VIETNAM+INFRASTRUCTURE+ 31052011 BMI

Q3 2011
www.businessmonitor.com
INFRASTRUCTURE REPORT
ISSN 1750-5593
Published by Business Monitor International Ltd.
VIETNAM
INCLUDES BMI'S FORECASTS
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VIETNAM INFRASTRUCTURE
REPORT Q3 2011
INCLUDING 10-YEAR INDUSTRY FORECASTS BY BMI


Part of BMI's Industry Report & Forecasts Series
Published by: Business Monitor International
Copy Deadline: May 2011

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CONTENTS
Executive Summary ......................................................................................................................................... 5

SWOT Analysis ................................................................................................................................................. 7

Vietnam Infrastructure SWOT ............................................................................................................................................................................... 7

Market Overview ............................................................................................................................................... 8

Vietnam ....................................................................................................................................................................................................................... 8

Building Materials .......................................................................................................................................... 11

Global Overview ....................................................................................................................................................................................................... 11

Asia Overview ........................................................................................................................................................................................................... 17

Industry Forecast Scenario ........................................................................................................................... 21

Table: Vietnam Construction And Infrastructure Industry Data .......................................................................................................................... 21

Table: Vietnam Construction And Infrastructure Industry Data .......................................................................................................................... 23

Construction And Infrastructure Forecast Scenario ................................................................................................................................................. 25

Transport Infrastructure ................................................................................................................................ 27

Table: Vietnam Transport Infrastructure Industry Data ...................................................................................................................................... 27

Table: Vietnam Transport Infrastructure Industry Data ...................................................................................................................................... 29

Transport Infrastructure Forecast Scenario ............................................................................................................................................................. 32

Transport Infrastructure Overview ........................................................................................................................................................................... 33

Table: Ports Are The Weakest Link: Quality Of Infrastructure Global Ranking Out Of 134 Countries ............................................................... 35

Table: Vietnam Railway Corporation’s Main Targets ......................................................................................................................................... 36

Key Projects – Transport ..................................................................................................................................................................................... 37

Table: Major Infrastructure Projects – Transport ............................................................................................................................................... 37

Energy And Utilities Infrastructure ............................................................................................................... 44

Table: Vietnam Energy and Utilities Infrastructure Industry Data ...................................................................................................................... 44

Table: Vietnam Energy and Utilities Infrastructure Industry Data ...................................................................................................................... 46

Energy And Utilities Infrastructure Forecast Scenario ............................................................................................................................................. 48

Energy And Utilities Infrastructure Overview ........................................................................................................................................................... 49

Table: The Three Levels Of Liberalising Vietnam’s Electricity Market ............................................................................................................... 51

Key Projects – Energy And Utilities .................................................................................................................................................................... 52

Table: Major Infrastructure Projects – Energy & Utilities .................................................................................................................................. 52

Residential/Non- Residential Construction and Social Infrastructure ..................................................... 57

Table: Vietnam Residential and Non-residential Building Industry Data ............................................................................................................ 57

Table: Vietnam Residential and Non-residential Building Industry Data ............................................................................................................ 57

Residential/Non-Residential Construction Forecast Scenario .................................................................................................................................. 58

Residential/Non-Residential Construction And Social Infrastructure Overview ....................................................................................................... 59

Key Projects Table – Residential/Non- Residential Construction And Social Infrastructure ............................................................................... 62

Table: Major Infrastructure Projects – Residential/Non- Residential Construction and Social Infrastructure ................................................... 62

Business Environment .................................................................................................................................. 63

Vietnam Business Environment ................................................................................................................................................................................. 63

Rewards ............................................................................................................................................................................................................... 63

Risks .................................................................................................................................................................................................................... 63

Regional Overview .................................................................................................................................................................................................... 64

Asia Pacific Infrastructure Business Environment Ratings .................................................................................................................................. 64

Table: Regional Infrastructure Business Environment Ratings............................................................................................................................ 65

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Company Monitor ........................................................................................................................................... 70

Cavico Corporation ............................................................................................................................................................................................. 70

Electricity of Vietnam Group (EVN) .................................................................................................................................................................... 73

Global Overview ............................................................................................................................................. 76

Methodology ................................................................................................................................................... 81

Industry Forecasts .................................................................................................................................................................................................... 81

Construction Industry .......................................................................................................................................................................................... 82

Data Methodology ............................................................................................................................................................................................... 82

New Infrastructure Data Sub-sectors ................................................................................................................................................................... 82

