81.7km

Volunteer Youth Group, Construction Corp No 1,

Truong Son Construction Corp, Truong Thinh

Group Joint Stock Co, Son Hai Group Co Ltd,

Traffic Works Construction Corp No 8,

Van Tuong Co Ltd Q3 2012 –

2015

At tendering process, companies shortlisted, seeking

financing (June 2012)

National Highway No 1 expansion BOT project, Thanh Hoa – Vung Ang (Ha Tinh province) – Can Tho section 4300 1057km

Vietnam government [Sponsor]

March 2012 -

At planning stage, seeking government

approval, government funds fully disbursed, in need of additional funds (May 2012)

Bac Luan 2 bridge connecting Mong Cai (Quang Ninh) and Dongxing (Guangxi) na na na

March 2012 -

Agreement signed between Vietnam and China (March

2012)

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

Thang Long, South Korea [Sponsor]

December 2011 -

Under construction, US$130mn ODA loan from South

Korea (December 2011)

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

Vietnam Railway Corporation (VRC)

January 2012 – early-


(January 2012)

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

Land acquisition delayed (April 2012)




Project Name Value

(US$mn) Capacity/


Beltway No. 2 (An Lap intersection to Nguyen Van Linh Parkway) na na na April 2012 -

Design work completed, Land

acquisition not completed (April

2012)

Nguyet Vien-Thanh Hoa Bridge na na na May 2012 - At planning stage

National Highway 61B (Vi Thanh District [Hau Giang Province] – Can Tho City [Mekong Delta]) 165 47.5km na - May 2012

Completed (May 2012)

Ha Long City – Mong Cai City expressway project, part of Noi Bai – Halong – Mong Cai expressway, Quang Ninh province 2100 134km Italian-Thai Development

Q1 2013 – 2015

MOU signed for feasibility study

phase 2 (September 2012)

Ha Long – Hai Phong Highway BOT project, Quang Ninh province na 25km na June 2012 -

MOU signed (June 2012)

First overhead road project (Cong Hoa Intersection – Nguyen Huu Canh Street), Ho Chi Minh City 714 8.4km na June 2012 -

At planning stage, seeking Financing

(June 2012)

Second overhead road project (To Hien Thanh Street – Belt road No. 2), Ho Chi Minh City 328 10.2km na June 2012 -


(June 2012)

Third overhead road project (To Hien Thanh Street – District 7), Ho Chi Minh City 817 na na June 2012 -


(June 2012)

Fourth overhead road project (Binh Phuoc Junction – Cong Hoa Intersection), Ho Chi Minh City 547 7.7km na June 2012 -

At planning stage, seeking financing

(June 2012)

Sa Huynh – Dung Quat coastal road project, Quang Ngai central province 269 na na 2012 -

Under construction, cost increased by

100% (June 2012)

Tan Vu-Lach Huyen expressway project, part of Lach Huyen port project 630 15.63km Japan ODA [Sponsor]

December 2012 -

At planning stage (May 2012)

Trung Luong – My Thuan – Can Tho expressway project 1000 54km

Cuu Long Corporation for Investment, Development and Project Management

of Infrastructure 2013 -

At planning stage, seeking financing

(August 2012)




Project Name Value

(US$mn) Capacity/


Ring Road No. 5 (Son Tay-Phu Ly, Phu Ly-Bac Giang; Bac Giang-Thai Nguyen and Thai Nguyen-Son Tay), Hanoi 4700 385km

Transport Engineering Design Incorporated

(TEDI)

September 2012 – 2015

(detailed planning);

2030

At detail planning stage (September

2012)

84 bridge upgrading project 376 na

Japan International Cooperation Agency

(JICA) [Sponsor] September

2012 -

US$376mn loan from JICA, at pre-

feasibility study stage (September

2012)

Six-lane Nha Trang City [Khanh Hoa Province] – Phan Thiet City [Binh Thuan Province] PPP expressway project, part of north-south Highway 3500 235km na

September 2012 -

At feasibility-study stage (August 2012)

North-South Highway 22800 1811km na

2010 – 2015 (136km); –

2020 (793km); –

2020 (1018km)

Certain sections under construction

(August 2012)

Source: BMI. na=not available.



Energy And Utilities Infrastructure

Table: Vietnam Energy and Utilities Infrastructure Industry Data, 2010 – 2016

2010 2011 2012e 2013f 2014f 2015f 2016f

Energy and Utilities Infrastructure Industry Value As % Of Total Infrastructure 28.8 31.4 32.2 32.4 32.4 32.5 32.7

Energy And Utilities Infrastructure Industry Value, VNDbn 18,480.0 24,024.9 26,704.2 30,216.6 33,571.2 37,136.7 41,039.1

Energy and Utilities Infrastructure Industry Value, US$bn 1.0 1.2 1.3 1.5 1.6 1.8 2.0

Energy and Utilities Infrastructure Industry Value Real Growth, % chg y-o-y 9.5 11.3 2.1 6.8 4.9 5.4 5.5

Energy and Utilities Infrastructure Industry Value As Percent Of Total Construction (%) 13.3 14.8 15.1 15.1 14.9 14.7 14.6

Power Plants and Transmission Grids Infrastructure Industry Value As % Of Total Energy and Utilities 89.8 89.6 89.5 89.6 89.5 89.4 89.3

Power Plants and Transmission Grids Infrastructure Industry Value, VNDbn 16,591.7 21,523.5 23,904.7 27,066.5 30,039.4 33,204.3 36,665.7

Power Plants and Transmission Grids Infrastructure Industry Value, US$bn 0.9 1.0 1.1 1.3 1.5 1.6 1.8

Power Plants and Transmission Grids Infrastructure Industry Value Real Growth, % chg y-o-y 10.0 11.0 2.1 6.9 4.7 5.3 5.4

Power Plants and Transmission Grids Infrastructure Industry Value As % of Total Infrastructure 25.9 28.2 28.8 29.1 29.0 29.1 29.2

Power Plants and Transmission Grids Infrastructure Industry Value As % of Total Construction 11.9 13.2 13.5 13.5 13.3 13.2 13.0



Table: Vietnam Energy and Utilities Infrastructure Industry Data, 2010 – 2016

2010 2011 2012e 2013f 2014f 2015f 2016f

Oil and Gas Pipelines Infrastructure Industry Value As % Of Total Energy and Utilities 3.2 2.3 2.3 2.1 2.0 1.9 1.8

Oil and Gas Pipelines Infrastructure Industry Value, VNDbn 594.9 563.3 602.7 641.3 679.2 715.8 754.5

Oil and Gas Pipelines Infrastructure Industry Value, US$bn 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Oil and Gas Pipelines Infrastructure Industry Value Real Growth, % chg y-o-y -25.1 -24.0 -2.0 0.1 -0.4 0.2 0.4

Oil and Gas Pipelines Infrastructure Industry As % of Total Infrastructure 0.9 0.7 0.7 0.7 0.7 0.6 0.6

Oil and Gas Pipelines Infrastructure Industry As % of Total Construction 0.4 0.3 0.3 0.3 0.3 0.3 0.3

Water Infrastructure Industry Value As % Of Total Energy and Utilities 7.0 8.1 8.2 8.3 8.5 8.7 8.8

Water Infrastructure Industry Value, VNDbn 1,293.3 1,938.1 2,196.7 2,508.8 2,852.6 3,216.5 3,618.9

Water Infrastructure Industry Value, US$bn 0.1 0.1 0.1 0.1 0.1 0.2 0.2

Water Infrastructure Industry Value Real Growth, % chg y-o-y 27.9 31.2 4.3 7.9 7.5 7.5 7.5

Water Infrastructure Industry As % of Total Infrastructure 2.0 2.5 2.6 2.7 2.8 2.8 2.9

Water Infrastructure Industry As % of Total Construction 0.9 1.2 1.2 1.3 1.3 1.3 1.3




Table: Vietnam Energy and Utilities Infrastructure Industry Long Term Forecast, 2015-2021

2015f 2016f 2017f 2018f 2019f 2020f 2021f

Energy and Utilities Infrastructure Industry Value As % Of Total Infrastructure 32.5 32.7 33.0 33.4 33.8 34.3 34.6

Energy And Utilities Infrastructure Industry Value, VNDbn 37,136.7 41,039.1 45,408.3 50,218.5 55,550.0 61,299.1 66,978.3

Energy and Utilities Infrastructure Industry Value, US$bn 1.8 2.0 2.3 2.5 2.8 3.1 3.3

Energy and Utilities Infrastructure Industry Value Real Growth, % chg y-o-y 5.4 5.5 5.6 5.6 5.6 5.3 4.3

Energy and Utilities Infrastructure Industry Value As Percent Of Total Construction (%) 14.7 14.6 14.5 14.4 14.4 14.3 14.2

Power Plants and Transmission Grids Infrastructure Industry Value As % Of Total Energy and Utilities 89.4 89.3 89.3 89.3 89.3 89.3 89.3

Power Plants and Transmission Grids Infrastructure Industry Value, VNDbn 33,204.3 36,665.7 40,550.5 44,838.3 49,602.1 54,752.7 59,797.5

Power Plants and Transmission Grids Infrastructure Industry Value, US$bn 1.6 1.8 2.0 2.2 2.5 2.7 3.0

Power Plants and Transmission Grids Infrastructure Industry Value Real Growth, % chg y-o-y 5.3 5.4 5.6 5.6 5.6 5.4 4.2

Power Plants and Transmission Grids Infrastructure Industry Value As % of Total Infrastructure 29.1 29.2 29.5 29.8 30.2 30.6 30.9

Power Plants and Transmission Grids Infrastructure Industry Value As % of Total Construction 13.2 13.0 12.9 12.9 12.8 12.8 12.7



Table: Vietnam Energy and Utilities Infrastructure Industry Long Term Forecast, 2015-2021

