Tuesday, April 22, 2008, 01:00 GMT+7

Vietnam's infrastructure development

Enormous progress in infrastructure development has been accomplished in Vietnam in recent years. The country is by now investing more than one third of its GDP; about 9% goes into infrastructure.


 

As a result, Vietnam is rapidly catching up with its neighbors in terms of availability and cost of services. Electrification and telephone penetration have seen the most remarkable improvements, and the road network has expanded considerably as well. Still, enterprises in Vietnam complain about insufficient transport infrastructure, and excessively expensive electricity and telephone services.

Vietnam has sustained an impressive growth in access to infrastructure services since the early 1990s. All urban areas in Vietnam are now electrified. In rural areas, electrification expanded from 51% of all households in 1996 to 88 percent in 2004. The length of the road network increased from 96,100 km in 1990 to 224,500 km in 2004. In the case of national-level roads, the increase was from 15,100 to 17,300 km. By 2002, 45% were deemed in good condition, compared to 37% in 1997. Access to improved water grew from around 35% of the population in 1993 to 80% in 2004, and access to hygienic latrines from 10 to 32%. The number of fixed and mobile lines per 100 people increased from 1.1 in 1995 to 9.2 in 2002. It is on target to reach a total of 10 million lines in 2006-2007, achieving one of the fastest growth rates of tele-density on record.

Regional comparisons confirm how far Vietnam has come in terms of infrastructure development. In some sub-sectors, such as electricity and water, access to infrastructure services approaches that of richer countries in the region. In others, like sanitation and telephones, access levels are some distance behind the best regional performers. But at comparable development levels, Vietnam does better than average for sanitation and about average for telephones. Overall, the increased availability of infrastructure has resulted in prices increasingly aligned to those in the region as shown in the table below.

 
 
Hanoi
HCMC
Bangkok
Jakarta
Manila
Kuala – Lumpur
Industrial electricity
(cents/KW/h)
5.5
5.5
4.2
5.0
10.0
5.0
40-feet container to Yokohama, Japan ($)
1630
1150
1300
990
950
725
Call to Japan ($/3 minutes)
1.95
1.95
1.49
3.78
1.20
1.42
ADSL connection ($/month)
76.3
76.3
14.6
782.1
25.4
162.6
Source: JETRO (2005). Figures refer to 2004.

The resources mobilized for infrastructure development come from a variety of sources, including the government budget at both central and local levels, state development credit provided by Development Assistance Fund (in 2004, about 40 percent of this fund’s resources were from official development assistance provided by international credit institutions and foreign governments), the issuance of infrastructure bonds, borrowing from sate owned commercial banks, own-source revenues, and partnerships with the private sector (energy and telecommunication have been the principal recipients of private investment).

Vietnam’s WTO Membership and Infrastructure Development

Vietnam’s pledges in its bid to join WTO to open its market for foreign services providers will inevitably help improve the country’s infrastructure in many areas. Following are Vietnam’s commitments in the telecommunications and energy sectors: 

Telecommunications: Vietnam will open its telecommunications market and permit majority owned foreign supply in four areas: basic public telecommunications services offered on a non-facilities basis (fixed and mobile services offered by leasing transmission capacity from a Vietnamese company); private data networks (primarily serving multinational investors, offering Internet-based applications); satellite services; and submarine cable services.

Vietnam also accepted the pro-competitive WTO Basic Telecommunications Reference Paper which establishes an independent regulator and obligations to prevent anti-competitive behavior by the dominant supplier. The Reference Paper establishes transparency obligations and interconnection requirements.

Energy Services: Vietnam has made a broad range of commitments that will result in the phased opening of its energy services market. Vietnam will allow foreign energy services firms to compete for energy services projects associated with oil and gas exploration and development, management consulting, technical testing and analysis, and repair and maintenance of equipment, among others. Upon accession, Vietnam will permit foreign energy services companies to operate as jointventures with a Vietnamese partner for a period of three to five years, depending on the type of service. Thereafter, foreign energy services companies will be able to operate as 100% foreign-owned enterprises. Vietnam also has committed to provide foreign energy service companies with full national treatment.
 
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