Construction ........................................................................................................................................................................................................ 83

Capital Investment ............................................................................................................................................................................................... 84

Construction Sector Employment ......................................................................................................................................................................... 85

Infrastructure Business Environment Rating ............................................................................................................................................................ 86

Table: Infrastructure Business Environment Indicators ...................................................................................................................................... 87


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Executive Summary
BMI View: The views presented by BMI last quarter have fully played out in Vietnam, and we expect that
the attempts of both the Vietnamese government and the State Bank of Vietnam (SBV) to cool the economy
will lead to a further moderation on construction activity. In spite of this, Vietnam’s construction sector
still holds significant value, as the country is in dire need of both new transport and energy
infrastructure. We anticipate that growth for the sector will remain positive over the forecast period
(2011-2015), and industry value will reach US$13.9bn by 2015..
Major developments over the past quarter include:
 A hike in electricity price approved in March 2011 by the Vietnamese government. Artificially
capped prices have long made it unprofitable for foreign infrastructure companies to invest in the
Vietnamese power sector because most of the equipment for power stations needs to be
purchased from other countries at global market prices. The price increase represents therefore a
noteworthy improvement.
 Japan's Overseas Development Assistance (ODA) coordinator Japan International
Cooperation Agency (JICA) is set to team up with Japanese companies to construct the
JPY140bn (US$1.7bn) Lach Hyuen port project in northern Vietnam. BMI believes that this
project highlights the attractiveness of this sector in the country as well as the importance of
foreign investment in Vietnam's port infrastructure.
 Plans to improve Vietnam's urban transport system have moved forward significantly over the
past six months, with funding secured and construction companies selected for many of the

country's metro railway projects. For instance, in March 2011, the Asian Development Bank
(ADB) agreed to provide US$293mn to support the construction of Hanoi's US$1bn metro
railway line 3.
 A new recent draft housing development plan, which includes spending for US$19.7bn between
2015 and 2020, with an emphasis on low-income housing provision. This is an encouraging sign,
as it shows that the government is taking the necessary steps to deal with the country's expanding
housing deficit.
We also stress that Vietnam’s business environment continues to be an issue for the country, as Vietnam’s
score has slipped to 53.72 from the already low 54.9 of last quarter. Although the country’s infrastructure
market continue to score quite well, downside risks from market volatility and country risk have further
dragged down the overall score. Corruption still remains a problem for Vietnam and is likely to continue
to impede infrastructure development until government reforms can change the landscape. Yet, with
increased foreign investment on the back of attractive growth rates there have been signs that the country
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is moving in the right direction in invoking structures to improve the business environment such as PPP
regimes.
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SWOT Analysis
Vietnam Infrastructure SWOT

Strengths
 Strong project pipeline will still sustain growth in the sector and add capabilities for
further development, particularly as transport structure improves.
 Rapid growth has attracted investment from many of the world’s largest
infrastructure companies.
 The current poor state of infrastructure in the country provides easy wins for foreign
investors and construction companies.
 Hike in electricity prices should stimulate investments in the energy sector.

Weaknesses
 State-owned companies dominate the infrastructure market. This is especially so in
the utilities sector, where Electricity of Vietnam (EVN)’s dominant position has
deterred investments.
 Vietnam relies heavily on foreign imports: it is estimated that Vietnam needs to
import 2mn tonnes of steel billets per year, adding up to 80% of the country’s
annual demand.
 The country presents a relatively risky environment for major infrastructure projects,
especially with regard to project finance operations.
 Power outages are occurring daily in Vietnam, highlighting the severe electricity
problems in the country.

Opportunities
 Demand for urban infrastructure projects in transport and sanitation will rise in
tandem with urbanisation in coming years.
 Severe droughts is driving demand in other electricity generation sources besides
hydropower; i.e. gas-fired and wind power plants.
 If the government’s attempts to cool the overheating economy are successful,
Vietnam will see a more stable growth trajectory for over the longer term.

Threats

 The Vietnamese government's shift in focus from driving economic growth towards
fighting inflation and addressing macroeconomic imbalances is expected to have a
cooling effect on the economy
 Public spending cuts, tighter credit conditions and aggressive monetary tightening
are likely to keep economic activity depressed over the coming months.
 Lack of energy infrastructure holds downside risk to nearly all projects and presents
significant bottleneck to development.
 Uncertainty and downside risks in business environment could have negative
impact should any significant events occur to highlight Vietnam’s structural
difficulties.
 The EU does not predict Vietnam will become a true market economy until 2018.