2015f 2016f 2017f 2018f 2019f 2020f 2021f

Oil and Gas Pipelines Infrastructure Industry Value As % Of Total Energy and Utilities 1.9 1.8 1.8 1.7 1.6 1.5 1.5

Oil and Gas Pipelines Infrastructure Industry Value, VNDbn 715.8 754.5 795.2 838.2 883.4 931.1 981.4

Oil and Gas Pipelines Infrastructure Industry Value, US$bn 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Oil and Gas Pipelines Infrastructure Industry Value Real Growth, % chg y-o-y 0.2 0.4 0.4 0.4 0.4 0.4 0.4

Oil and Gas Pipelines Infrastructure Industry As % of Total Infrastructure 0.6 0.6 0.6 0.6 0.5 0.5 0.5

Oil and Gas Pipelines Infrastructure Industry As % of Total Construction 0.3 0.3 0.3 0.2 0.2 0.2 0.2

Water Infrastructure Industry Value As % Of Total Energy and Utilities 8.7 8.8 8.9 9.0 9.1 9.2 9.3

Water Infrastructure Industry Value, VNDbn 3,216.5 3,618.9 4,062.6 4,542.0 5,064.4 5,615.3 6,199.4

Water Infrastructure Industry Value, US$bn 0.2 0.2 0.2 0.2 0.3 0.3 0.3

Water Infrastructure Industry Value Real Growth, % chg y-o-y 7.5 7.5 7.3 6.8 6.5 5.9 5.4

Water Infrastructure Industry As % of Total Infrastructure 2.8 2.9 3.0 3.0 3.1 3.1 3.2

Water Infrastructure Industry As % of Total Construction 1.3 1.3 1.3 1.3 1.3 1.3 1.3




Energy And Utilities Infrastructure Outlook and Overview

Slowly Overshadowed

Energy And Utilities Infrastructure Value And Share Of Infrastructure Value

e/f = BMI estimate/forecast, Source: BMI, Local news sources, industry sources, BMI Research (Major Projects Database)

BMI View: The energy and utilities sector is seeing rising levels of growth, with BMI forecasting

average annual industry value growth of 5.6% between 2013 and 2017.

Although the total investment in the transport sector will continue to overshadow spending on energy and

utilities, the value of the power plants and transmission grids sub-sector will increase, with real growth

averaging 5.6% 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 Power

Development Plan 7, the government has set a target of developing 75,000MW 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. 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, Phan Van Khai, 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.

Growing Foreign Participation In Coal Sector

The first ever 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 independent power producers (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 2000MW

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 BOT (build-operate-transfer) 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, three other coal-fired plants (Phu My 3, Mhy My 2.2 and Hai Duong) are being

implemented by foreign independent power investors under BOT contracts. Sembcorp Utilities is the



latest company to potentially develop a power plant in Vietnam under a BOT format. 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.

Besides BOT contracts, the Vietnamese government is keen to award foreign players EPC (engineering,

procurement, construction) contracts for thermal (gas- and coal-fired) power plants and 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.

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 has

been awarded a 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 , 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 followed with 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 Electricity of Vietnam (EVN) to provide

engineering, procurement and construction (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.

Hydropower: Indispensible, But Problematic

Hydropower provides more than a quarter of Vietnam’s electricity. There is a stable stream of investment

into increasing hydropower capacity, as elevated coal prices in Asia render coal plants costly to operate.

However, hydropower has proven to be an unreliable source of electricity, largely due to the severe

droughts that have plagued Vietnam. As a result, Vietnam is reliant on electricity imports from China to

meet the shortfall, although this is an expensive option.

The environmental effects caused by hydropower plants are also increasingly becoming a concern. In

June 2012, the Vietnamese Department of Industry and Trade announced that local authorities had

rejected 52 substandard hydroelectricity projects since the start of 2012. Environmental concerns, such as

deforestation and the destruction of natural landscapes, have been cited as reasons for the decision. 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.

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 nuclear power

development plan, Vietnam is planning to construct 10-13 nuclear reactors in eight different sites by

2030, bringing the country's total nuclear capacity to 15,000MW.

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 2000-megawatt (MW) Ninh Thuan 1 nuclear project. A Russian consortium

will conduct an 18-month feasibility study on the project, 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.



Similarly, in September 2011,

a Japanese consortium, known

as the International Nuclear

Energy Development of Japan

(INEDJ), signed an agreement

with Vietnamese state utility

Electricity of Vietnam (EVN)

to jointly develop the Ninh

Thuan 2 nuclear power project

in Vietnam. As part of the

agreement, nuclear plant

operator Japan Atomic Power

will conduct a US$26mn

feasibility and environmental

study on the project and report

the results, which includes an

assessment on tsunamis, to

EVN by March 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.

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. 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 are scheduled to be

concluded in mid-2013.

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. We estimate that electricity losses in Vietnam due

to transmission and distribution made up 10.3% of total output in 2011. Significant investment is

therefore required to address these transmission losses and meet future demand for grids. According to

the National Power Transmission Corp (June 2012), total demand for investment capital to develop the

Vietnam Electricity Generation Capacity Mix, 2012e

e/f = BMI estimate/forecast, Source: UN Data, EIA, BMI



electricity transmission network to 2020 reaches about US$10bn. Transmission projects have so far

borrowed only US$4bn worth of ODA and commercial loans; the remaining US$6bn has not been

arranged.

Vietnam is looking to change this. In November 2011, the National Power Transmission Corporation

(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 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 HCMC Power Corporation 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 at 6.58% of electricity prices during the 2008-2012

period. This is much lower than the global average price and needs to be raise to 10-12% of electricity

prices.

In July 2012, General Electric signed an equipment supply contract worth US$16.5mn with the Power

Transmission Company No. 4, a subsidiary of the National Power Transmission Corporation, to double

Vietnam’s existing power transmission capacity. GE’s series capacitor banks will be installed as part of

the upgrade of the 500-kV Pleiku–Phu Lam transmission line to increase power capacity from 1,000 amps

to 2,000 amps, according to the contract signed in Hanoi at the witness of U.S. Secretary of State Hillary

Rodham Clinton, cited from the Saigon Times.

Droughts Driving Demand For Water Treatment Services

Vietnam has significant potential for large-scale water treatment facilities and we are forecasting real

growth in the water infrastructure industry to average 7.5% 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 1-1.5mn 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 public private

partnership (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, expected to be issued in the third quarter of 2013.

Several foreign investors have expressed an interest in Vietnam's water utilities sector, particularly

Japanese and Philippines 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 by Vietnamese 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 manage downside risks for private investors.

The lack of incentives to attract investors to the sector. According to the HCMC Institute of

Development Studies (cited by the Saigon Times), private companies enjoy corporate income tax

reductions and exemptions, 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

government had launched a pilot PPP mechanism in November 2010, but specific regulations for

the different types of infrastructure (including water) have yet to be completed by their

respective agencies .



Major Projects Table – Energy And Utilities

Table: Major Projects – Energy and Utilities

Project Name Value

(US$mn) Capacity/


Oil & Gas Pipelines

B-O Mon natural gas pipeline 800 400km

Vietsovpetro Joint Venture Co,

PetroVietnam Construction Joint Stock Corp and PetroVietnam

Technical Services Joint Stock Corp 2009-2011

Construction started (November 2009)

2nd Nam Con Son gas pipeline na 400km PetroVietnam 2010-2014

PetroVietnam to prepare feasibility

study (March 2010)

Nam Con Son 2 pipeline project, southern Vietnam 441 293km

PetroVietnam Construction and

PetroVietnam Equipment Assembly, Metal

Structure 2011 – 2013

Contract awarded by Petrovietnam Gas (July 2011)

Power Plants & transmission grids

Nghi Son 1 thermal power plant, Thanh Hoa province 981 600MW

Marubeni, Electricity of Vietnam 2010-2014


Danang hydropower plant 74 170MW Geruco Song Con

Hydropower 2010-2013 Under construction

Kien Luong Coal-fired Power Complex (Phase 1), Kien Luong Province 2500 1200MW

Tan Tao Energy Corporation, China

Harbour Engineering Company [EPC]

Q1 2010 – end-2013 Under construction

Nhon Trach 2 gas-based power plant, Ong Keo Industrial Park, Dong Nai province 470 760MW PetroVietnam

mid-2009 – November

2011 Completed

(November 2011)

Vinh Tan 2 thermal power plant, part of Vinh Tan Electric Centre, Tuy Phong districts, Binh Thuan province 1300 1244MW

Shanghai Electricity Corporation-China [EPC]

August 2010 – late-2013

(first turbine);

June 2014 (second turbine)

Under construction (July 2012)

Two wind farms, Binh Thuan Province 440 200MW Saigon Invest Group

August 2010 -

Project approved in principle (August

2010)

Coal power plant BOT project, Binh Thuan province 1750 1200MW

China Southern Power Grid Corp

September 2010 – 2014 Under construction




Project Name Value

(US$mn) Capacity/


Muong Kim hydropower plant 37 13.5MW

Hanoi Electrical Equipment -2010

Completed – Started commercial

operations (September 2010)

Wind farm in Thuan Bac district, Ninh Thuan Province 500 200MW

Trung Nam Investment and Construction 2010-2012


Dak R'Tih hydropower plant, Gia Nghia town, Dak R'Lap district, Dak Nong province 192 144MW

Dakdrinh Hydropower Joint Stock Company,

Construction Corp No 1

2007 -December

2011

Completed without foreign guidance

(Oct 2011)

Dak Sepay hydropower plant in Bai Tho spring 3 3MW

Duc Long Gia Lai Group (DLG) 2010- Currently underway

Ninh Thuan 1 nuclear power plant 10600 2000MW

EVN, Rosatom, Atomstroyexport, E4

Group , Kiev Scientific Research and Designing

Institute (JSC KIEP), EnergoProjectTechnolog

y (LLC EPT) 2014-2020

US$8bn loan from Russia, consultancy

agreement for 18-month feasibility

study signed(Nov 2011)

