3. Logistics and industrial infrastructure

This section covers the following topics: ports and waterways, railways, roads, airports, telecommunications and connectivity, industrial and logistics parks.

Summary

• 3.1. Ports and waterways
• 3.2. Railways
• 3.3. Roads
• 3.4. Airports
• 3.5. Telecommunications and connectivity
• 3.6. Industrial and logistics parks

Investment in public infrastructure has been a major driving force for Vietnam's economic development in recent decades. Infrastructure accounted for 53% of total official development assistance (ODA) received between 2010 and 2017. 1Vietnam has invested heavily in transportation, especially roads, airports, and seaports. Vietnam's public and private investment in infrastructure has reached 5.7% of GDP in recent years, the highest in Southeast Asia and the second highest in Asia after only China (6.8% of GDP). On the one hand, enhanced infrastructure development meets the needs of investment projects; on the other, it will help create greater economic growth and more jobs. In addition, rapid urbanization in Vietnam is a strong driver for the development of the transportation and public services sector. With an estimated 50% of the population now living in major cities, the growing population has already outpaced the capacity of existing connectivity networks and utility systems.

Recently, the Vietnamese government approved a plan to spend $43-65 billion on the construction and upgrade of road, rail, inland waterway, maritime and air infrastructure between 2021 and 2030. 2The government also enacted a new Public-Private Partnership (PPP) Law, effective March 29, 2021, to support and regulate private investment to boost infrastructure upgrades, especially in the transportation, electricity grid and power plant sectors. This move is to attract more private investment to reduce the burden on national debt and fiscal policy.

According to the World Economic Forum Global Competitiveness Report 2019 3, Vietnam ranks 77th out of 141 countries in terms of overall infrastructure quality, 66th in transport infrastructure, and 87th in services infrastructure.

3.1. Ports and waterways

Vietnam has a total of 320 ports, both sea and river, of which 163 are international ports. Hai Phong , Da Nang and HCMC are the three major ports in Vietnam, located in the north, center and south respectively. Vietnam ranks 19th out of 141 countries in terms of connectivity for liner shipping, however, according to the World Economic Forum 4, the efficiency of port services ranks 83rd.

Port infrastructure is a magnet for FDI in Vietnam, especially investments from major shipping companies and joint venture port companies. However, the current capacity has failed to meet the growing demand from import/export activities. Under the 2021-2030 master plan, the government aims to invest and mobilize private sector investment to expand the country's port system to nearly US$13.8 billion and increase the system's capacity to handle 1.1-1.4 billion tons of cargo 5.

There are approximately 47,130 km of waterways in Vietnam, which play a significant role in transporting people and goods. The tributaries of the Mekong River and the Red River create the most critical waterway networks. Inland waterways carry approximately 4.7% of passengers and 17.8% of goods, making them the second most popular mode of transportation after roads 6. However, inland waterways only receive 1% of total transportation investment. Based on the government's plan to invest US$43–65 billion in transportation infrastructure between 2021 and 2030, inland waterways will attract additional investment 7.

3.2. Railways

The railway system in Vietnam was first built during the French colonial period over 140 years ago and was once the pride of the country. However, it is now outdated and lagging behind, with traffic demand increasing while the transport volume of the railway industry is continuously decreasing. Statistics show that in 1990, the railway served 10.4 million passengers, accounting for 3% of the total number of passengers in the transport sector; by 2019, this number had dropped to just 4.7 million or 0.2% 8.

The current railway system covers a total of 3,163 km, of which 84% is narrow gauge: this type of gauge has been removed in almost all countries of the world. Standard gauge tracks (1,435 m wide) account for 6% of the total and the remaining 10% of existing routes are mixed gauge. The average speed for a freight train is 50–60 km/h and for a passenger train is 80–90 km/h, which is substantially lower than that of other developed countries (150–200 km/h). In addition, Vietnam's railway system still uses diesel fuel, which is considered a second-generation technology (the first generation was steam engine).

The overall condition of Vietnam's railway infrastructure ranges from poor to fair, with most of the network in need of modernization. Vietnam's railway system has faced chronic underinvestment, relying on only 3% of the total infrastructure budget, while road development receives 90%.

In a plan to overhaul the rail network, the government aims to build nine new rail lines, covering 2,362 km between 2021 and 2030. The longest route would run from Hanoi to HCMC, covering 1,545 km.

3.3. Roads

Vietnam currently has about 570,448 km of roads, including 24,136 km of national highways, 816 km of expressways, 25,741 km of provincial roads, 58,347 km of district roads, 26,953 km of urban roads, 144,670 km of municipal roads, 181,188 km of rural roads in built-up areas, and 108,597 km of rural roads crossing fields. The road system is the backbone of the country's logistics and transportation industry. The road network is relatively well developed, however, due to congestion and lack of safety, the average speed on national highways is only 50 kilometers per hour 9.