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Market Overview
Vietnam
Vietnam's emergence as one of the most promising economies in Asia, if not in the world, stems largely
from the Communist Party of Vietnam's (CPV) adoption of the Doi Moi market reform policies in 1986.
The gradual but steady shift from a largely agrarian country with a high degree of state ownership and
government intervention to a market economy has stimulated the flow of foreign investment and domestic
entrepreneurship, which are now the prime drivers of growth. For instance, foreign direct investment
(FDI) reached US$6.7bn in 2007, of which a quarter went towards fixed capital formation, according to
data from UNCTAD.
However, Vietnam’s poor infrastructure has long been putting a damper on the country’s growth as its

developing industry is highly dependent on sound infrastructure (especially power and road) to operate. In
August 2008, even Vietnam’s planning and investment deputy minister, Cao Viet Sinh admitted that the
weaknesses of the country’s infrastructure are slowing down the absorption rate of FDI. In addition, the
urbanisation process and the growing population figures, also indicate that the pressure on urban
infrastructure will increase in the coming years. According to BMI forecasts, between 2011 and 2015,
Vietnam’s population will increase by 3,98%.
Vietnam’s Ministry of Planning and Investments has released a list of 60 urban infrastructure projects to
be implemented between 2009 and 2016. The total estimated investment required for the projects is
US$12bn. The projects range from new water and sanitation infrastructure to new roads and traffic
systems, and will take place in 15 provinces around the country. Around 18 of the proposed projects on
the list will be funded by official development assistance (ODA) from Europe, Japan and the Asian
Development Bank, while the ministry said that the rest will come from the private sector, through PPPs.
Infrastructure bonds are another option, but this idea has not gained much support from the government
thus far. However, as the capital requirements for projects in energy, utilities and transport increase,
infrastructure-specific bonds may become more popular.
Vietnam has indeed been making noteworthy efforts to attract investments, and the government has made
infrastructure a priority investment area. The country is undeniably in need of significant infrastructure
investments, and PricewaterhouseCoopers (PWC)’s executive director for South East Asian
infrastructure (quoted in the Saigon Times) affirmed that 'Vietnam will need to increase the levels of
infrastructure investment at twice the growth rate of GDP to increase its overall national competitiveness.'
In the past few years, the government has demonstrated a strong commitment to the sector, making
infrastructure a priority investment area and concentrating noteworthy efforts on attracting adequate
funding. Among various demand-side policies aiming to boost macroeconomic growth, the government
itself adopted various infrastructure spending initiatives. Furthermore, over the past year Vietnam has
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been pushing for faster implementation and development of public-private partnerships (PPPs) for
upcoming infrastructure projects. The move was announced at a conference held in Ho Chi Minh City in
July 2010, by Vietnam's deputy minister of planning and investment, Dang Huy Dong. BMI believes that
this is a step in the right direction towards addressing the structural weaknesses of the infrastructure
sector, though wholly predicated upon the approval of the draft regulatory PPP framework to govern the
sector.
Foreign investments have also been playing a growing role. BMI notes that while poor infrastructure still
inhibits foreign investment in the country, we expect this effect to diminish over the next few years. The
country's infrastructure deficit combined with an improving business environment provides growing
opportunities for foreign infrastructure and construction companies in the country. For instance, in March
2010, Japan's government announced plans to increase its participation in co-financing infrastructure
projects in Vietnam, as part of a wider venture to spearhead the involvement of Japanese companies in the
development of infrastructure in the region. This is part of a wider trend for foreign involvement in the
sector. Improved contract agreements between the Export-Import Bank of the United States (US Ex-
Im Bank) and the Vietnam Development Bank (VDB) are also helping to change the outlook for the
infrastructure sector.
A stream of road building projects is set to boost the infrastructure market. Foreign investment pledges
for the port sector, also increased over the third quarter of 2009. Taiwan's Formosa Plastics Group –
which is rapidly emerging as one of the largest, if not the largest, foreign investors in Vietnam –
confirmed its commitment to the government to build a deep-sea port in Son Duong, next to the Vung
Ang Economic Zone, where it is investing US$19.2bn in petrochemical, steel and oil refinery projects.
Investors are showing keen interest in acquiring concessions in Vietnam’s transport sector, and thus
establishing a long-term presence in the country. However, we also warn against the obstacles and
challenges that still characterise Vietnam’s business environment, including corruption (the country ranks
116 in the ‘2010 Corruption Perception Index’ of Transparency International) and the fact that in spite of
the commendable strides the government has been taking in opening up, the EU stresses that the country
will not be considered a market economy until 2018.
A regulatory and legal framework to nurture the development of concessions is also largely absent,
though there are regulatory frameworks under construction. From this perspective, the absence of an
enabling institutional and regulatory/legal environment, which hinders the proliferation of PPPs, was a

