Crumbling infrastructure is hindering in Vietnam
Crumbling infrastructure is hindering in Vietnam
By Dean Yates
HANOI (Reuter): Whether it's the potholes on Highway One or power lines dangling from city lamp-posts, crumbling infrastructure is holding back communist Vietnam's efforts to join Asia's "tiger" economies.
Decades of war and central planning have left a legacy of bone-jarring roads, slow-moving ports, inefficient power generation, scarce public transport and no more than 500,000 telephone lines across the largely agricultural nation.
About 60 percent of Vietnam's 105,000 km (65,600 miles) of official roadways are made of earth. Installed electricity capacity is a mere 3,500 megawatts, with only one-third of that available in economically booming southern Vietnam.
These factors and slow implementation of reform policies embraced in the late 1980s have made some foreign investors cautious about sinking funds into Vietnam, whose 72 million people are among the world's poorest.
But Bradley Babson, resident representative of the World Bank in Hanoi, says Vietnam's leaders have acknowledged the infrastructure woes and are getting down to business.
"The government recognizes very clearly how critical this is to the overall economic growth agenda and to their efforts to create a market economy," he said in an interview.
"Areas such as roads, power and ports are clearly getting high official priority," he added.
Babson said the government was undertaking a public investment planning study that would hopefully work out how limited financial resources could be allocated to the many areas in the public domain, including infrastructure, that urgently needed funds.
He said the study, expected to be completed next September, should determine how much Vietnam needs to spend on infrastructure -- a figure bankers believe will run into tens of billions of dollars.
"How do you make choices between airports, power, roads and ports, waterways and railways?" he asked.
"These are the real-time questions that have to be faced. Hopefully what this public investment plan will do is rationalize this," he added.
Vietnam has already said it plans to invest $4 billion in power development by the turn of the century to fund nine power plants and boost power generation.
It needs $3.4 billion to upgrade ports and main highways -- including the national artery Highway One that stretches the length of the country -- over the next decade. World Bank and Asian Development Bank money has been earmarked to fund rebuilding of three stretches of the highway.
The government has also approved a $4.0 billion plan to upgrade and expand Ho Chi Minh City's Tan Son Nhat airport.
What these and myriad other projects on the drawing board mean for foreign investors is obvious.
"There will be many opportunities here. This rebuilding will go on for 20 years. They need everything," said Alfonso DeMatteis, director of operations at DeMatteis Vietnam, a firm that specializes in design and construction management.
But DeMatteis, who heads the Hanoi Chapter of the American Chamber of Commerce, said investors were still cautious about getting involved in infrastructure projects.
"Vietnam has to expedite the changes in some of their rules and regulations because it is just not working the way it is. Everything is tied up in red tape," DeMatteis said.
He added, however, that it was Asian firms from Taiwan, South Korea, Singapore and Hong Kong that had sunk most private money into infrastructure deals and they appeared set to provide very competitive tenders on future projects.
One example is South Korea, whose firms dominate the bidding to upgrade a 435-km (270-mile) section of Highway One that links Ho Chi Minh City north to the town of Nha Trang.
Out of 27 foreign and domestic firms recently selected to compete for the $141 million deal, 17 come from South Korea.
Babson said Vietnam would rely heavily on foreign government aid for public investment in infrastructure in the medium term.
Many local firms were not in a financial position to borrow overseas at commercial terms, he added.