Song Hau 2 coal-fired power plant (Song Hau Thermo Power Complex), Hau Giang province 2500 2000MW

PetroVietnam, Toyo Ink Group

January 2012 – 2018

BOT project received

government approval (Jan 2012)

Ninh Thuan 2 nuclear power plant 14400 2000MW

International Nuclear Energy Development

Corporation of Japan, Japan Atomic Power 2014-2022

US$26mn feasibility and environmental

study to be completed by March

2013 (Sep 2011)

Mong Duong 2 coal-fired BOT power plant project, Quang Ninh province 2100 1200MW

AES, Posco Power, China Investment

Company (CIC), Doosan Heavy Industries &

Construction, Hoa Binh Construction and Real

Estate Trading Joint Stock Co (HBC)


Under construction, 40% completed

(September 2012)

Wind power project in Vinh Tan and Vinh Phuoc, Soc Trang Province na 300MW EAB Group, Trasesco 2011-

At the development stage

Huoi Quang hydropower plant project na 520MW

Electricity of Vietnam, French Development

Agency (AFD) 2010-2015

Received US$100mn

financing from AFD




Project Name Value

(US$mn) Capacity/


Phu Quy wind power plant, Binh Thuan Province 17 6MW

PetroVietnam Power Corporation, Electronics

and Informatics Corp (VEIC), Viettronics Construction JSC (VIETCT), Amec

Technologies Joint Stock Co 2010-

First phase under construction;

Financing secured with OceanBank

and HSBC

Dak Mi 2 Hydropower plant 128 96MW Song Da 9.01 2010- 2013

Contract signed – First turbine

expected 2013

Song Chay 5 hydropower plant project, Then Phang Commune, Xin Man Dist, Ha Giang province 21 16MW

Song Da 5 Investment, Construction and Energy Development Joint Stock

Co 2010-2012 Construction

underway

Son La hydropower power plant, Muong La district, Son La province 2900 2400MW

Electricity of Viet Nam (EVN) [Sponsor]

2005 – August 2012 Completed

Long Phu 1 coal-fired power plant, Soc Trang Province 1200 1200MW

Petrovietnam, Petrovietnam Technical

Services Corp 2011-2014 Construction

underway

Lai Chau hydropower plant, Lai Chau province 1831 1200MW

Electricity of Vietnam (EVN), Song Da Group 2011-2017

Under construction; Facing payment

delays (June 2011); First phase

completed by March 2016

Thang Long coal-fired circulating fluidised bed power plant, Guangninh province 303 600MW

Wuhan Kaidi Electric Power, Thang Long

Thermoelectric, Vinacomin 2012 – 2015

EPC contract signed (Dec 2011)

Vung Ang 2 coal-fired power plant, Ky Anh District, Ha Tinh Province 1700 1200MW

Vapco, Hung Nghiep Formosa Ha Tinh Co. 2012 – 2020


1.1mn-volt ultra high voltage (UHV) electric power transmission project near Ho Chi Minh City na na

Tokyo Electric Power (TEPCO) 2011-

Feasibility study completed in

February 2011

Nam Cong 2 and Nam Cong 3 power plants in Attapeu, Laos 135 111MW

Hoang AnhAttapeu Electric 2011-2013 Licence Granted

Hydropower plant 62.5 na

Sumitomo Mitsui Financial Group

[Sponsor], Nippon Export and Investment

Insurance of Japan [Sponsor], Chugoku

Power Co February

2011 -

Sumitomo Mitsui Financial Group has

agreed to US$51 mn loan (February

2011)




Project Name Value

(US$mn) Capacity/


Nghi Son 2 coal fired power plant, Thanh Hoa province 2000 1200MW

Marubeni Corp, Vietnam National Coal-Mineral

Industries Group (Vinacomin) 2011-2016

Undergoing negotiations

Phu My 2.2 thermal power station na 715MW

Electricity of France (EDF) 2011-

EDF selected as investor

Cong Thanh coal-fuelled power plant, Nghi Son Economic Zone, Thanh Hoa 619 600MW Cong Thanh Corporation 2011- 2014 Under construction

Da M'bri plant, Lam Dong province 2 75MW

Southern Region Hydropower, Mien Dong 2011-2012

Construction contract awarded

A Luoi Hydropower, Thua Thien Hue Province 155.5 170MW

Cavico, Central Hydropower

2007 – May 2012

First unit completed, Second unit

completed by end-2012 (May 2012)

Hua Na hydropower plant, Que Phong district, Nghe An province 286 180MW

Hua Na Hydropower Joint Stock Co, Lilama 35

Joint Stock Co 2008 – late-

2012

Under construction; First generator into operation (August

2011)

A solar and wind power development, Ninh Thuan province 249 124.5MW na 2011-

Received investment licences

2 wind power projects – Nhon Hoi Economic Zone, Binh Dinh province 60 51MW

Central Region Wind-Power, Phuong Mai

Windpower Q2 2011- Under construction

Thermo power plant, Nhon Hoi Economic Zone, Binh Dinh province 972 1400MW STFE 2012 -2014

At planning stage; Document

submitted to Vietnamese government

Thermoelectric power plant, Hau Giang 2500 2000MW TOYO 2011-2019

Seeking formal government

approval

Waste-to-power treatment plant, Binh Phuoc 60 na Suc Song Xanh 2011-

Construction approved – Planned

production capability of 124

million kWh of electricity per year

Mao Khe coal-fired power plant, Quang Ninh province 577 440MW

Vinacomin, BNP Paribas [Sponsor], Bank of China

[Sponsor] 2009-2012

Under construction, first 220MW unit operational (July

2012)




Project Name Value

(US$mn) Capacity/


Duyen Hai 2 coal-fired power plant, Tra Vinh province 1500 1200MW Janakuasa 2011-2014

To start construction in

2011; Project fully financed by

Huadian Engineering

Quang Trach 1 coal-fired power plant, Quang Binh province 2250 1200MW

PetroVietnam, EPF Power, JPAWORR,

Sumitomo [Sponsor] early-2013 –

2015

Under construction, seeking funds, selected to use

local power equipment (July

2012)

Song Tranh 4 hydropower plant, Quang Nam province 77 48MW na 2011- 2014 Under construction

Trung Son hydropower project, Quan Hoa, Thanh Hoa province 411 260MW

World Bank [Sponsor], 47 Construction JSC (C47),

Samsung C&T Corporation

H2 2011 – Q2 2017

Under construction, main construction contract awarded

(September 2012)

Hai Phong 1 thermo power plant na 300MW na - Q2 2011

Generator No 1 and 2 joined national

grid (Q211)

Hai Phong 2 thermo power plant na 300MW

Hai Phong Thermo Power Joint Stock Co

-September 2013

Third generation to start in April 2013; Fourth generator, September 2013

Dadrinh hydropower plant, along Tra Khuc River, Quang Ngai Province 170 125MW

Dakdrinh Hydropower Joint Stock Co.,

Petrovietnam 2011 – 2014

Under construction; US$178 credit

contract signed with Credit Agricole

Corp.

Solar power generation plant, Quang Binh province 14 na na 2011 – 2013

US$12mn loan approved from

Korea Eximbank (June 2011)

Undersea (110KV) power cable project (Ha Tien Township – Phu Quoc Island), Kien Giang province 112 56km

EVN Southern Power [Sponsor], World Bank

[Sponsor], Prysmian Powerlink SRL Group

[EPC] May 2012 –

late-2013

EPC contract awarded (May

2012)

Hai Duong coal-fired power plant, northern Vietnam 2260 1200MW

Jaks Resources Berhad, Meiya Power, Island Circle, JAKS Pacific

Power Q2 2013 –

Q2 2017

Under construction; 25-year BOT

contract awarded; Key agreements

(BOT, land, PPA) signed (Aug 2011)




Project Name Value

(US$mn) Capacity/


Wind Farm, Bac Lieu, Cuu Long province, Mekong Delta 247 99.2MW

Cong Ly Construction, General Electric (GE),

Trade and Tourism

September 2010 –

September 2013

Under construction; GE to provide

turbines (Jul 2011); PPA signed (August

2012))

Wind power plant, Duyen Hai District, Tra Vinh province. na 30MW

EAB Group, General Trading Production and Services Joint Stock Co

(Trasesco 2011 -

In discussion with Tra Vinh province

People's Committee (July 2011)

Wind power project, Tram Hanh Commune, Da Lat City, Lam Dong province na 300MW na 2011 – 2013


Ninh Loan wind power plant, Duc Trong District, Lam Dong province na na na 2011 – 2013

Under construction (July 2011)

Dakrinh hydropower plant, Kon Turn province 205 125MW

Dakdrinh Hydropower Joint Stock Co, PV

Power, PetroVietnam 2011 – 2013

BOO agreement signed; US$15.5mn equipment contract

awarded to Dongfang Electric

(July 2011)

Song Hau 1 coal-fired power plant, Hau Giang province na 1200MW

PetroVietnam, Petrovietnam Technical

Services Corp 2011 – 2015

Under construction, selected to use


2012)

Duyen Hai 3 coal-fired power plant, Tra Vinh province, southern region of Vietnam 1300 1245MW

CHENGDA, DEC, SWEPDI, ZEPC 2011 – 2015

EPC awarded by EVN; 85% financed

by Chinese banks (August 2011)

Vung Ang 1 coal-fired power plant, Ha Tinh province 1600 1200MW

Petrovietnam, LILAMA Corporation [EPC],

Toshiba, Sojitz, JBIC [Sponsor], Sumitomo

Mitsui [Sponsor] August 2011 – July 2012

Under construction; Steam turbine

generators from Toshiba, Sojitz

(November 2011)

