Vietnam Freight Transport Report Q4 2011

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Vietnam Freight Transport Report Q4 2011 Published on August 2011

Report Summary We have maintained our forecast for Vietnam's freight transport sector in 2011 and see this sector performing well over the mid-term to 2015. Our overall view has two major components: a background of high single-digit economic growth on the one hand (albeit at a slower rate than in 2010), while on the other hand there are and some disparities in the pace of expansion of freight capacity by transport mode. The pace of expansion is detrimentally affected by the infrastructure in the country, highlighted by the fact that construction work on the Van Phong International Port has been stalled indefinitely and that BMI believes Vietnam's ports need to begin accommodating mega vessels to maximise opportunities. In terms of year-on-year (y-o-y) growth, road freight will lead the way in Vietnam in 2011 recording a growth rate of 6.88%, equating to 36.84bn tonnes per kilometre (bntkm). Rail freight carried will grow 4.72%, although officials admit that this sector is plagued by insufficient track and signalling. The air freight sector will also perform well this year, recording 5.3% growth in tonnage carried, more than double the rate achieved in 2010. Inland waterways will see 4.34% growth in 2011 in terms of tonnage carried, down slightly on last year. Headline Industry Data * Rail freight carried will increase by 4.72% in 2011 to 3.89bn tonnes/km * Air freight tonnage will grow by 5.3% this year to 147,910 tonnes * The real value of total trade will rise by 11.3% this year, with exports gaining 11.0%, behind import growth of 11.6% * Total volume handled at the Port of Ho Chi Minh City will rise 7.45% to 33.45mn tonnes in 2011, while volumes at the Port of Da Nang will rise 2.76% to 3.39mn tonnes. Key Industry Trends Air France-KLM Cargo's Asia Expansion Strategy Flying High - In June 2011, Air France-KLM Cargo established a new connection between Vietnam and France, underlining the fact that airfreight links between Vietnam and Europe are increasing - a phenomenon we also note in the shipping sector. Van Phong Port Suspension Highlights Weakness In Business Environment - Work at the US$3.6bn Van Phong International Port in the southern central province of Khanh Hoa has been suspended with no indication of a resumption date due to, we believe, the escalating cost of capital in Vietnam, the lack of proper planning for projects which lead to slow execution, and the lack of regulatory maturity in the country's business environment. Vietnam Needs To Dig Deeper To Accommodate Mega Vessels - The projected increase in trade will require Vietnam's ports to undertake considerable investment going forward. BMI believes that despite recent large-scale foreign investment in the sector, further spending on port modernisation is needed if Vietnam is to take full advantage of increasing trade and a particularly pressing issue, in the age of increasingly large container vessels, is port depth. Key Risks To Outlook On the downside, although Vietnam's real GDP growth figure came in slightly better than expected at 5.7% y-o-y in Q211, we expect economic activity to continue to moderate in H211, and we see this as a positive sign that government efforts to iron out macroeconomic imbalances in the economy remain on track. Despite incipient evidence of a narrowing trade deficit, we warn that global economic headwinds remain a downside risk to external demand. Accordingly, we are projecting real GDP growth to remain subdued at 6.3% for 2011 (below the government's target of 6.5%), but we remain optimistic that we could see a pickup in growth towards 7.2% in 2012.

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Table of Content CONTENTS ....... 3 Executive Summary 5 Headline Industry Data. 5 Key Industry Trends ...... 5 SWOT Analysis 7 Vietnam Freight Transport Industry SWOT .. 7 Vietnam Political SWOT ....... 8 Vietnam Economic SWOT ..... 9 Vietnam Business Environment SWOT 10 Industry Trends and Developments ..... 11 Air ....... 11 Maritime ..... 11 Intermodal and Logistics .... 14 Market Overview .... 16 Global Oil Products Price Outlook ....... 18 Table: Oil Product Price Assumptions, 2011 (Us$/Bbl) ..... 19 Table: Oil Product Price Forecasts, 2011-2015 (Us$/Bbl) . 21 Industry Forecast .. 22 Macroeconomic Outlook ..... 22 Road Freight ....... 22 Table: Road Freight, 2008-2015 . 22 Rail Freight 23 Table: Rail Freight, 2008-2015 .. 23 Air Freight .. 23 Table: Air Freight, 2008-2015 .... 23 Maritime and Inland Waterways . 24 Table: Maritime Freight - Throughput, 2008-2015 ('000 tonnes) 24 Table: Inland Waterway Freight, 2008-2015 ...... 25 Trade .. 25 Table: Trade Overview, 2008-2015 .... 25 Table: Key Trade Indicators, 2008-2015 .... 26 Table: Vietnam's Main Import Partners, 2002-2009 (US$mn) .... 27 Table: Vietnam's Main Export Partners, 2002-2009 (US$mn) .... 27 Political Outlook .... 28 Foreign Policy .... 28 Domestic Politics 29 Long-Term Political Outlook ...... 31 Macroeconomics Outlook ..... 34 Table: Vietnam - Economic Activity, 2008-2015 . 36 Company Profiles .. 37 Vietnam Airlines Cargo ...... 37 Vinatrans .... 39

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>> Get this Report Now by email! Vietnam National Shipping Lines (Vinalines) ..... 41 Vietnam Petroleum Transport Company (VIPCO) ...... 43 BMI Methodology .. 44 How We Generate Our Industry Forecasts . 44 Transport Industry ...... 44 Sources .... 45

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