core theme among the participant of a conference organised by the Asian Development Bank (ADB) in
February 2009, called Strengthening Public Private Partnerships For Infrastructure Investments In
Vietnam., Law firm Duane Morris identified four main obstacles for the limited participation of the
private sector in infrastructure in Vietnam. These are:
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 the weak governance structures of the state-owned companies that dominate the construction and
utilities sectors;
 difficulty in accessing domestic capital;
 costly delays in projects due to the weak regulatory environment; and
 the often uncertain support of the government.
In the long run, these problems could become a major obstacle for economic growth. Duane Morris noted
in their presentation at the ADB conference that the government is able to meet a quarter of financing
needs for infrastructure, and official development assistance (mainly from the JBIC) another quarter. This
leaves 50% of financing needs unmet by public finances, which at the moment make up the main source
of financing.



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Building Materials

Global Overview
Building Materials: Global Demand To Hit New Highs In 2011
Demand for key building materials (namely cement and steel) experienced a mixed recovery in 2010.
Surging demand in Asia and particularly China was the key growth driver globally, offsetting a muted
recovery in the consumption of building materials in Europe and North America. Moreover we expect
this story to continue over the next two years as Asia's booming economies drive global demand for
cement and steel to new heights in 2011 and 2012.
Key views for 2011:
 China to remain key growth driver of cement and steel demand
 Asia and Latin America - regions to outperform globally
 Europe - cement prices/volumes to remain subdued (economic headwinds, austerity cuts etc.)
 Steel prices to trend higher; but Chinese overcapacity to alleviate some upside pressure
Risks:
 Rising costs of raw materials to pose risks to margins and consumers
 Inflationary pressures a key concern for prices/costs across much of Asia
 China's slew of cooling measures may impact cement/steel consumption
 Short-term supply-side issues in steel sector arising from floods in Australia
Asia to accelerate in 2011
Continued efforts to cool China's economy and the persistent economic headwinds facing many
developed countries will see the overall consumption of building materials moderate in 2011. However,
across much of Asia and other key emerging markets, notably Latin America, the rate of cement and steel
consumption will accelerate, buoyed by robust economic growth. Indeed, having accounted for the lion's
share of growth in global cement sales and two thirds of global steel production in 2010, we expect key
Asian markets such as China, India, Indonesia and Philippines to further increase the region's share of the
total in 2011.

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China-Led Recovery
Crude Steel Production (1000's of metric tonnes)

Source: WSA

Indonesia, Asia's third most populous country, the Philippines, Thailand and Vietnam continue to be key
growth markets for the consumption of building materials in the region, with residential construction in
particular exerting strong upward pressure on cement prices. Indeed, Indonesia's cement consumption is
expected to grow by between 6% and 8% in 2011, according to Reuters, while Vietnam is expected to see
a 9% to 10% rise (according to the Ministry of Industry and Trade). Similarly in Thailand, cement
consumption is anticipated to increase by nearly 10% in 2011, according to Siam City Cement.
Steel consumption in India will grow by 13.6% in 2011, according to World Steel Association (WSA)
estimates, as the country's insatiable demand for infrastructure projects and housing drives demand for the
metal. While cement consumption in the country is also likely to see double-digit growth, manufacturers
expect margins to remain under pressure in the short-term at least as significant overcapacity in the sector
will keep prices depressed.

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Middle East And Asia Stay Positive In 2009
Global Cement Production (2008 - 2009)

Source: Lafarge, JP Morgan Report 2008, 2009.

Rising input costs and inflation to squeeze margins
High and rising costs of production will continue to be a threat for construction companies in 2011. A
booming demand for raw materials in recent months is resulting in rising input costs for energy and raw
material-intensive industries, such as steel production and cement manufacturing. The costs of key inputs
such as iron ore, coking coal and scrap steel have all surged of late, placing strong pressure on firms'
margins. Moreover, with input costs likely to remain high over the coming months, margins will be
squeezed further as well as the possibility of these costs being passed on to the consumer through price
rises.


