Vietnam’s over-burdened shipping infrastructure is taking a big toll on freight operations, with the peak port authority estimating the industry loses US$2.4 billion a year because it can’t reach the country’s best docks.
Cai Mep International Terminal (CMIT), 50 kilometers southeast of Ho Chi Minh City, the nation’s commercial hub, provides deep-water access for larger vessels with capacity of 18,000 20-foot equivalent units (TEUs).
But shippers prefer to use the far smaller Cat Lai Port, which is closer to the manufacturing districts of Binh Duong, Ba Ria-Vung Tau, Dong Nai and Ho Chi Minh City itself.
Containers must be offloaded onto more compact vessels at sea or transshipped through larger Hong Kong and Singapore ports so they can access Cat Lai, which creates delivery delays and hikes costs. Shipping through Hong Kong can add 30% to the cost of a container.
“If goods can be shipped with large vessels, goods owners can save US$200-US300 per container compared with small vessels,” Vietnam Port Association secretary general Ho Kim Lan told VietnamNet Bridge.
The association says the estimated losses of US$2.4 billion a year are based solely on the industry’s inability to access CMIT, which is operating well below its capacity while congestion steadily builds at Cat Lai. There is no effective road or rail infrastructure linking CMIT to Ho Chi Minh City.
Excess capacity exists at ports in Da Nang in the central region and Haiphong in the north, but they are too distant to serve Ho Chi Minh City. Haiphong’s new Lach Huyen port, due to be completed in 2020, has only been designed to accommodate container ships of up to 8,000 TEUs.
In the meantime, Cat Lai, handling 50% of Vietnam’s container freight, is facing its own transport snarls because of chokepoints at weigh stations and gridlock at a major road intersection. Drivers partly blame a ban on trucks using the most direct route, which diverts traffic to side streets.
City authorities approved funding of US$18.9 million in September for the construction of a 1.5 kilometer corridor from the port to a ring-road and are building an interchange at the biggest chokepoint. Completion is scheduled for 2019, but could be delayed due to slow land clearance.
Cat Lai also implemented an online freight-forwarding system in April, for both approval procedures and payments, that has reduced waiting times. But Vietnam’s freight handling is still among the slowest in Southeast Asia.
On average it takes 21 days to import freight, compared with just four days for Singapore, the region’s shipping hub. The cost of importing a container to Vietnam is about US$600, against US$440 at Singapore. Yet Singapore handled 31.6 million TEUs in 2016 and Vietnam 8.4 million.
Vietnam was ranked a lowly 19th in the 2017 Agility Emerging Markets Logistics Index with a rating of 5.33, unchanged from 2016, which put it behind countries like Kazakhstan, Sri Lanka, Russia and Turkey.
China, the index leader in both years, had a rating of 7.88, ahead of India (7.14); in Southeast Asia Malaysia (6.66) was fourth and Indonesia (6.41) sixth.
Shippers privately blame political inertia for the ports debacle, with turf wars between state enterprises making it difficult to prioritize projects. Reluctant to risk a loss of influence, state officials prefer to split funding between all ports instead of taking a broader look at national needs.
In any case, financing has become scarce due to a debt ceiling imposed by the central government. While port development has been opened to foreign investors, many are deterred by a lack of transparency within state enterprises, difficulties in acquiring public land and endemic corruption.
Strained relations with China over competing territorial claims in the South China Sea are also squeezing potential funding from the Silk Road fund and Asian Infrastructure Investment Bank, even though consumer goods are now being shipped from Chinese factories relocated to Vietnam.
Vietnam’s export revenues are expected to reach a record US$213.6 billion in 2018, but freight growth is slowing, partly because of port congestion: a 13.5% expansion in exports is forecast in 2018, down from 13.6% in 2017 and 14.6% in 2016.