Reports notes potential for northern port city to be a gateway connecting Vietnam with the world in the future.
Possessing major advantages and potential, Hai Phong is expected to become a gateway connecting Vietnam with the world, according to CBRE’s Vietnam Special Report released recently.
Vietnam’s GDP grew from $66 billion in 2006 to $186 billion in 2014, for average growth of 13 per cent annually (in current dollar terms). At the same time trade has also boomed. The country’s economic performance has spurred the development of logistics infrastructure and the establishment of the major logistics hubs supporting trade.
Ho Chi Minh City and Hai Phong have the two most significant seaports in Vietnam. “Although throughput capacity at Ho Chi Minh City’s port is currently only equivalent to a quarter of Hong Kong’s and one-sixth of Singapore’s in 2014, and Hai Phong’s capacity is about 50 per cent of that of Ho Chi Minh City, annual throughput for the ports is growing,” the report stated.
From 2008 to 2014 annual throughput in the south of Vietnam, where Ho Chi Minh City takes the lead, increased by 105 per cent. Over the same period total throughput in the north, where Hai Phong takes the lead, increased 88 per cent.
Vietnam’s logistics network is still in its early stages of development compared to global logistics networks. Since Vietnam joined the WTO in 2007 to 2014 total trade volumes grew 168 per cent. This has supported the growth of logistics capacity. Annual throughput nationwide has doubled, from 4.9 million TEUs in 2008 to 10 million TEUs in 2014.
Notably, in the north, Hai Phong contributed 98 per cent of total throughput in 2014. With over 100 kilometers of coastline the city has the potential to be a rising logistics hub domestically and regionally in the future, according to the report.
A lack of fully-integrated infrastructure has been the main reason why Hai Phong’s logistics have not performed to full capacity.
Local authorities have been very active in promoting the city among investors and at the same time made great efforts to improve the city’s infrastructure and connections with other cities and provinces, especially regional logistics hubs such as Hanoi and Quang Ninh province.
“While this helps improve connectivity and facilitates the operation of various businesses operating in related source and end markets, it would also enhance investors’ confidence in the prospects of Vietnam in general and the north of Vietnam and Hai Phong in particular,” according to the report.
Although the TPP will open up huge opportunities for Vietnam’s trade, with expansions in key markets such as the US and Japan, and will spur trade between Vietnam and member countries, it is not all wine and roses and the challenges of an emerging economy remain. “While leveraging the opportunities, Hai Phong also needs to address some issues that are of concern to foreign investors in Vietnam and the city,” the report emphasized.
According to the World Bank’s Ease of Doing Business Report 2014, Vietnam ranked 90th out of the 189 surveyed countries, improving three rankings over 2013. Issues remaining included cross-border trade and investor protection, construction permits, property registration, and contract enforcement.
In the Provincial Competitiveness Index (PCI) 2014, Hai Phong ranked only 34th among Vietnam’s 63 cities and provinces. Among the issues noted were transparency, infrastructure, and labor quality.
“In order to become a local hub in the near future and a regional hub in the long run, it is critical that Hai Phong address the issues of administrative procedures and transparency as well as pay attention to improving labor quality as growing FDI is poured into the country as well as the city and infrastructure is developed,” the report stated.
Hai Phong has the foundation and the opportunity to grow and realize its potential of becoming a major logistics hub in Vietnam and, in the future, a connecting dot in regional and global logistics networks.
According to the report, with the completion of major infrastructure, Hai Phong hopes to have tackled one important issue that has been of concern to foreign investors. “Gradually, if other issues are addressed, it is expected that Hai Phong would fulfill the vision to become a logistics hub in the region, contributing to the growth of the country,” the report noted.