China may be making the front pages, but there are significant projects coming online in Vietnam’s port sector.
Like most developing countries, Vietnam is plagued by infrastructure shortcomings that frustrate rapid economic growth. No matter how efficiently factories churn out goods for export, if they can’t get to the port, and if the ports can’t accommodate vessels, factory workers may as well be drinking beer under trees all day.
Until June this year when APL launched a deep sea service between Cai Mep near Ho Chi Minh and the US West Coast, Vietnam cargo was served by feeder vessels connecting with the big intercontinental strings out of Hong Kong or Singapore.
Its ports were too shallow to accommodate even the smaller container ships, and the feeders added to the cost of shipping boxes out of the country.
That is still largely the case, but the country entered the deepwater club when dredging at Cai Mep deepened the port to 29.5 feet and allowed deep sea vessels to enter. Very soon after that APL and MOL began offering direct services to the US. In the fourth quarter of 2010, APM Terminals and two local partners will open Cai Mep International Terminals (CMIT) that will be able to handle ships of up to 6,000 TEU capacity, and
shipping lines MOL, Hanjin and Wan Hai, along with terminal operator Saigon Newport, will establish a joint venture company to operate another Cai Mep container terminal expected to be online in 2011.
With exports of US$27.6 billion in goods in the first half of this year – well over half of that in furniture, garments and footwear – one would expect Vietnam to be attracting the big 8,000 TEU-plus size of vessel.
However, the market may be big enough to accommodate the outsized box boats, but the supporting infrastructure isn’t. At least, not yet. For the volume of cargo required to fill ships of that size, the port needs connecting highways and bridges, railways, warehouses and container yards. Attention also needs to focus on inland waterways and the barge system that is a critical part of the transport network.
Never slow to act, the Vietnam has dedicated a massive amount of government spending to improving the transport network. It is no coincidence that CMIT is timed to open when the highway network expansion currently underway is completed.
Vietnam is fast developing as a sourcing destination as manufacturers spread their risk, and while it is unlikely to ever really challenge its giant northern neighbour, the country does offer an attractive alternative.