The most common means of transportation for Vietnamese is the motorbike, which comprises 85% of all vehicles in the country. In 2019, there were 61.3 million motorbikes on the road, making Vietnam the world's fourth-largest motorbike market after China, India and Indonesia. In 2021, there were 4.5 million cars on the road, mostly concentrated in cities. According to Nikkei Asia, in 2021 Vietnam was among the top 4 countries by auto sales volume in Southeast Asia 10.

In addition to personal vehicles, there are extensive networks of subsidized bus services in Ho Chi Minh City (HCMC) and Hanoi to serve downtown riders. In all major cities, there are private car/motorcycle taxi services that can be hailed both traditionally and via digital services (e.g. Grab , Gojek , Be). In addition, after more than a decade of construction, Vietnam opened its first metro line in Hanoi in 2021, and the first HCMC metro line is scheduled to open in 2023. There will eventually be eight metro lines in HCMC, and Hanoi plans to build six.

3.4. Airports

Vietnam operates 33 civil airports, including 11 international and 12 local airports. Noi Bai International Airport in Hanoi and Tan Son Nhat International Airport in Ho Chi Minh City are the two main airports for international destinations. The 12 local airports serve all regions and most provinces of Vietnam. By 2030, the country will build 5 more airports in Son La, Lao Cai , Quang Tri, Binh Thuan and Dong Nope .

3.5. Telecommunications and connectivity

Internet penetration rate in Vietnam stood at 73.2% of the total population in 2022, with 72.1 million Internet users, of which 95.8% access the Internet via mobile phones. In addition, there were 156 million cellular mobile Internet connections in Vietnam in 2022. 11The average download speed via cellular mobile connection was 38.23 Mbps, which ranked 47th out of 140 countries, while the speed provided by fixed broadband Internet connection was 76.16 Mbps, which ranked 45th out of 182 countries. However, the quality of Internet access is uneven, with poor households in mountainous areas having limited 3G/4G signals, which limits access to Internet services.

Fixed subscriptions continue to decline as mobile cellular subscriptions grow. In 2021, there were 71 million mobile broadband subscribers and nearly 19 million fixed-band subscribers. Viettel Group, MobiFone , FPT and VNPT are the current giants of the telecom industry in Vietnam.

The main types of mass media in Vietnam are newspapers, radio, television, and online sites. In practice, most of these organizations and services are under government control or management, including the national television provider, Vietnam Television (VTV), and the national radio broadcaster, Voice of Vietnam.

Social media is widely used in Vietnam, with 76.95 million users. Facebook , Zalo ( national app ), Tiktok and Instagram are the most popular social media platforms in Vietnam for spreading news and information. In Vietnam, there are 70.4 million users on Facebook and 63.5 million on Youtube , demonstrating an emerging digital market.

3.6. Industrial parks

Vietnam's determination to become one of the world's manufacturing hubs is evident in its 20-year goal of becoming a developed country with enhanced industrial infrastructure and lower-middle income by 2025, a developed country with modernized industrial infrastructure and upper-middle income by 2030, and a developed country with wealthy citizens by 2045.

There are three industrialized zones throughout the country:

• Northern Region: There are 125 industrial parks in 21 provinces, among which the most important are Song Khe - Noi Hoang Industrial Park, Luong Son Industrial Park, Mai Son Industrial Park, Luong Son Industrial Park and Song Cong Industrial Park,

• Central Region: There are 56 industrial parks in 11 provinces, among which the most important are Bim Son Industrial Park, Lam Son Industrial Park and Cua Lo Industrial Park,

• Southern Region: It is the main hub for manufacturing in Vietnam, with 183 industrial parks in 19 provinces. The main ones include Sonadezi Industrial Park Chau Duc , Hiep Industrial Park Phuoc and Tan Phu Industrial Park Trung .

Currently, most of Vietnam's industrial parks are highly regarded, with cutting-edge technologies and infrastructure ready for high productivity. Vietnam attracts large FDI in industrial zones, from Asian investors (especially Japanese and South Korean) to Western investors (including Germany and the United States), thus benefiting from the technological expertise offered by foreign companies.

Foreign enterprises mainly invest in Vietnam's industrial parks for textiles, electronics, rubber and plastics, food processing, electronic components, iron and steel, footwear and woodworking. In 2021, FDI in manufacturing accounted for 53.4% of the total capital in the sector, with US$11.83 billion and an increase of 16.45% year-on-year.

Manufacturers in Vietnam are increasingly adopting artificial intelligence and 3D model printing in their products, while the government is planning to upgrade transportation infrastructure around industrial zones to boost logistics and attract more investment.

Despite the positive signs, the growth rate of industrial infrastructure is still insufficient. Up to 17% of German companies investing in Vietnam said that the current infrastructure is a big challenge for them as advanced technologies and automation, although increasingly adopted in factories, are yet to be applied on a large scale. Many factories are still dependent on labor instead of being automated and technology-based.