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Costs Increase Pressure On Margins
Global Cement Majors Vs Global Construction Majors (basket of share pricest)


Source: BMI Research, Bloomberg

In South East Asia in particular, such issues are accentuated by the constant threat of inflation, which will
be a key concern for a number of countries in the region in 2011, particularly Indonesia and Vietnam.
Although local supply-demand dynamics can drive up prices on a short-term basis in a particular market;
factors such as transport and distribution costs as well as uncertain electricity supply also remain notable
constraints for the region's building materials sector.

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Treading Higher
Relative Performance Of Iron Ore & LME Steel Billet Prices*


Source: BMI / *Rebased (January 2009 = 100)

Developed economies to lag
While the key challenges are firmly on the supply-side in the developing markets, the issues facing the
building materials sector in developed markets, particularly Europe, continue to be on the demand-side.
Cement production in the region slowed in the second half of 2010 and in fact shrank in the third quarter,
keeping prices depressed, though largely stable. In a number of countries, an increase in the production of
building materials, notably steel, belied a far weaker domestic demand picture, with exports accounting
for a significant portion of the total.
Steel: demand to grow, with moderate price rises expected
Following a contraction of 6.6% in 2009, apparent steel use (i.e. steel demand) increased by 13.1% in
2010 to 1,272 million metric tones (mmt), according to WSA estimates. It is forecast by the WSA that
growth will moderate in 2011, but still rising by 5.3% to reach an all time high of 1,340mmt. This
moderation in growth is due to factors such as base effects as well as China's raft of measures aimed at
curbing its rampant property and construction sectors. Moreover, much of the growth seen in developed
markets in H110 reflected inventory restocking and stimulus measures that are now unwound. Indeed, the
WSA estimates that steel consumption in developed markets will remain well below the pre-crisis peak
levels in 2011. Having said that, positive macroeconomic data emerging from the US and Germany in
recent months highlights the upside potential to this view.
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Although 2011 will likely see a relative slowdown in Chinese demand for the metal, global steel
consumption will continue to be driven by the Asian giant. Indeed, China's construction and automobiles
industries - two major steel consuming sectors - are forecast to expand by 9% and 15.8% respectively.
Over the next two years we expect steel prices to rise steadily. Three-month LME steel billet prices will
average US$580/tonne in 2011 and US$620/tonne in 2012, according to BMI's commodities team;
though still a long way off pre-crisis peak levels. Over the coming quarter we expect the metal to trade
between US$500/tonne and US$600/tonnne, with a number of factors combining to prevent any potential
price surge. One notable issue is that of significant overcapacity in China, which along with the Chinese
government's concerted efforts to cool industrial production, reduce the likelihood of any supply-side
constraints.
While we believe that overcapacity will play a key role in curbing potential gains in steel prices there are
a number of dynamics that could precipitate upward price pressure over the coming months. Over the
short-term, the effect of flooding in Australia could result in supply-side issues, resulting in further rises
in the cost of coking coal and iron ore. In addition, with the potential for the cost of raw materials to
remain high over the coming months, there is the possibility that this will be passed on to consumers.
Table: World's Top Steel Producing Countries (Million Metric Tonnes - Mmt)
2010 2009 2009/2010 % Chg
China

626.7

573.6

9.3

Japan

109.6

87.5

25.2

US

80.6

58.2

38.5

Russia

67

60

11.7

India

66.8

62.8

6.4

South Korea

58.5

48.6

20.3

Germany

43.8

32.7

34.1

Ukraine

33.6

29.9

12.4

Brazil

32.8

26.5

23.8

Turkey

29

25.3

14.6

Source: WSA


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Asia Overview
Building Materials: Asia Will Be Key Global Growth Driver In 2011
BMI View: Robust economic growth across key Asian markets will drive demand for building materials
to new heights in 2011 and 2012, significantly outperforming the still muted outlook in developed
countries. BMI notes that while many countries are expanding their production capacities to cope with
rising demand for cement and steel, inflationary pressures will be the key cause for concern in terms of
price rises across much of the region in 2011. In addition to local supply-demand dynamics, the rising
costs of raw materials and fuel will also play a key role in dictating cement and steel price movements.
Key trends:
 Wider inflationary pressures to be a key concern in 2011, particularly in Indonesia and Vietnam.
 Resurgent economic growth in 2011 to increase demand for building materials across the region.

