Infrastructure

Investment in public infrastructure has been one of the key driving forces for Vietnam’s economic development over recent decades. Infrastructure accounted for 53% of total Official Development Assistance (ODA) received between 2010-2017.1Vietnam has heavily invested in transportation, particularly roads, airports, and seaports. Vietnam’s public and private investment in infrastructure reached 5.7% of GDP in recent years, the highest in Southeast Asia and second highest in Asia after only China (6.8% of GDP). On the one hand, boosting infrastructure development satisfies requirements for investment projects; on the other hand, it will help create higher economic growth and more employment. In addition, rapid urbanization in Vietnam is a strong driver for developing the transport and utilities sector. With 50% of the population estimated to now live in major cities, the rising population has already exceeded the capacity of the existing connectivity networks and utility systems. 

Recently, the Vietnamese government approved a plan to spend US$43-65 billion on building and upgrading road, rail, inland waterways, sea, and air transport infrastructure between 2021-2030.2The government also enacted a new Public Private Partnership (PPP) Law, effective March 29, 2021, to support and regulate private investment to scale up infrastructure upgrades, especially in the transportation, power grid, and power plant sectors. This movement is to attract more private investment to reduce the burden on the national debt and fiscal policy.

According to the World Economic Forum Global Competitiveness Report 2019,3Vietnam ranks 77th out of 141 in terms of overall quality of infrastructure, 66th in transport infrastructure, and 87th in utility infrastructure.

1. Transport 

Transportation in Vietnam has been improving rapidly in both quantity and quality. Vietnam’s transport sector consists of the full range of transport modes: road, railway, inland waterways, coastal and sea shipping, and aviation. In passenger transport, road and inland waterways are dominant. In cargo transport, Vietnam relies heavily on roads, inland waterways, and maritime transport.4The Ministry of Transport (MOT) oversees the state management function of all transport modes nationwide.

1.1 Roads 

Vietnam currently has an estimated 570,448 km of roads, of which national highways account for 24,136 km; expressways 816 km; provincial roads 25,741 km; district roads 58,347 km; urban roads 26,953 km; commune roads 144,670 km; village roads 181,188 km; and inner field roads 108,597 km.5Road transport is a backbone of the country’s logistics and transport industry. The road network is relatively well developed; however, due to congestion and lack of safety, the average speed on the national highways is a mere 50 kilometers per hour.6

The most common form of transportation for the Vietnamese is the motorbike, which comprises 85% of all vehicles in the country. There were 61.3 million motorcycles in the country in 2019, making Vietnam the world’s fourth largest motorcycle market after China, India, and Indonesia.7Cars are also prevalent, especially in the cities; as of 2021, there were 4.5 million cars in circulation.8According to Nikkei Asia, in 2021, Vietnam was among the top 4 countries in car sales volume in Southeast Asia.9

In addition to personal vehicles, there are extensive networks of subsidized bus services in Ho Chi Minh City (HCMC) and Hanoi to serve inner-city riders. In all major cities, there are private car/motorbike taxi services that can be hailed either traditionally or technologically (e.g. Grab, Gojek, Be). In addition, after more than ten years of construction, Vietnam opened its first metro line in Hanoi in 2021, and HCMC’s first metro line is scheduled to open in 2023. There will eventually be eight metro lines in HCMC, and Hanoi plans to build six. ODA capital and management board inefficiency are the two leading causes of the metro line completion delays in both cities.10

1.2 Railways 

The rail system in Vietnam was first built during the French colonial period over 140 years ago and was once the country’s pride. However, it is now outdated and lagging, with traffic demand increasing while the transportation volume of the railway industry continually declines. Statistics show that, in 1990, the railway served 10.4 million passengers, accounting for 3% of the total number of passengers in the transport industry; by 2019, this number fell to just 4.7 million or 0.2%.11

The current railway system has a total of 3,163 km of track, of which narrow gauge (1m wide) accounts for 84% of the total length (2,656 km)—this type of gauge has been removed in almost every country in the world. Standard gauge (1.435m wide) track accounts for 190km or 6% of the total, and the remaining 10% of existing routes is mixed gauge. The average speed for a freight train is 50-60 kph and for a passenger train is 80-90 kph, which is substantially lower than in other developed countries (150-200 kph). In addition, Vietnam’s railway system still utilizes diesel fuel, which is considered a second-generation technology (the first generation was the steam engine). In contrast, third and fourth-generation technologies—including electrification and electronics—have been deployed in other countries.12

The overall condition of Vietnam’s railway infrastructure varies from poor to fair, with most of the network in need of rehabilitation and upgrading. Vietnam’s rail system has faced chronic underinvestment, with only 3% of the infrastructure budget allocated to rail compared to roads, which receive 90% of the budget.13

In a plan to restructure the railway network, the Government aims to build nine new railway routes, running 2,362 km between 2021 to 2030. The longest route would run from Hanoi to HCMC, covering 1,545 km.