Mong Duong 1 coal-fired power plant, near Cam Pha Town, northern Quang Ninh Province 1700 1080MW

Hyundai Engineering & Construction

October 2011 –

August 2015 (first turbine)

Under construction; EPC contract

awarded (Sep 2011); US$930mn

loan from ADB

Srepok 4A hydropower plant na 64MW

Buon Don Hydropower Joint Stock Co

2011 – late-2012

Under construction (Sep 2011)

Son My Power Centre (LNG) BOT project, Ham Tan District 4670 3000MW

International Power, Sojitz, Pacific

October 2011 – 2019

Feasibility study prepared for

1950MW Son My 1 power plant (Oct

2011)




Project Name Value

(US$mn) Capacity/


Thermoelectric plant, Ganh Dau Commune 344 200MW

Phu Quoc Investment and Development

Management Board October

2011 -

Received government

approval (Oct 2011)

Hydropower plant, Song Bac River, Ha Giang province 50 42MW Song Bac Hydroelectric

November 2011 – end-

2012

Under construction (Nov 2011);

US$50mn loan from Sumitomo Mitsui

Bank

O Mon 4 combined cycle gas-based power plant, part of O Mon thermal power complex, Can Tho city 793.5 720MW

Can Tho Thermal Power Company, Asian

Development Bank (ADB)

2011 – June 2016

US$309.9mn loan from ADB,

US$370mn from KfW Bankengruppe

(Nov 2011)

Integrated gasification combined cycle system coal-fired power plant, Hai Lang District, Quang Tri Economic Zone, central Vietnam na 3600MW

PHI Group, Sao Nam Group

December 2011 -

MOU signed (Dec 2011);

Power Transmission Investment Program (involves building 648km of transmission lines in first tranche) 730 860km

Asian Development Bank (ADB), National Power

Transmission Corporation

December 2011 – June

2020

US$730mn loan from ADB, first

tranche of US$120.5mn

approved (Dec 2011)

Coal-fired power plant, Dung Quat Economic Zone, Quang Ngai Province 338 1200MW Sembcorp Industries June 2012 -

Feasibility study underway;

Received license (June 2012)

Waste plasma-converted gas-fired power plant first phase, Ho Chi Minh City 400 na

Trisun International Development, Kien Giang

Composite KGC Company

March 2012 -

Project awarded (Mar-12)

O Mon 1 gas-based power plant, part of O Mon thermal power complex, Can Tho city na 660MW

Can Tho Thermal Power Company Limited,

Daelim Industrial [Design and Construction], Sojitz

Corporation [Steam Turbines], JICA

[Sponsor]

September 2012 –

October 2015

Under construction (September 2012)

Pleiku-My Phuoc-Cau Bong 500KV Transmission Line 447 na

National Power Transmission Corp (NPT)


2012

Under construction; US$200mn from

ADB, US$192mn from Vietcombank,

US$74mn from VDB

Dak Nong-Phuoc Long-Binh Long 220KV Transmission Line 67 na

National Power Transmission Corp (NPT)


2012

Under construction; US$45mn from

BIDV




Project Name Value

(US$mn) Capacity/


Ba Thuoc 2 hydropower plant project 72 na

Hoang Anh-Thanh Hoa Hydropower Joint Stock Co, Hoang Anh Gia Lai

Group September

2009 – 2012 Under construction

Song Bung 4 hydropower EPC project, Bung River 24 156MW

Alstom, Hydrochina Huadong Engineering

Corp February

2012 – 2014 Contract awarded

(February 2012)

Dong Nai 5 Thermo coal-fired power plant na 300MW Vinacomin 2011 – 2015 At planning stage

An Khanh 2 coal-fired power plant, Tan Phu Commune, Pho Yen District, Thai Nguyen province 481 300MW

An Khanh Thermo Power Joint Stock Co., Bank of

China [Sponsor] early-2012 –

2016

Investment licence received (October

2011); Site clearance underway

An Khanh 1 coal-fired power plant, An Khanh Commune, Dai Tu District, Thai Nguyen province. na 100MW

An Khanh Thermo Power Joint Stock Co. 2011 -

Under construction (December 2011)

Kien Luong Coal-fired Power Complex (Phase 2), Kien Luong Province na 1200MW


Harbour Engineering Company [EPC]

June 2010 – early-2014

Contract awarded in 2010

Kien Luong Coal-fired Power Complex (Phase 3), Kien Luong Province na 2000MW


Harbour Engineering Company [EPC] June 2010 -

Contract awarded in 2010

Thermal power plant, Ly Son Island, Quang Ngai province na na na - April 2012

Project suspended due to

environmental concerns (April

2012)

Phuong Mai Wind Power Plant No 1, Nhon Hoi Industrial Park, Binh Dinh Province 60.25 30MW

Clean Energy, CP Phuong Mai Wind Power

April 2012 – April 2013

Under construction (April 2012)

Grid revamping project; 8km of medium-voltage power lines and 43km of low-voltage power lines 816 na

HCMC Power Corporation

May 2012 – 2015

At planning stage (May 2012)

Thai Binh 2, coal-fired power plant, Thai Binh province 1600 1200MW

PetroVietnam Power Corporation,

PetroVietnam Construction Joint Stock

Corporation [EPC], Toshiba, Sojitz

[Equipment], Daelim Industrial [Equipment],

Babcock & Wilcox Beijing Company (BWBC)

August 2012 – end-2015

US$300mn equipment sub-

contract awarded (August 2012)




Project Name Value

(US$mn) Capacity/


Mekong Delta Wind Power Centre, Vinh Trach Dong Commune 1000 500MW

Vietnam Development Bank [Sponsor], Export-

Import Bank of the United States [Sponsor]

June 2012 – 2015

Under construction (June 2012); US$1

loan received (October 2011)

Undersea power cable project (Sa Ky Port – Ly Son Island), Quang Ngai Province 14.4 26km

Power Engineering Consulting Joint Stock

Company 2 June 2012 -

Surveying activities completed (June

2012)

Solar farm, Binh Thuan province na 50MW ACO Group July 2012 -


Quynh Lap 1 coal-fired power plant, Central Nghe An province 1500 1200MW

Vinacomin, No 1 Construction Consultancy

JSC January

2012 – 2016

Under construction, selected to use


2012)

Da Nhim hydropower plant expansion project na 80MW

Da Nhim-Ham Thuan-Da Mi Hydropower JSC

Q1 2013 -Q4 2015


Vinh Tan 1 thermal power plant BOT project, part of Vinh Tan Electric Centre, Tuy Phong districts, Binh Thuan province 1900 na China Southern Group July 2012 -

At documentation stage, BOT contract

yet to be signed (July 2012);

Undergoing land acquisition process

(August 2012)

Waste power generation project, Hanoi 29.5 na

Hitachi Zosen Corporation, Japanese

New Energy and Industrial Technology

Development Organisation [Sponsor],

Hanoi government [Sponsor]

August 2012 -

Contract awarded (August 2012)

Vinh Tan 3 thermal power plant BOT project, part of Vinh Tan 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 Power Company

August 2012 – 2015



Can Tho Thermal Power Company

August 2012 – 2015


Nam Chien hydropower plant BO project, Son La province na 200MW Song Da Group

August 2012 -

Seeking government

financing (August 2012)




Project Name Value

(US$mn) Capacity/


Geothermal power plant, Dakrong District, Quang Tri province na 25MW na

September 2012 -

Received government

approval (September 2012)

Nong Son coal-fired power plant, Quang Nam province 253.3 na

China National Heavy Machinery Corporation

(CHMC), Vinacomin [Sponsor] 2008 -

Construction halted, 55% completed

(September 2012)

Pleiku-Phu Lam 500kV transmission line, part of North-South power transmission na 500km

Power Transmission Company No. 4, General

Electric (GE), US Exim Bank [Sponsor]

2012 – Q3 2013

US$16.5mn equipment supply

contract signed (July 2012)

Water

Thanh My Loi wastewater treatment na na na -2015

Site selected (August 2010)

Song Hau 1 water treatment plant PPP project, Can Tho City na na PetroVietnam 2011 -

Contract awarded; Construction due to

begin (May 2012)

Song Hau 2 water treatment plant, An Giang Province na na na 2011 -

Plan approved by the government in

2010

Song Hau 3 water treatment plant, An Giang Province na na na 2011 -

Plan approved by the government in

2010

Wastewater treatment plant, Binh Duong 95

6mn m3 /year na

2011-mid 2013 Under construction

Water supply and irrigation system project, south of Vietnam 329 na

Asian Development Bank (ADB) 2011-2014

US$85mn loan from ADB and French government; The

rest from Vietnamese government

Yen So PPP wastewater treatment plant, Hoang Mai District, Hanoi 300

200,000 m3/day

Gamuda, Gamuda Land Vietnam Co., Japan

International Cooperation Agency (JICA), Hanoi

Water Drainage Company 2008-2012

Under construction, almost completed

(June 2012)

Water pipeline system project (Binh Thai intersection [Thu Duc District] – Dien Bien Phu Street near Saigon Bridge), Ho Chi Minh City 154 10km

Asian Development Bank [Sponsor], Saigon Water

Corporation (Sawaco) June 2012 –

late-2014

US$138mn loan from ADB (June

2012)

Phuc Hoa water resource project 60 na na 2011 – 2014

US$60mn supplementary

financing provided by ADB




Project Name Value

(US$mn) Capacity/


Bay Mau PPP wastewater treatment plant under Second Hanoi Drainage Project For Environmental Improvement, Vietnam 29

13300 m3/day

Japan International Cooperation Agency

(JICA), Metawater, TSS, Hanoi Water Supply,

Sewerage, Environment Investment Construction

October 2011 -

US$192.4mn loan signed with JICA

(Jul 2011); To form JV with Vietnam

company (Sep 2011)