 Increasing costs of raw materials and fuel will make further upward price movements likely as
input costs are passed to consumers.
 Continuing slowdown in China presents potential for downward price pressure over the short to
medium term.
Economic Fundamentals To Drive Growth In 2011
We expect demand for cement and steel in countries such as India, Indonesia and Philippines to rebound
strongly from the seasonal slowdown caused by heavy flooding in South and South East Asia between
July 2010 and September 2010. In spite of this, steel production in the region grew by 11.8% in 2010
compared to 2009, increasing its proportion of the global total from 63.5% to 65.5%. Driven by
favourable economic conditions and strong domestic demand for housing and infrastructure, these
dynamic markets should experience robust growth over the medium term. This should see the growth in
consumption of building materials in a number of countries pick up speed in 2011. Meanwhile continued
efforts to cool China's economy will see consumption of building materials slow in 2011, although
potential declines in price may be offset by rising costs and growth elsewhere.

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Cooling Off In 2011
China And Total Asia Crude Steel Production 2010 (thousand metric tonnes)


Source: WSA

Indeed, a booming demand for raw materials and rising fuel costs is resulting in rising input costs for
energy and raw material-intensive industries. Meanwhile weaknesses in the business environment will
continue to pose varying degrees of risk to companies operating in the building materials sector.

As China slows, India, Asia's other giant, will see the demand for building materials accelerate in 2011.
Indeed, according to the World Steel Association, demand for steel in the country is expected to grow by
13.6% year-on-year (y-o-y) in 2011 as the country's insatiable demand for infrastructure projects drives
consumption of the metal.
There are risks to this outlook, however, notably those arising from the well-publicised shortcomings
within India's business environment. Costly delays continue to hit planned steel and mining projects in the
country. This is inhibiting production levels and resulting in Indian steel producers such as Tata Steel and
Jinda Steel and Power increasingly seeking to tap new markets, notably Africa, in order to secure
sufficient supplies for its booming economy.
While risks remain, it is nonetheless expected that India will become the world's third largest consumer of
steel in 2011. Moreover, South Korean firm POSCO's planned US$12bn steel mill, which has been
delayed for a number of years, looks set to get the go ahead from India's authorities this month, sending
positive signals to the sector. Demand for cement will also rise, although whether this will exert any
upward pressure on prices is uncertain as capacity is high and India's cement producers are able to absorb
rising costs.
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A Widening Slice
Share of Global Crude Steel Production 2010

Source: WSA

Indonesia, the continent's third most populous country, the Philippines, Thailand and Vietnam continue to
be key growth markets for the consumption of building materials in the region. Residential construction,
in particular, is helping place strong upward pressure on cement prices. Indonesia's cement consumption
is likely to increase considerably, with sales expected to grow by between 6 % and 8% in 2011, according

to Reuters, while Vietnam is expected to see a 9 to 10% rise (according to Ministry of Industry and
Trade). Similarly in Thailand, cement consumption is anticipated to increase by nearly 10% in 2011,
according to Siam City Cement, in spite of an expected slowdown in residential construction.
Rising Costs A Continual Threat
High and rising costs of production will continue to be a threat for construction companies. In South East
Asia in particular, the threat of inflation will be a constant one in 2011, with rising costs sapping profits as
margins are reduced. Indeed, rising cement prices in the Philippines will continue to take their toll on
companies' costs bases, with high energy costs also a significant factor given the energy-intensive nature
of the industry. Cement prices in Indonesia and the Philippines are two of the highest in the region.
Although local supply-demand dynamics can drive up prices on a short-term basis in a particular area,
key obstacles such as transport and distribution costs (due to poor infrastructure), as well as an uncertain
electricity supply, continue to drive up prices and limit supply in many parts of the region.
Vietnam is a case in point, where, despite the fact there are 12 new cement plants due to come into
operation to satisfy domestic demand, upward price pressure is a constant threat. Indeed, the threat of
inflation, the country's inadequate infrastructure and creaking power sector will put prices under strong
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upward pressure. BMI notes that the government's recent proposal for tighter regulations on the building
materials sector is a welcome one, given the rapid growth that Vietnam's construction industry is
currently experiencing.
China Cools Regional Steel Outlook
China's introduction of measures to prevent economic overheating has precipitated a slowdown in China's
steel production, falling from a high of 56.1 million metric tonnes (mmt) in May 2010 to 51.6mmt in
August 2010, according to the World Steel Association (WSA). Energy conservation measures as well as
efforts to cool the property market have resulted in a construction slowdown in the latter half of 2010
which has seen global steel prices weaken over this period.