1.3  Waterways 

There is approximately 47,130 km of waterways in Vietnam, which play a significant role in the transportation of both people and products. The tributaries of the Mekong River and the Red River create the most critical networks of waterways. Inland waterways transport roughly 4.7% of passengers and 17.8% of freight, making them the second most popular mode of transportation after roadways.14However, inland waterways receive only 1% of total investments in transportation. Under the Government plan to invest US$43-65 billion in transport infrastructure between 2021 and 2030, inland waterways will draw further investment.15

1.4 Ports 

Vietnam has a total of 320 ports, including seaports and river ports, of which 163 are international ports. Hai Phong, Da Nang, and HCMC are the three major ports of Vietnam, located in the North, the Central, and the South, respectively. Vietnam ranks highly—19th out of 141 countries—in terms of liner shipping connectivity; however, the efficiency of seaport services ranks 83rd according to the World Economic Forum.16

Port infrastructure is a magnet of FDI for Vietnam, especially investment from major shipping lines and joint-venture port companies. However, the current capacity has failed to meet soaring demand from import/export activities. Under the master plan for 2021-2030, the Government aims to invest and mobilize private sector investment to expand the country’s seaport system to nearly US$13.8 billion and increase the system capacity to handle 1.1-1.4 billion tons of cargo.17

1.5 Airports 

Vietnam operates 33 civil airports of which 11 are international and 12 are local. Noi Bai International Airport in Hanoi and Tan Son Nhat International Airport in HCMC are the two major airports for international destinations. The 12 local airports service all regions and most provinces in Vietnam. By 2030, the country will build 5 more airports in Son La, Lao Cai, Quang Tri, Binh Thuan, and Dong Nai provinces.

2. Communications 

2.1 Internet Access 

Vietnam’s internet penetration rate stood at 73.2% of the total population in 2022, with 72.1 million internet users, of whom 95.8% access the internet via mobile phone. In addition, there were 156 million cellular mobile connections to the internet in Vietnam in 2022.18The median download speed via cellular mobile connection stood at 38.23 Mbps, ranked 47 out of 140 countries, while the speed provided by fixed broadband internet connection was 76.16 Mbps, which ranked 45 of 182 countries.19However, the quality of internet access is not uniform, with poor households in mountainous areas having limited 3G/4G signals, which restricts access to internet services.

Regarding internet service providers, the three leading companies for fixed broadband include VNPT, Viettel, and FPT, which together cover 92% of the market share.20In contrast, for mobile service, Viettel, Mobifone, and Vinaphone are the three leaders, providing services to 98.1% of the market.Vietstock. 2020. “Technology - Telecommunication industry report 2020.” Accessed in September, 2022.21 Vietnam is one of the countries with the cheapest Internet rates for both fixed and mobile internet. The average monthly package cost for broadband internet in Vietnam is US$10.81, ranked 13 out of 220 countries.22 The average price of 1GB of mobile data in Vietnam is US$0.61, ranked 37 out of 223 countries.23

2.2 Fixed-landline Phones and Mobile Phones 

Fixed-landline subscriptions continue to decline in Vietnam with the growth in mobile cellular subscriptions. In 2021, 71 million mobile broadband subscribers and nearly 19 million fixed band subscribers were recorded. Viettel Group, MobiFone, FPT, and VNPT are the current giants in Vietnam’s telecoms industry.24

2.3 Mass Media and Social Media

The main types of mass media in Vietnam are newspapers, radio, television, and online sites. In practice, most of these organizations and services are under government control or management, including the national TV provider, Vietnam Television (VTV), and the national radio broadcaster, Voice of Vietnam. 

Social media is widely used in Vietnam, with 76.95 million users. Facebook, Zalo (national app), Tiktok, and Instagram are Vietnam's most popular social media platforms for circulating news and information. Vietnam is providing 70.4 million users on Facebook and 63.5 million on Youtube, presenting an up-and-coming digital market.25

3. Utilities 

3.1 Electricity 

Since 2020, 100% of Vietnam's population has had electricity access in both rural and urban areas.26Vietnam Electricity Company (EVN), a state-owned enterprise, is the primary electricity provider. EVN manages and operates the national electricity network throughout the country. 

3.2 Water and Sanitation

Vietnam has made progress in increasing water supply and sanitation coverage. National access to improved water supply increased from 65% in 2017 to 95% in 2020, while access to basic sanitation rose from 52% to 84% during the same period. However, disparities between rural and urban areas and between the rich and the poor continue to prevail.27

The country continues to face inequitable access to water and sanitation services, and water service coverage is diminishing in remote and mountainous communities. The 2019-2020 severe drought and saltwater intrusion in the Mekong Delta region caused 439,000 people to face a shortage of daily use water during the drought.28In addition, clean water, basic toilets, and good hygiene practices remain challenging for women and children living in some rural communities. Open defecation is still practiced by an estimated 10.7 million people in Vietnam.29

4. Investment forecasts for Vietnam

With the continued influx of FDI, continuing rapid urbanization, and the government’s determination to implement Industry 4.0, the current infrastructure cannot keep up. 

The G20 Global Infrastructure Outlook forecasts that Vietnam needs, on average, US$25-30 billion annually for infrastructure to ensure economic growth. The national budget can only cover 60% of that, and the government has to source the remainder from private investors. In total, the country will require US$605 billion from now through 2040 for all infrastructure projects across all sectors. Based on current trends, investments over this period will reach US$503 billion—a gap of US$102 billion.30

 

References

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