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Vietnam’s economy recorded GDP growth of 2.91% in 2020, the lowest during 2011-2020, due to impact of the pandemic. The economic growth in 2020 was mainly due to public investment, with several public-funded infrastructure projects playing a significant role in improving demand, assisting enterprise development, and creating jobs. Infrastructure has been a key factor in Vietnam’s economic development.
Public investment in Vietnam is mainly focused on key socio-economic infrastructure projects, particularly in water resources, transport, education, healthcare and agriculture. These are expected to attract private and foreign investment in the country which will support growth in total social investment to 33-34%, which will be an important factor in sustaining economic growth in 2021.
The public investment disbursement rate in Vietnam improved in H2’2020 to reach 91.1% of 2020 target, with total at US$20.2 billion (VND466.6 trillion), an increase of 34.5% over 2019. Though the country failed to achieve 100% target, it was the highest rate during 2011-2020, with substantial funds spent on major infrastructure projects including three sections of the north-south expressway: Mai Son-National Highway 45, Vinh Hao-Phan Thiet and Phan Thiet-Dau Giay, whose construction began in Q3’20. These three stretches will now be funded by Vietnamese Government instead of public-private partnerships (PPPs) model as previously planned. The public investment positively impacted the construction sector which recorded 6.76% growth rate, making it an important part of the economy in 2020.
Construction of the North-South Expressway connecting Hanoi and Ho Chi Minh City will improve local transportation capacity along a passage that links industrial zones with urban centers, ports and the border with China. Focus on enhancing capacity and improving efficiency of major ports such as the Cai Mep International Terminal near Ho Chi Minh City will also improve the attractiveness of nearby industrial areas.
Also, a new law was passed on public-private partnerships (PPPs) in Vietnam which was approved in June 2020 and came into effect in January 2021. The law is aimed at regulating investments and attracting private investments under the PPP model. The law is also expected to boost infrastructure development in the country. It makes projects in transport, grid infrastructure and power plants, water management, IT infrastructure, schools and hospitals eligible for PPP deals.
Currently, under the PPP model, there are around 100 major infrastructure projects in planning to be delivered with a projected value of roughly US$21 billion. Of these projects, over 50% are focused on bridges and roads.
Moreover, Ho Chi Minh City (HCMC) plans to build three major complexes and four metro lines, over the next five years. The city is inviting foreign investments for these projects. The capital required for these projects will be funded by Official Development Assistance loans under the PPP model.
The four metro lines project includes second phase of Metro Line 2 which will involve two sections with a combined length of 9.1kms at US$1.4 billion; 19.5-kms Metro Line 3A which will link HCMC with Tan An Town in Long An Province and connect District 1 with the south-western part of the city at US$1.8 billion. The third project includes 36.2-kilometer Metro Line 4 which will link northern and southern parts of HCMC at over US$4.5 billion; and 9-kms Metro Line 5 to link the Bay Hien Crossroads in Tan Binh District with Saigon Bridge in the eastern District 2, at US$1.7 billion.
To improve connectivity, traffic and flooding, there are major transport infrastructure projects under construction which are expected to conclude in 2021. These projects include an upgrade of Huynh Tan Phat Street in District 7; and construction of My Thuy 3 Bridge which began in March 2020 costing VND57 billion.
Other projects include an upgrade of the section of the street from Phu Xuan Bridge to Binh Khanh Ferry which began in April 2020 costing around US$12.9 million (VND300 billion) which is 90% complete. Another road upgrade includes 3.2-km Nguyen Huu Canh in District 1 and Binh Thanh District which began in October 2018, costs VND473 billion and is expected to conclude in April 2021. Also, construction of Thu Thiem 2 Bridge over Saigon River, which is now 70% complete, is expected to conclude in September 2021.
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