Given that China accounts for around half of global steel consumption, a continued slowdown in
construction activity through 2011 certainly creates the potential for a softening in global steel prices.
Indeed, following expected growth of 6.7% in China's apparent steel use in 2010, compared to 2009,
Chinese steel consumption is expected to slow to 3.5%, according to WSA forecasts. To what extent this
creates downward pressure on steel prices remains to be seen and will depend on the strength of demand
growth across the rest of Asia in the first half of 2011. However, signs so far in 2011 suggest that steel
prices will be well supported, not least due because of the recent large rises in raw material costs,
particularly fuel and iron ore, with the latter recently reaching an all-time high in mid-January 2011 as
well as a surge in the price of coking coal.
Holcim Cement Price/Volume Variance - Asia Pacific
Domestic Cement Prices / Domestic Cement Volumes (9M 2009/09M 2010 (+/-))


*based on local currencies, (1) Weighted average like-for-like, (2) Not published yet. Source: Holcim

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Industry Forecast Scenario
Table: Vietnam Construction And Infrastructure Industry Data
2007 2008 2009 2010f 2011f 2012f 2013f 2014f 2015f
Construction
industry value,
VNDbn
79,712.0 95,696.0 110,255.0 139,162.0 161,427.9 182,067.8 204,410.1 228,437.5 254,103.5
Construction
industry value,

US$bn
5.0 5.8 6.2 7.3 8.2 9.2 10.6 12.2 13.9
Construction
industry, real
growth, % y-o-y
12.2 -0.4 11.4 10.1 4.5 6.3 6.3 6.3 6.2
Construction
industry, % of
GDP
7.0 6.4 6.6 7.1 6.9 6.9 6.8 6.8 6.8

Total capital
investment,
VNDbn
437,702.
0
513,987.
0
572,525.6 668,900.5 798,031.8 900,898.1 1,012,249 1,131,998 1,259,914
Total capital
investment,
US$bn 27.2 31.1 32.0 34.9 40.4 45.6 52.6 60.4 69.0
Total capital
investment, %
of GDP
38.3 34.6 34.5 34.2 34.3 34.1 33.9 33.7 33.5
Capital
investment per
capita, US$
319.7 360.4 367.1 394.8 452.7 505.9 577.4 656.6 743.7

Real capital
investment
growth, % y-o-y 24.2 3.8 8.7 7.0 7.0 6.0 6.0 6.0 6.0

Construction
industry
employment,
'000
2,267.7 2,316.5 2,516.6 2,741.8 2,852.7 3,014.5 3,186.2 3,368.1 3,560.8
Construction
industry
employment, %
y-o-y 6.1 2.2 8.6 8.9 4.0 5.7 5.7 5.7 5.7
Total workforce,
'000 56,495.3 57,912.5 59,248.7 60,600.0 61,659.4 62,664.3 63,612.9 64,503.4 65,334.0
Construction
industry
employees as
% of total labour
force 4.0 4.0 4.2 4.5 4.6 4.8 5.0 5.2 5.5

Infrastructure
Industry Value
42.5 45.7 45.9 46.1 45.2 44.4 43.9 43.5 43.2
Vietnam Infrastructure Report Q3 2011



© Business Monitor International Ltd Page 22

Table: Vietnam Construction And Infrastructure Industry Data
2007 2008 2009 2010f 2011f 2012f 2013f 2014f 2015f
As % of Total
Construction
Infrastructure
Industry Value,
VNDbn
33,864.9 43,758.3 50,595.1 64,157.4 72,912.7 80,873.8 89,685.7 99,347.5 109,758.9
Infrastructure
Industry Value,
US$bn
2.1 2.6 2.8 3.3 3.7 4.1 4.7 5.3 6.0
Infrastructure
Industry Value
Real Growth
(%)
3.7 25.6 15.6 17.6 2.1 4.4 4.9 5.3 5.5
Infrastructure
Industry Value
as % of GDP
3.0 2.9 3.1 3.3 3.1 3.1 3.0 3.0 2.9


Residential and
Non-residential
Building
Industry Value
As % of Total
Construction 57.5 54.3 54.1 53.9 54.8 55.6 56.1 56.5 56.8
Residential and

