Vietnam targets $21 billion port-enlargement investment

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Vietnam is pouring billions of dollars into building ports for the world's largest container ships in a drive to draw export industries from China.

The investment may propel the port complex near Ho Chi Minh City into the ranks of the world's top 15 ports within a decade, said Malcolm Gregory, chief commercial officer at the US$270 million Cai Mep International Terminal Co.

Companies from Nokia Oyj to Intel Corp. are shifting production to Vietnam, lured by cheaper labor compared with China and deeper ports for container vessels sailing directly to the US, Europe and Asia. The government aims to boost shipping volume more than 400 percent this decade in the quest for economic growth. Exports make up about 75 percent of Vietnam's gross domestic product.

"Vietnam is so heavily dependent on external demand that getting the entire system to work, not just ports, but roads and railways too, and making customs work faster, is a big part of the story," said Jonathan Pincus, the dean of the Harvard Kennedy School's Fulbright Economics Teaching Program in Ho Chi Minh City.

Port manager Vietnam Container Shipping Joint-Stock Co. is among stocks worth buying, says Cha Kyung Jin, the Seoul-based head of investment at Golden Bridge Asset Management Co. He pointed to the untapped potential in a nation that last year exported less than half as much as Thailand, whose population is about a quarter smaller.

"We want to increase our investment in Vietnamese companies, including Vietnam Container Shipping," he said. "Their port industry offers a lot of potential as their international trade is growing."

Another shipping enterprise, General Forwarding & Agency Joint-Stock Co., is a "good buy" after sliding since 2009, said Ho Chi Minh City- based Nguyen Hoai Nam, an analyst at Kim Eng Vietnam Securities.

"You've got all these wonderful exports, but you can't get them to the market," said David Creighton, chief executive officer of Cordiant Capital Inc. in Montreal. It invested $27 million in the Cai Lan International Container Terminal, LLC in the northern province of Quang Ninh.

Devaluation buffer

"The new ports will allow much larger ships to get access and will earn fees in US dollars, meaning devaluations of the Vietnamese currency won't hit their balance sheets," he said.

The port-investment target is part of Prime Minister Nguyen Tan Dung's plan to boost Vietnam's economic growth. The premier is also striving to tame inflation, which climbed to a two-year high of 12.31 percent in February.

The State Bank of Vietnam raised borrowing costs for the third time in as many weeks on March 8, increasing its refinancing and discount rates to 12 percent each, matching the level of the repurchase rate. The monetary authority devalued the dong for the fourth time in 15 months on February 11 as it strives to narrow the nation's trade deficit.

Officials have also clamped down on the use of gold and dollars as they seek to stabilize the currency and steady the economy. The central bank devalued the dong by about 7 percent last month, the most since at least 1993.

Cargo surge

Dung's goal is to invest as much as VND440 trillion this decade to increase deep-water port capacity for larger vessels, including container ships and oil tankers. The volume of goods handled will expand to between 900 million and 1.1 billion tons by 2020 from 172.1 million in 2009 under the plan.

Vietnam has a coastline of about 3,400 kilometers, giving access to shipping routes to China and Japan, across the Pacific Ocean to the US and over the Indian Ocean toward Europe.

Cargo volumes at Vietnam's ports surged more than four times from 1999 to 2009, while the number of calls by vessels increased about 215 percent, according to the Vietnam Seaports Association.

The complex close to Ho Chi Minh City ranked 29th among the top 100 container ports in 2009, behind such regional rivals as Singapore. The city-state took the top spot, according to London-based Cargo Systems, a unit of Informa Plc.

Dung's strategy aims to reduce reliance on transiting goods through neighboring countries. Cai Mep International Terminal gives access to vessels with a draught of as much as 16 meters, the company said in a presentation dated February 2011.

"Many manufacturing bases are being moved to Vietnam," said Jay Ryu, a Hong Kong-based analyst at Mirae Asset Securities Co. "With the yuan appreciating and costs, especially labor expenses, on the rise, it's becoming less attractive to do business in China and many are moving out."

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