Phu Do wastewater treatment plant, Hanoi 144

84000 m3 /day

Hanoi Water Drainage Company July 2012 -


Yen Xa water treatment plant, Hanoi 288

275000 m3 /day

Hanoi Water Drainage Company, ODA

[Sponsor] July 2012 - At planning stage

(July 2012)

Seven water supply projects, Ho Chi Minh City 240 na

Saigon Water Supply Corporation (Sawaco)


Under construction (September 2011)

Sewage treatment plant, Ben Rong commune, Go Dau district, Tay Ninh 14.4

300tonnes/day

Vietnam Green Environment Company

September 2011 – late-

2012

Received approval from Tay Ninh

provincial People's Committee

(September 2011)

Binh Hung wastewater treatment plant second phase, Binh Chanh District, Ho Chi Minh City na

512000 m3/day

Center of Urban Flood Control, Japan

International Cooperation Agency (JICA) July 2011 -

MOU for second phase signed with

JICA (July 2011)

Garbage and wastewater treatment PPP project, Da Nang city 190 na

JFE Engineering, Nihon Suido Consultants

November 2011 -

Working group established for feasibility study

(Nov 2011)

Tra Bong water supply project, Binh Son district, Quang Ngai province 197

200000m3/day

Anh Phat Water Supply Group Joint Stock Co

April 2012 – Q4 2013

Under construction (April 2012)

Nhieu Loc-Thi Nghe Canal Basin environmental sanitation project 787 na

World Bank [Sponsor], Asian Development Bank

[Sponsor]

2003 – June 2012 (first

phase)

US$317mn first phase under

construction (April 2012); Second

phase to cost US$470mn

Kenh Dong water treatment BOT project, Ho Chi Minh City na

200000 m3/day

Kenh Dong Water Supply Joint Stock Co, Ayala

Corp, Manila Water 2003 – H2


(April 2012)

Water pipeline system project (Binh Thai intersection – Thu Duc water plant), Ho Chi Minh City na 12.4km

Asian Development Bank (ADB), Saigon Water

Corporation (Sawaco) - June 2012 Completed (June

2012)

Thu Duc 3 water treatment plant, Ho Chi Minh City na na na

2012 – late-2014 Under construction




Project Name Value

(US$mn) Capacity/


Nhieu Loc-Thi Nghe wastewater treatment plant (second phase), Thanh My Loi Ward, District 2, Ho Chi Minh City na

850000m3/day na July 2012 -

Received HCM City approval (July

2012)

Western West Lake waste water treatment plant, Hanoi 144

61400m3/day na July 2012 -


Ha Dong waste water treatment plant (first phase), Hanoi 20

20000m3/day ODA [Sponsor] July 2012 -


Green waste treatment plant, Thu Thua district, Long An Province 700

40000 tonnes/yr

Vietnam Waste Solutions Co. (VWS)

August 2012 – 2022

At planning stage; Design, feasibility,

geological study completed (August

2012)

water supply project, Pleiku, Gia Lai province 9

30000m3/day

Saigon Infrastructure Real Estate Investment (SII), HFIC Investment Joint Stock Company,

Tuan Loc Company 2013 – 2014


(August 2012)

Water supply project, Van Phong Economic Zone, Khanh Hoa Province 4.8

30000m3/day na

September 2012 -

At planning stage (September 2012)

Son Tay water treatment plant, Hanoi 12

9000m3/day na July 2012 -





Residential/Non-Residential Construction and Social Infrastructure

Table: Vietnam Residential and Non-residential Building Industry Data, 2010 – 2016

2010 2011 2012e 2013f 2014f 2015f 2016f




Residential and Non-Residential Building Industry Value Real Growth, % chg y-o-y 16.5 -3.8 -0.1 8.2 7.5 7.5 7.8



Table: Vietnam Residential and Non-residential Building Long Term Forecasts, 2015 – 2021

2015f 2016f 2017f 2018f 2019f 2020f 2021f




Residential and Non-Residential Building Industry Value Real Growth, % chg y-o-y 7.5 7.8 7.8 7.6 7.5 7.1 7.0





Residential/Non-Residential Building Outlook and Overview

BMI View: Vietnam's robust economy, which is forecast to grow at an average rate of 7.2% year-on-

year (y-o-y) between 2013 and 2017, is to be a driving force for residential and non-residential building

sector growth. Rising trade activity will drive demand for industrial buildings, while rising incomes

among Vietnamese consumers will drive demand for housing and commercial construction projects, such

as malls and hotel development. We also believe that there is upside potential to our long-term forecast in

Vietnam's residential and non-residential building sector and are forecasting real growth for the sector to

average 7.8% y-o-y between 2013 and 2017.

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 8.2% in 2013, compared to a contraction of 0.1% in 2012. Our

optimistic outlook for Vietnam's buildings sector is primarily driven by the country's conducive monetary

conditions. The benchmark interest rate in Vietnam has stayed at around 10.00% since July 2012 and this

should be favourable for construction activity.

Recovering After 2012

Residential And Non-residential Building Industry Data

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

However we believe 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 Vietnamese investment group Dragon Capital in a recent

economic forum held in late-September, above 35,000 apartments are currently available for sale in

Hanoi and Ho Chi Minh City each. This excess supply have seen land and real estate prices fall

significantly and consistently since mid-2011.



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. According to the

HCM City Department of Construction, the city currently is has planned for over 1,100 apartment

projects. If completed, these projects will provide the market with around 380,000 apartments. However,

only 195 projects, or 17% of the total number, have been completed at the end of September. Out of the

815 unfinished projects, 158 projects have not completed investment procedures, 122 projects have yet to

get off ground and the remaining 14 have been suspended. A survey carried out by the department (cited

from Intellasia) showed that many projects had fallen far behind schedule due to 'prolonged hardship of

the real estate market, lateness in site clearance, investment formalities and financial problems of

investors'.

In Hanoi, it is reported that hundreds of urban and residential projects in the Ha Tay Province and Vinh

Phuc’s Me Linh District failed to start construction despite receiving government approval. In the Me

Linh District, it is believe that there are as many as 110 projects ready to start construction, with

significant portions of the land cleared. However, all of these projects are now sit abandoned.

Although the aggressive rate cuts taken by the government in 2012 could reignite demand for housing, the

scale of the oversupply makes this unlikely. According to Dragon Capital, the current apartments in stock

could take 7 years to be fully absorbed by the market unless demand stimulus measures are executed.

There are currently plans to carry out such a stimulus, but it remains to be seen if they will be enacted.

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.

Besides stimulus measures, other upside risks for the residential sector is 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. Lastly,

the demand for affordable houses is still outstripping supply, as residential development has largely

focused on high-end customers.

Non-Civil Building To Outperform

We believe that the main driver of growth for the residential and non-residential building sector is the

non-residential building sector. We believe an increase in trade activity could boost the demand for

energy-related facilities and industrial buildings (ie, factories, warehouses). 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 year 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 year polyethylene, 500,000 tonnes

polypropylene and 400,000 tonnes 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 project 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.

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. The rising popularity of integrated gaming resorts

across the region epitomises this growing trend, 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 multibillion dollar

developments.

The Vietnamese government has therefore set a US$4bn minimum investment threshold for its 135

hectare (ha) project, which will include a 30,000 m2 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 year 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.

Major Projects Table – Residential/Non-Residential Construction And Social Infrastructure

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

Project Name Value

(US$mn) Capacity/


Commercial Construction

Eight ibis hotels in Vietnam's major cities na na

Accor, Benthanh Group 2010-

At planning stage – 1st hotel to open in

2012

Six tourism construction projects, Nhon Hoi economic zone, Binh Dinh 518 na na 2011-

Projects approval received

Tourism and entertainment resort, Chu Lai Open Economic Zone (OEZ) 4000

21000000 sq m Genting Group 2011-

Government approval received

SSG Tower, Ho Chi Minh City 11 na

Ryobi Kiso Holdings, Ryobi Kiso Holdings,

Phu Cuong 2011 - Contract (foundation

works) awarded

Empire Residences and Resort project (include 5-star hotel), Ngu Hanh Son District 476 na

Thanh Do Construction and

Investment 2011 – -


(August 2011)

Casino resort (include 30,000sq m casino and five-star hotels), Phu Quoc Island 4000

1350000 sq m na

August 2011 –

2020 At tendering stage

(August 2011)

Three condominiums, Ho Chi Minh City 57.9 549 units

Ssangyong Engineering, Keppel

Land September

2011 - Contract awarded (September 2011)

Wonderland World Vung Tau complex (includes a five-star hotel, 4 four-star hotels, an entertainment centre), Nguyen An Ninh Ward, Vung Tau city 1300 na Good Choice

January 2007 –

October 2011

Investment license revoked (Oct 2011)

Ecotourism centre (includes 20km bridge), Southern Hon Khoai Island, Ngoc Hien District, Ca Mau Province 143 na na July 2012 -


(July 2012)

Education

Ayunpa secondary school, Ca Mau general Hospital na na Korea Eximbank 2010- US$6mn loan signed

Happyland Vietnam Entertainment Complex project (includes US$600mn Happyland theme park project and US$140mn Movie World), Ben Luc District, Long An Province 2000

35000000 sq m Sanderson Group

November 2011 – April


(Nov 2011)



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

Project Name Value

(US$mn) Capacity/


Healthcare

Social development project (educational and healthcare buildings), Ho Chi Minh City 138 na AFD 2011-

US$29mn loan from French AFD agreed

Orthopaedic hospital BT project, Binh Chanh District,Ho Chi Minh City 54 500 beds

Clearance Compensation

Corporation April 2012 -

mid-2014 BT contract signed

(April 2012)

Industrial Construction

Nghi Son refinery, Thanh Hoa province 5800 200000bpd

Petrovietnam Construction, Mitsui Chemicals, Idemitsu

Kosan, Kuwait Petroleum

International (KPI)

