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    Vietnam’s Construction Industry – Ready for new investment wave in 2021:

    – Remarkable recovery and growth potential

    In the first quarter of 2020, the construction industry grew at 4.37%, considered to have the highest growth rate in the major economic markets in Asia although was affected by the COVID-19 epidemic when the Government strongly directed the implementation of measures to the social gap(1)

    In the press conference to announce socio-economic statistics for the first 6 months of 2020, the industry and construction sector increased by 1.38%, contributing 73.14% to the overall growth rate of the whole economy. In this field, the construction industry increased by 4.5%, higher than the 0.11% and 2.41% increase in the same period of 2011 and 2012(2).

    Realizing the dual goal of the effective prevention of the Covid-19 epidemic and the socio-economic recovery and development, the Vietnamese economy can recover strongly with a growth rate of about 6.5-7% by 2021. The construction industry in Vietnam will still be a potential industry that is forecasted to have strong economic growth next year.

    In the trend of moving the production systems out of China, more and more large corporations are considering shifting the production system to Vietnam. According to information from the Ministry of Foreign Affairs of Vietnam, up to 126 large corporations are preparing to make an investment in Vietnam.

    – Challenges for development of enterprises

    According to the FPTS construction industry report(3), the construction industry outlook is less positive compared to the previous period mainly because of the slow growth of the infrastructure sector and the short-term slowdown in housing construction. The growth rate of the domestic construction industry is expected to be 6.9% per one year over the next 10 years (2018 – 2028), slightly lower than the average 10 years ago (7.1%/year). Moreover, competitive pressure between Vietnamese contractors is expected to increase due to the falloff in growth when entering the restructuring phase, in addition to the entry of foreign contractors in the globalization trend.

    Competitive pressure among contractors remains non-decline during the epidemic since the competitive strategy is mainly on price, causing revenue and profit margin to reduce. This is not only a challenge but also an opportunity for contractors to have the ability to cooperate and absorb advanced technology from foreign contractors.

    Vietnam’s Mining Industry – Stable recovery:

    Industrial production continued to face difficulties when the index of industrial production in July 2020 only increased by 3.6% over the previous month and by 1.1% over the same period last year, failing to achieve a breakthrough as in June. In the first 7 months of 2020, the industrial production index averagely increased by 2.6%, which is the lowest increase in many years.

    In the first quarter of 2020, the mining industry showed constant growth, including some sectors which are difficult increased compared to the same period last year such as coke (15.9%), refined petroleum (16.7%), metal ore (15.7%), gasoline (18.6%), steel bar and angle steel (13.8%), etc., demonstrated the possibility of developing stably again after a period of economic recession.

    In 2021, the Mining industry is expected to thrive with advanced technology and export boosting, due to meeting the oil demand will increase by 6.2 million barrels per day compared to 2020(4).

    Vietnam’s Transport Industry – Implementation, quality assurance for Planning:

    According to the General Statistics Office of Vietnam, in the first 6 months of 2020, the CPI of Vietnam increased by 4.19% compared to the same period in 2019, of which Transport section to account for the largest proportion (6,05%). CPI in the second quarter is reduced by 1.87% in comparison with the preceding quarter but increased by 2.83% in contrast to the same period of 2019.

    The transport infrastructure system has also been increasingly focused and invested more and more(5). In 2021, Transport industry is in prompt preparation for national planning project for the 2021-2030 period on road, railway, port, airport, and inland waterway sectors in order to conduct modernly and meet the development needs to move towards the goal of industrialization and modernization of the country.

    In 2020, Vietnam highways are put 1,041km into operation, invested more than 160km, continued to construct the North-South expressway, Lang Son – Huu Nghi border gate, and the highway of Van Don – Mong Cai.

    Vietnam’s aviation has made a breakthrough in both scale and quality, promptly meeting the needs of air transport, with an average growth rate of 16% – 18% per year, upgraded and put up of airports, increasing the total capacity of the airport network to approximately 90 million flights/year, up 2.5 times compared to 2011.

    Vietnam has also completed an international gateway port investment, which is capable of obtaining large ships going directly internationally; implemented the renovation of key regional ports, bringing the total capacity of ports to about 580 million tons/year Cruise ports in Phu Quoc and Ha Long can be received the world’s largest passenger ships. Main waterways have been upgrading and improving transport capacity.

    During the 2017-2018 assessment period, the capacity and quality of Vietnam’s infrastructure continuously increased, from 95th (2011) to 79th (2016), of which, the index of structural quality road infrastructure increased 28 places to 92nd, seaport increased 31 places to 82th(6).

     

    References:

    (1) Report on the socio-economic situation of the first quarter of 2020 by the General Statistics Office

    (2) Report on the socio-economic situation of the second quarter and the first 6 months of 2020 by the General Statistics Office

    (3) Construction industry report of FPTS Securities JSC issued in December 2019

    (4) Report of the Joint Technical Committee of OPEC+

    (5) Global Competitiveness Report prepared by World Economic Forum (WEF) 2017-2018

    (6) “Development of the “one steap ahead” transport infrastructure in a synchronous and modern direction “, Nguyen Van The, Minister of Transport, Vietnamese Fatherland Front Magazine