Vietnam among leaders in Asian infrastructure race

A bridge being built in Ho Chi Minh City in January. Vietnam's public- and private-sector infrastructure investment has averaged 5.7 per cent of gross domestic product in recent years, the highest in South-east Asia.
A bridge being built in Ho Chi Minh City in January. Vietnam's public- and private-sector infrastructure investment has averaged 5.7 per cent of gross domestic product in recent years, the highest in South-east Asia.PHOTO: BLOOMBERG

It aims to attract more foreign investors as it positions itself as region's next tiger economy

HANOI • It may be one of the smallest economies in Asia, but Vietnam is among those leading the infrastructure race.

Vietnam's public- and private-sector infrastructure investment has averaged 5.7 per cent of gross domestic product (GDP) in recent years, the highest in South-east Asia and compares with 6.8 per cent in China, according to the Asian Development Bank (ADB).

Indonesia and the Philippines spend less than 3 per cent, while Malaysia and Thailand spend even less at under 2 per cent.

The ADB estimates emerging economies in the region will need to invest up to US$26 trillion (S$36 trillion) to 2030 to build transport networks, boost power supply and upgrade water and sanitation facilities.

Vietnam, among the fastest-growing nations in the world, is boosting infrastructure to lure more foreign investors as it positions itself as Asia's next tiger economy.

"The government knows that if they want to compete for investment, low wages aren't enough," said economist Eugenia Victorino at Australia and New Zealand Banking Group in Singapore. "They need infrastructure good enough to entice companies to put up factories. The development has been fairly spread out, with airports and roads being built across the country."

Those efforts are paying off.

Foreign direct investment surged to a record US$15.8 billion last year, and the economy is forecast by the World Bank to expand more than 6 per cent until 2019 - among the top performers this decade.

Its challenges are formidable.

Vietnam needs about US$480 billion from now to 2020 for infrastructure, including 11 power plants with a total capacity of 13,200MW and about 1,380km of highways, according to the government.

Just last week, Prime Minister Nguyen Xuan Phuc ordered the Transport Ministry to speed up plans to attract more private investment for infrastructure as the state can meet only a third of the cost.

The share of private investment in infrastructure spending in Vietnam may be under 10 per cent, said ADB director of development economics Rana Hasan. In India, the private sector has accounted for more than 30 per cent of total infrastructure investment in recent years, he added.

Others are planning to catch up.

Philippine President Rodrigo Duterte has set an ambitious goal of infrastructure spending at 7 per cent of GDP, or US$160 billion to 2022.

Indonesian President Joko Widodo struggled at first to get infrastructure projects going, but momentum is now building with projects including a 720km railway from Jakarta to Surabaya being sped up.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on March 24, 2017, with the headline 'Vietnam among leaders in Asian infrastructure race'. Print Edition | Subscribe