October 2011 –

2015

Request 70% financing from JBIC

(Feb 2011); Financing from IFC (Oct 2011)

Solar cell factory, Dong Nam Industrial Park, Hoa Phu Commune, Cu Chi Dist, HCM City 1000 238MW

First Solar Group, First Solar Vietnam

Manufacturing Co Ltd 2011-H2

2012

Under construction; commission of

US$300mn module factory postponed

(Nov 2011)

Solar modules manufacturing plant, Chu Lai Open Economic Zone 390 120MW

120MW per year – Indochina Energy &

Industry Company Limited (ICE) May 2011 -

Under construction; First to have capacity

of 30MW per year

Solar panel manufacturing plant, Quang Nam province na 120MW

Indochinese Energy Company 2011- 2013

120MW /year – Under construction

Petrochemical complex, Long Son Island, Ba Ria-Vung Tau province 4500

1.4mn tonnes/yr

Siam Cement Group (SCG), QPI Vietnam,

PetroVietnam, Vietnam National

Chemical Corporation (Vinachem) 2013-2016

Vinachem to withdraw from project, Land

acquisition and EPC tender to be

completed by end-2012 (July 2012)

Residential Construction

Residential developments and manufacturing projects 291 na

CapitaLand, KeppelLand, PepsiCo 2010- contract signed

Development of 60mn square metres of residential space (public housing) 19700

600000 units na 2015-2020 At planning stage

Commercial-residential complex, Hanoi 188 na

Daewoo Engineering & Construction, Hi

Brand Vietnam, Inpyung 2011- 2013 Contract awarded




Risk/Reward Ratings

Vietnam’s Risk/Reward Ratings

Vietnam has achieved a score of 54.5 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 the emerging SEA 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 and 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.

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 (WB) banned Vietnam's Social and

Environmental Development and its Managing Director, Nguyen Xuan Doan, for five years, following

allegations of fraud among WB-finance water supply projects. Joint ventures (JVs) 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.

Regional Overview

Asia Pacific Infrastructure Risk/Reward Ratings

BMI View: The risk/reward scores for Asia's infrastructure sector continue to be adversely affected by

the ongoing slowdown in global economic activity. Although this has dampened the demand for

infrastructure in some countries, it has prompted several others to boost their project pipeline, while

providing a more conducive credit climate for construction growth. Overall, the potential for returns in

Asia's infrastructure sector remains robust, reinforcing the region's status as the world's most

concentrated infrastructure and construction market.

There remains a substantial disparity in the demand for infrastructure throughout Asia, translating into a

significant divergence in rewards and risks among the Asia Pacific infrastructure markets. A 40-point

differential exists between the top and bottom countries in BMI's 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 on the Asia Pacific infrastructure risk/reward ratings (RRRs)

can be summarised as follows:

Economic activity across Asia continues to soften. Although this has dampened the demand for

infrastructure, it has prompted countries such as Hong Kong and Malaysia to boost the project

pipeline to offset the economic slowdown.

Furthermore, this decline in economic activity is allowing Asian countries to loosen their

monetary policies and create a more positive credit climate for construction growth.



Despite poorer economic conditions for infrastructure, the most populous countries in the region

continue to present sufficient scope in rewards to overcome risks. However, policy inertia

remains a problem in India and Indonesia, suggesting that risks at a grass-roots level will remain

considerable for these countries.

Emerging South East Asian (SEA) countries continue to offer greater rewards for their level of

risk, but there are growing risks for these export-oriented economies due to weakening external

demand.

Similarly, the more developed countries in the region continue to present the most attractive

business environment, but the decline in external demand is dampening rewards in their

respective infrastructure markets.

Global Downturn Impacts All

Asian Countries - Infrastructure BE Risk/Reward Ratings, Scores out of 100

* Higher Score = Lower Risks. Source: BMI

China, India and Indonesia: Rewards Sizeable

Asia's largest economies - China, India and Indonesia - continue to head the group in terms of industry

rewards. 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. Furthermore, disinflationary pressures and a

significant slowdown in economic growth have provided their respective governments with the leeway to

loosen their monetary policies in 2012, making it increasingly tenable for infrastructure companies to take

on new projects in 2012 by financing capital expenditures through debt.



China's economy is experiencing a significant slowdown and this has prompted the government to carry

out a series of pro-growth policies aimed at arresting the growth downturn. Some of these policies are

directed towards boosting growth in the infrastructure sector, including boosting access to financing for

infrastructure projects, creating incentives to encourage greater private sector participation and

accelerating the approval of new infrastructure projects such as airports, renewables and railways.

In September 2012, the National Development and Reform Commission approved railway projects worth

a total of US$110bn. The figure is nearly twice the amount announced in July 2012, though this seems to

be a longer-term spending plan, with the projects included still in the feasibility stages.

However, we believe that these policies are not going to boost infrastructure spending to levels seen in

previous years, thus limiting the upside potential for China's reward score.

Reform Process At Risks

China, India And Indonesia - Infrastructure Rewards (LHS) And Risks (RHS) BER, Scores out of 100


India has massive plans to plug its infrastructure deficit, with the government aiming to raise US$1trn in

infrastructure investment over the 12th Five-Year Plan period (FY2012/13-FY2016/17). These planned

investments, along with the release of several initiatives to accelerate and enhance the flow of long-term

financing for infrastructure projects, lead us to believe that there are significant rewards to be realised in

India.

However, repeated failures to carry out the necessary reforms to accelerate project execution (e.g. land

acquisition, environmental clearances, coal supply, electricity tariff hike) have created a non-conducive

investment climate for the private sector. The momentum to carry out reforms by the government has

taken a turn for the worse, with the ruling United Progressive Alliance (UPA) coalition having been



rocked by the withdrawal of its second largest member, the All-India Trinamool Congress (TMC). The

populist TMC was staunchly opposed to the reforms introduced by the UPA in mid-September 2012, and

its complete withdrawal leaves the UPA short of an absolute majority in the lower house of parliament

(Lok Sabha). This could prompt Prime Minister Manmohan Singh to backtrack on reform or in a worst-

case scenario, be forced to announce early general elections well ahead of the 2014 constitutional

deadline.

As for Indonesia, the country continues to present vast opportunities across the entire infrastructure

spectrum. However just like India, the country's political landscape is hindering the push for regulatory

reforms. The presidential elections in 2014 represents a key risk to the reform process as Indonesian

President Susilo Bambang Yudhoyono is constitutionally prohibited from standing for a third term. We

have already noticed a growing trend towards nationalism within the current government and the likely

presidential candidates.

Therefore, even though President Yudhoyono has finally signed the long-awaited regulation on land

acquisition, we remain concerned that the government might not enact reforms in other pertinent business

environment issues. For example, the private sector remains wary of providing long-term financing for

infrastructure projects and companies, due to a continuing lack of legal rights to safeguard private

interests. Indonesia also suffers from significant red tape and a lack of institutional capacity to resolve

contract disputes.

Vietnam Growing Attractive

Emerging South East Asia (ex Indonesia) - Infrastructure Rewards (LHS) And Risks (RHS) BER, Scores out of 100




South East Asia: Large Pipelines, Loose Monetary Policy

The risk/reward scores for emerging SEA countries are facing downside pressure, as we continue to see

evidence of a decline in global economic activity. We have once again revised down the rewards scores

for Vietnam (58.5 to 56.9) and the Philippines (48.6 to 46.9).

That said, there is a silver lining. The decline in global economic activity has improved monetary

conditions in these countries, as disinflationary pressures have provided leeway for policymakers to adopt

monetary easing measures (e.g. cut interest rates) to support economic and infrastructure growth. We

have already seen Vietnam and the Philippines slash interest rates to levels predicted by our country Risk

team, and we believe that Thailand and Malaysia could follow suit.

Furthermore, we continue to expect emerging SEA countries to offer greater rewards relative to their

level of risk over the coming years. These countries exhibit varying levels of infrastructure deficits and

many have launched multi-billion dollar infrastructure programs to address these shortfalls.

Malaysia's rewards scores, for example, continues to growth in strength despite the poor external

environment. The country's 10-year investment plan continues to provide a lot of greenfield opportunities,

prompting us to improve Malaysia's rewards score from 51.7 to 55.0. Several large-scale infrastructure

projects, particularly in terms of railways and the power sector, reached key milestones in 2012 and are

on track to be awarded and/or start construction.

Rising Rewards In HK

Nearly Developed Countries In Asia - Infrastructure Rewards (LHS) And Risks (RHS) BER, Scores out of 100




Nearly Developed Markets: Boosting Pipeline To Offset Slowdown

Disinflation is also taking hold in Asian countries that are nearing developed market status in terms of

their infrastructure market maturity. However, monetary easing measures are unlikely to overcome a

general decline in economic activity (their export-oriented economies leaves them highly vulnerable to

the deleterious effects of a languorous global economy), resulting in a net decrease in the demand for

infrastructure and a decline in the amount of fiscal funding for infrastructure. We have revised down our

rewards scores for Taiwan (from 51.9 to 50.3) this quarter because a deep economic slowdown in China,

Taiwan's main trading partner, is creating an increasingly dour investment climate for construction.

Hong Kong is also affected by this slowdown in external demand, but its rewards score has improved

again this quarter, from 54.3 to 57.5. This is because Hong Kong's plans to boost land supply for

construction and to improve the city's transport links are moving into full swing, creating numerous

project opportunities for infrastructure. We also expect the third round of quantitative easing by the US

Federal Reserve to increase the demand for speculative investments in Hong Kong, including real estate.

This could in turn, drive property developers to increase the supply of buildings to meet demand, further

driving the demand for infrastructure.