Non-residential
Building
Industry Value,
TRYbn 45,847.1 51,937.7 59,659.9 75,004.6 88,515.3 101,194.0 114,724.4 129,090.0 144,344.6
Residential and
Non-residential
Building
Industry Value,
US$bn 2.9 3.1 3.3 3.9 4.5 5.1 6.0 6.9 7.9
Residential and
Non-residential
Building
Industry Value
Real Growth
(%)
3.2 9.7 14.9 16.5 6.5 7.8 7.4 7.0 6.8
Residential and
Non-residential
Building
Industry Value
as % of GDP
4.0 3.5 3.6 3.8 3.8 3.8 3.8 3.8 3.8
f = BMI forecasts. Sources: Vietnam General Statistics Office/ILO


Vietnam Infrastructure Report Q3 2011



© Business Monitor International Ltd Page 23

Table: Vietnam Construction And Infrastructure Industry Data
2012f 2013f 2014f 2015f 2016f 2017f 2018f 2019f 2020f
Construction
industry value,
VNDbn 182,067.8 204,410.1 228,437.5 254,103.5 282,669.7 314,464.0 349,850.9 389,236.7 433,073.0
Construction
industry value,
US$bn
9.2 10.6 12.2 13.9 15.9 18.2 20.9 24.0 27.1
Construction
industry, real
growth, % y-o-y
6.3 6.3 6.3 6.2 6.2 6.2 6.3 6.3 6.3
Construction
industry, % of
GDP 6.9 6.8 6.8 6.8 6.7 6.7 6.6 6.6 6.5


Total capital
investment,
VNDbn
900,898.1 1,012,249 1,131,998 1,259,914 1,402,284 1,560,742 1,737,106 1,933,399 2,151,873
Total capital
investment,
US$bn
45.6 52.6 60.4 69.0 79.0 90.5 103.7 119.0 134.5
Total capital
investment, %
of GDP 34.1 33.9 33.7 33.5 33.3 33.1 32.9 32.6 32.4

Capital
investment per
capita, US$
505.9 577.4 656.6 743.7 843.1 956.7 1,086.7 1,235.9 1,385.1
Real capital
investment
growth, % y-o-y
6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0


Construction
industry
employment,
'000
3,014.5 3,186.2 3,368.1 3,560.8 3,765.7 3,983.6 4,215.3 4,461.7 4,723.7
Construction
industry
employment, %
y-o-y 5.7 5.7 5.7 5.7 5.8 5.8 5.8 5.8 5.9
Total workforce,
'000
62,664.3 63,612.9 64,503.4 65,334.0 66,080.5 66,774.5 67,414.5 67,999.4 68,528.0
Construction
industry
employees as
% of total labour
force
4.8 5.0 5.2 5.5 5.7 6.0 6.3 6.6 6.9

Infrastructure

Industry Value
As % of Total
Construction
44.4 43.9 43.5 43.2 42.9 42.6 42.4 42.1 41.9
Vietnam Infrastructure Report Q3 2011



© Business Monitor International Ltd Page 24

Table: Vietnam Construction And Infrastructure Industry Data
2012f 2013f 2014f 2015f 2016f 2017f 2018f 2019f 2020f
Infrastructure
Industry Value,
VNDbn 80,873.8 89,685.7 99,347.5 109,758.9 121,312.7 134,042.8 148,209.6 163,927.9 181,328.6
Infrastructure
Industry Value,
US$bn
4.1 4.7 5.3 6.0 6.8 7.8 8.8 10.1 11.3
Infrastructure
Industry Value
Real Growth
(%) 4.4 4.9 5.3 5.5 5.5 5.5 5.6 5.6 5.6
Infrastructure
Industry Value
as % of GDP
3.1 3.0 3.0 2.9 2.9 2.8 2.8 2.8 2.7


Residential and

Non-residential
Building
Industry Value
As % of Total
Construction
55.6 56.1 56.5 56.8 57.1 57.4 57.6 57.9 58.1
Residential and
Non-residential
Building
Industry Value,
TRYbn
101,194.0 114,724.4 129,090.0 144,344.6 161,357.0 180,421.1 201,641.3 225,308.8 251,744.4
Residential and
Non-residential
Building
Industry Value,
US$bn
5.1 6.0 6.9 7.9 9.1 10.5 12.0 13.9 15.7
Residential and
Non-residential
Building
Industry Value
Real Growth
(%) 7.8 7.4 7.0 6.8 6.8 6.8 6.8 6.7 6.7
Residential and
Non-residential
Building
Industry Value
as % of GDP 3.8 3.8 3.8 3.8 3.8 3.8 3.8 3.8 3.8
f = BMI forecasts. Sources: Local news sources, industry sources, BMI Research (Major Projects Database)/ILO