As a whole, these countries continue to offer the best business environments for realising investment

returns. Countries such as Singapore, Hong Kong, Taiwan and South Korea are highly developed in terms

of their legislative and regulatory environments and present very little in the way of risk to sponsors and

financiers. The average score for risks in these developed markets is 78.2 out of 100, significantly higher

than the remaining nine Asian markets, which have an average of 50.3. This risk score reflects their high

degree of policy continuity - a major criterion to project execution and viability.



Table: Asia Infrastructure Risk/Reward Ratings

Rewards Risks

Industry Rewards

Country Rewards Rewards

Industry Risks

Country Risk Risks

Infrastructure RR Rating

Regional Ranking

South Korea 50.0 88.9 63.6 70.0 77.5 74.5 66.9 1

China 72.5 60.9 68.4 40.0 67.8 56.7 64.9 2

Singapore 35.0 86.2 52.9 90.0 88.6 89.2 63.8 3

Hong Kong 40.0 90.1 57.5 85.0 71.9 77.1 63.4 4

India 75.0 45.4 64.6 55.0 55.1 55.1 61.8 5

Taiwan 37.5 74.0 50.3 75.0 69.9 71.9 56.8 6

Indonesia 65.0 48.2 59.1 35.0 62.0 51.2 56.8 7

Malaysia 50.0 64.3 55.0 55.0 62.9 59.8 56.4 8

Vietnam 55.0 60.4 56.9 40.0 54.6 48.8 54.5 9

Thailand 40.0 72.3 51.3 50.0 61.1 56.7 52.9 10

Philippines 42.5 55.1 46.9 35.0 56.8 48.1 47.3 11

Cambodia 32.5 25.9 30.2 25.0 42.3 35.4 31.7 12

Pakistan 10.0 43.6 21.8 35.0 45.1 41.0 27.6 13

Regional Average 46.5 62.7 52.2 53.1 62.7 58.9 54.2

Source: BMI. Scores out of 100, with 100 highest.



Company Monitor

Cavico Corporation

Strengths It is diversified across a number of interrelated 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. The energy and utilities sector in Vietnam has picked up a lot of pace since FY2009, creating

plenty of opportunities.

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*. 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.

Financial Highlights

In Q210, revenues rose by 7.9% year-on-year (y-o-y) to reach US$14.7mn. Net profit for Q210

was a loss of US$1.8mn, compared to a 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$4mn to US$5mn.

Strategy and

Evaluation

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% 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 the company’s 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.

Activity and Projects In April 2011, Cavico Corporation announced that its subsidiary, Cavico Mining, had

received an investment licence for the Tan My Hydropower Plant. The licence grants Cavico

the right to build own and operate (BOO) a hydropower plant downstream from the Tan My

Irrigation Reservoir. The plant will be built in the Phuoc Tan Village, Ninh Thuan Province.

The plant has a designed capacity of 6MW and is estimated to cost US$6.7mn.

In March 2011, Cavico Corporation announced that its subsidiary, Cavico Construction

Manpower & Services, has signed a contract to construct the tunnel roof and grout the arch

consolidation of a 1.4-mile-long rock transport tunnel at the Nghi Son cement plant, Thanh

Hoa Province. The contract is valued at approximately US$1.3mn. Cavico expects to

complete the project within seven months from the start of construction.

In January 2011, Cavico Corporation announced that its subsidiary, Cavico Hydropower

Construction, had signed a US$7.75mn tunnel construction contract with Song Giang

Hydropower Joint Stock Company for the Song Giang 1 hydropower plant in Khanh Vinh

District, in central Vietnam's Khanh Hoa Province. The twin-unit plant, which is located 31

miles from Nha Trang city, will have a 24MW annual capacity once it becomes operational.

Song Giang Hydropower Joint Stock Company expects to invest a total of US$23.2mn in the

plant.

In December 2010, Cavico Corporation announced that its subsidiary, Cavico Bridge and

Tunnel, had signed a US$6mn construction contract with Vietnam’s state-owned electricity

company, EVN, for the100MW Song Bung 2 hydropower plant project. Under the contract,

Cavico will be responsible for the construction of three tunnels, a surge tank, and a power

house. Cavico expects to complete construction by 2014.

In October 2010, Cavico Corporation announced that its wholly-owned subsidiary, Cavico

Hydropower, had successfully completed all construction activities at the Dong Nai 3

Hydropower Plant. The company has started the handover process to the project owner,

EVN.

In June 2010, Cavico Corporation announced that its majority-owned subsidiary, Cavico

Bridge, and Tunnel JSC had signed a transport tunnel construction agreement with Korea-

based Doosan Heavy Industries & Construction Co., Ltd. for the Noi Bai-Lao Cai Highway.

The expected revenue value for this new contract is US$5.8mn, excluding VAT. In March

2010, Cavico announced it has won a contract for a US$2.1mn road construction contract

related to this project. Cavico expects to complete its portion of the project in 20 months.



In June 2010, Cavico Corporation announced that its majority-owned subsidiary, Cavico

Mining, had signed a construction contract for construction of Portal No. 2 at Ngan Truoi

reservoir of the Ngan Truoi Irrigation Dam located in Ha Tinh province. The expected

revenue value of this contract is US$3.3mn; however, the contract also has cost escalation

clauses, which may increase the revenues associated with the project. In May 2009, Cavico

signed a contract for US$8.5mn to construct Portal No. 1 on the same site. Cavico will be

responsible for the construction of a diversion dam, water intake gates and a groin dam

distributor. Ngan Truoi reservoir’s Portal No. 2 will be 2.5m in diameter and 464m in length.

* While we appreciate that mining activities are at the heart of the company’s operations, for the

purpose of this report we will only focus on the company’s infrastructure operations.

Key Statistics Financial Data

Revenue Q210: US$14.7mn

Net income Q210 (loss): US$1.8mn



Electricity of Vietnam Group (EVN)

Strengths EVN’s power companies account for 55% of the 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 Vietnamese government is committed to energy sector development visible in its ambitious

plans to increase Vietnam’s total installed generating capacity from20GW 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 was founded in 1995 as a state-owned utility engaged in the generation,

transmission and distribution of electricity. It has played an important role in supplying power which

is necessary for socio-economic development in Vietnam. EVN has moved forward with plans to

privatise member enterprises since the early 2000s, in line with the Government’s Strategy for

Electricity Sector Development. By April 2006, EVN had completed the privatisation of 21

subsidiaries and successfully converted five others into one-member limited liability companies.

EVN then began the process of privatising a further 18 companies and restructuring five others. It

was renamed as Vietnam Electricity Group.

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 BOT power plants. Despite further privatisation

plans, power transmission companies, 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

four big power projects financed by the World Bank, worth US$370mn.

Strategy And

Evaluation

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 49,000MW over the next ten 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, EVN is currently suffering from crippling debts due to a tightening in credit growth. Earlier

in 2011, Deputy General Director of EVN, Dinh Quang Tri, revealed that the company was

burdened with huge debts from the purchases of oil, gas, coal and electricity. EVN is also struggling

to clear these debts on its own, as the utility suffered a financial loss of VND8trn (US$388mn) in

2010. EVN is currently in negotiations with PetroVietnam and Vinacomin to refinance and extend

the tenure of its debt payments, while also requesting loans and additional capital from the

government to repay EVN's debts.

One reason for EVN's high debt levels is due to artificially low electricity prices and lack of

sophistication in setting electricity prices. Electricity prices in Vietnam are still 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 the Vietnamese telecoms sector is also 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 – ie 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. At present, EVN is 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.

In a bid to ease EVN’s current financial difficulties, in July 2011, the Vietnamese prime minister

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.

Activity And Projects In June 2012, Vietnam had 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 Southern Power Corporation (EVNSPC) and Prysmian Powerlink SRL Group

signed a US$112mn EPC contract for an undersea cable system in Vietnam. The cable system,

which will be the longest of its type in Southeast 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 EVNSPC.

In January 2012, VnExpress reported that the acquisition of EVN Telecom, a unit of Vietnam's

state utility Electricity of Vietnam (EVN), by mobile operator Viettel will 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.

In July 2011, Southern Power received approval from the Vietnamese Ministry of Industry and

Trade for developing an undersea power cable project, according to Thanhniennews.com. The

54km project, valued at VND1.81trn (US$87.5mn), will link the southern province of Ha Tien with

Phu Quoc Island. The company is seeking approval from the government and its parent company

EVN so it can launch a tender in Q311 . The bids will cover the engineering, procurement and

construction (EPC) of the project, which is due to start commercial operations in 2013.

In December 2010, construction began on the Lai Chau hydropower plant in Nam Hang, Vietnam,

reported Intellasia. The 1,200MW plant will require total investment of VND35.7trn (US$41.8bn).

One of the largest hydropower plants in South East Asia, Lai Chau is scheduled for completion in

2017.

In November 2010, EVN reported a loss of VND6.5trn (U$333bn) between January and July 2010,

reported Intellasia. The loss was due to the firm being forced to use expensive diesel for power

generation, after a number of natural disasters damaged hydropower plants and caused a shortage

of hydroelectric power in the country. The government is currently attempting to balance electricity

prices to cover production costs.

Company Data In January 2012, EVN announced a loss of VND3.5tn (US$168bn), which was a vast improvement

from a forecasted VND11tn (US$528bn). This smaller-than-expected loss comes from a greater

reliance on hydropower of 4.07TWh and a lower reliance on thermal by 10.9TWh as forecasted.



Global Overview

Our proprietary Global Infrastructure Index points to an ameliorating picture for the industry as a whole

(also see our online service, July 20 2012, 'Infrastructure Equities Reflect Ameliorating Picture'), with

utilities and machinery underperforming the wider industry. However, the overall index is in an uptrend,

suggesting there is positivity on the horizon.

Infrastructure Equities In An Uptrend

BMI Infrastructure Index, BMI Infrastructure Index 1-year Performance (%), By Sector

Source: BMI, Bloomberg.

We maintain our bearish view on French infrastructure. This is based on our macro outlook, which points

to a precarious picture, especially for public finances, which have been the linchpin behind infrastructure

financing in France over the past few years. The country’s banking sector and its ability for large-scale

project finance amidst the sovereign debt crisis in Europe, as well as Basel III, are two of the main drivers

behind out outlook for the French infrastructure sector. Combined, the two issues suggest that the sector's

growth will moderate in the coming quarters and adjust to the new macro and financial reality. We

believe that Bouygues and Eiffage are most at risk to be dragged down if the sector underperforms, with

Vinci's diversification acting as a safety net for the stock.



Bearish France

France Major Construction Companies, EUR

Source: Bloomberg.

Our bullish view for the construction sector throughout the Gulf Cooperation Council (GCC) has been

substantiated by the astonishing rally of some of the largest listed construction companies over the past 12

months. UAE-based Arabtec has been the second best performing stock in BMI's Infrastructure Index

over the past 12 months, rising by 111%. We hold a bullish view on companies with a well-diversified

portfolio across the GCC infrastructure and construction sector that allows taking advantage of

opportunities and spreading the risks.



Bullish Middle East Construction

Arabtec, Drake and Scull, AED / Orascom Construction, EGP

Source: Bloomberg.

One of the best performing sectors across the industry has been the US homebuilders. We formulated our

bullish view on the US homebuilders segment during Q311, and since then it has taken shape nicely, with

the main homebuilders in the United States posting strong gains on the back of rising confidence in the

sector (see our online service, January 13 2012, 'Lennar Results Support Housing Recovery View').

According to the latest National Association of Home Builders/Wells Fargo Housing Market Index,

confidence is returning rapidly, though overall the index is below 50 - an indication that the majority of

the market participants surveyed view the home sales conditions as poor. However, if the index continues

to rise at the current levels (it has gained nearly 28 points since January 2012), it will surpass the 50-point

mark in the next few months. US homebuilder equities track the HMI closely, and therefore expect the

uptrend in their share prices to continue.



Rally Has Further To Run

US Homebuilders - Lennar, PulteGroup, KB Homes

Source: Bloomberg.

Another top performer over the year has been Mexican infrastructure and construction player Empresas

ICA. The company is one of the strongest Latin American-listed infrastructure players, and in our view it

is on its way to becoming a strong barometer for the entire Latin America infrastructure sector. We

believe that ICA's development from a Mexican-focused construction company to a regional heavy-

weight came at the right time and its stock performance supported our bullish view of ICA over its bigger

rival IDEAL, which is exclusively focused on the Mexican infrastructure sector. Since we looked at the

factors why ICA would perform better than its Mexican rival IDEAL, the stock has gained 101% (see our

online service, October 14 2011, 'Strong Fundamentals Support Our Optimism For ICA Over IDEAL').



ICA Diversification Bolsters Stock Performance

Mexican Construction - ICA, IDEAL, MXN

Source: Bloomberg.

We have been bullish on the US midstream operators for more than 15 months based on the capacity

constraints on the US energy transport network, which makes available capacity all the more valuable

(see our online service, February 2 2012, 'Bullish Outlook on Midstream Sector Plays Out'). Oil and

liquids transportation companies have been reaping windfalls from the astonishing growth taking place in

the US oil & gas upstream segment. While in the upstream segment returns have been volatile, especially

for the natural gas-heavy producers, the necessity for transportation of higher volumes has meant that

energy transportation companies (from specialist rail freight to trucking to barges and of course pipelines)

have been reaping significant benefits. Midstream energy is a sector we expect to see a lot of investment

in over the coming years; therefore we also see rewards for engineering companies in the sector. The US

Pipelines Index from Bloomberg outperformed the S&P 500 Energy Index for most of 2012.



Transportation Benefits

North American Energy And Wider Market Indices, 100 = October 2011

Source: Bloomberg.

We expected the infrastructure sector equities in India to outperform the wider market, from both a

technical and fundamental perspective (see our online service, January 12 2012, 'Macro/Industry

Strategy: Indian Infra, US Autos, Morocco'). Having said that, the Indian business environment remains

fraught with risks and difficulties, even for the majors that dominate the industry, and thus creating a

discount to the stocks. Larsen and Tourbo had an impressive 2012, rising by 16.5% and outperforming

its peers. However, major structural risks remain and with the ailing macro picture, we expect problems to

remain. It is because of this view that we are cautiously optimistic.



Infrastructure Sector In India Holding Up

Indian Infrastructure Companies, INR

Source: Bloomberg



Methodology

Industry Forecasts

BMI’s industry forecasts are generated using the best-practice techniques of time-series modelling and

causal/econometric modelling. The precise form of model we use varies from industry to industry, in each

case being determined, as per standard practice, by the prevailing features of the industry data being

examined. BMI mainly uses ordinary least squares (OLS) estimators and in order to avoid relying on

subjective views and encourage the use of objective views, uses a ‘general-to-specific’ method. BMI

mainly uses a linear model, but simple non-linear models, such as the log-linear model, are used when

necessary. During periods of ‘industry shock’, for example a deep industry recession, dummy variables

are used to determine the level of impact. Effective forecasting depends on appropriately selected

regression models. BMI selects the best model according to various different criteria and tests, including,

but not exclusive to:

R2 tests explanatory power; Adjusted R2 takes degree of freedom into account;

Testing the directional movement and magnitude of coefficients;

Hypothesis testing to ensure coefficients are significant (normally t-test and/or P-value);

All results are assessed to alleviate issues related to auto-correlation and multi-co linearity.

BMI uses the selected best model to perform forecasting.

It must be remembered that human intervention plays a necessary and desirable role in all of BMI’s

industry forecasting. Experience, expertise and knowledge of industry data and trends ensures that

analysts spot structural breaks, anomalous data, turning points and seasonal features where a purely

mechanical forecasting process would not. Within the infrastructure industry, this intervention might

include, but is not exclusive to, new investments across sectors or cancelled projects; general investment

climate and business environment changes; changing domestic or regional trends; macroeconomic

indicators; and regulatory changes.

Example Of Construction Value Model

(Construction value)t = β0 + β1*(Gross Fixed Capital Formation)t + β2*(inflation)t + β3*(lending rate)t +

β4* (population)t + β5*(government expenditure)t + β6*(construction value)t-1 + εt

Note: Infrastructure sub-sector values are forecast using a similar regression model.



Construction Industry

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.

Employment Within The Construction Industry

These figures are forecast based on:

The growth or otherwise of the construction industry;

Company results and expansion plans.

Data Methodology

New Infrastructure Data Sub-sectors

BMI’s new Infrastructure Data examines the industry both from the top down and the bottom up in order

to calculate the industry value of infrastructure and its sub-sectors.

For the bottom up – a 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 has allowed 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 sufficiently comprehensive to

provide a solid starting point for our calculations.

The top down approach uses deduction to form the main hypothesis. We have separated the 35 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 characteristic: 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 on average around 30%.

Countries in Tier I: Germany, Greece, UK, US, France, Hong Kong, Taiwan, Singapore, Israel, Japan,

Australia.

Tier II – Core Emerging Markets; common characteristic: the most rapidly growing of emerging markets,

where infrastructure investments are a strategic priority for the government. There is significant scope for

new infrastructure facilities from very basic levels (highways, heavy rail for instance) to more high value

projects (renewables, urban transport). Infrastructure as percent of total construction on average around

45% and above.

Countries in Tier II: Mexico, South Korea, Peru, Turkey, Vietnam, Poland, Hungary, South Africa,

Nigeria, Russia, China, India Brazil, Indonesia.

Tier III- Emerging Europe; common characteristic: regional socioeconomic trajectories, development has

been defined by the recent or pending accession to European structures such as the European Union.

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 on average between 30% and 40%.

Countries in Tier III: 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 have applied the bottom-up

approach, i.e. calculated the ratios from our Major Projects Tables where data was not otherwise

available.



Construction

Construction Value

Our data is derived from GDP by output figures from each country’s national statistics office (or

equivalent). Specifically, it measures the output of the construction 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). Consequently, it does not measure the nominal value of all inputs

used in the construction industry, which, for most states would increase the overall figure by 50-60%.

Furthermore, it is important to note that the data does not provide an indication of the total value of a

country’s buildings, only the construction sector’s output in a given year.

This data is used because it is reported by virtually all countries and can therefore be used for

comparative purposes. However, it is important to note that, where we are able to locate them, data

released by national statistical offices or industry groups or associations for the overall value of the

construction sector also taken into account and published by us.

Growth

Our 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 (US$), % Of GDP, Per Capita

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 (i.e. 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, US$bn, % Of Total Spending

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 within the sector.

Construction Employment, % 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 opportunities available.

Sector growth, % y-o-y Objective measure of growth potential. Rapid growth results in increased opportunities.

Capital investment, % of GDP 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 market infrastructure From BMI’s Country Risk Ratings (CRR). Denotes availability/cost of labour. High costs/low quality will hinder company operations.

Financial infrastructure From CRR. Denotes ease of obtaining investment finance. Poor availability of finance will hinder company operations across the economy.

Access to electricity From CRR. Low electricity coverage is proxy for pre-existing limits to infrastructure coverage.

Risks

Industry risks

No. of companies Subjective evaluation against BMI-defined criteria. This indicator evaluates barriers to entry.

Transparency of tendering process

Subjective evaluation against BMI-defined criteria. This indicator evaluates predictability of operating environment.

Country risks

Structure of economy

From CRR. Denotes health of underlying economic structure, including seven indicators such as 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 framework From CRR. Denotes strength of legal institutions in each state. Security of investment can be a key risk in some emerging markets.

Corruption From CRR. Denotes risk of additional illegal costs/possibility of opacity in tendering/ business operations affecting companies’ ability to compete.

Source: BMI

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