Vietnam must close infrastructure gap to realise aim of being regional transshipment hub: analysts

[HO CHI MINH CITY] With Vietnam aspiring to be a transshipment hub in South-east Asia, analysts say this will require increased engagement with foreign investors, including those from China, to close the infrastructure gap.

At the China-Asean Expo held in Nanning last month, Vietnamese Prime Minister Pham Minh Chinh spoke about the vision of Vietnam becoming a regional transshipment hub and serving as a critical node of the supply chains between South-east Asia and China.

His visit to China took place just days after Hanoi upgraded diplomatic ties with the US to the highest level, with observers noting that Vietnam is taking steps to diversify its relations with the world’s major powers.

Le Hong Hiep, a senior fellow at the Iseas-Yusof Ishak Institute in Singapore, said that Vietnam and China need to be better connected before Vietnam can become a transshipment hub.

“Currently, there’s no infrastructure in place to make that visible and efficient in terms of cost,” he said. “It’s a good idea, but whether it’s feasible or not is another issue. I think it will be possible if, for example, they proceed with the proposed railway projects.”

Back in 2004, Vietnam and China launched the bilateral “Two Corridors, One Circle” connectivity initiative, which sought to promote trade and investment between the Chinese provinces of Yunan and Guangxi and the Vietnamese provinces of Lao Cai and Lang Son.

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There were plans to form transport links leading to Hai Phong, home of one of Vietnam’s busiest seaports, to facilitate freight forwarding between China and the region.

A study implemented by the United Nations Development Programme showed that the land crossings between Yunan and Guangxi and the Vietnam provinces, as well as Laos and Myanmar, would be a major conduit for China-Asean trade.

In April last year, Chinese foreign ministry spokesperson Zhao Lijian said that China was ready to work with Vietnam to boost connectivity through cross-border rail transport to ensure the smooth operation of industrial and supply chains.

Some cross-border freight trains between Vietnam and Chinese provinces such as Sichuan and Anhui became operational last year.

Chinh also said during his China trip last month that Vietnam plans to build more railway lines such as the Lao Cai-Hanoi-Hai Phong. He welcomed the interest of China Railway and Power China in taking part in the construction of this project, which will cost US$11 billion and stretch from the northern Vietnamese border all the way to one of the country’s largest seaports.

Earlier this year, Japan’s largest rail operator, East Japan Railway Company, also expressed interest in upgrading the Hanoi-Haiphong railway line as well as building the route to Haiphong Port.

Strategic location

Besides lying at the heart of Asia and facing the South China Sea, Vietnam is located along the world’s main maritime shipping route in the East-West hemisphere. Around 40 per cent of total containerised trade passes through the main East-West routes between Asia, Europe and the US.

Vietnam is upgrading its biggest port hub, Cai Mep-Thi Vai, in the southern province of Ba Ria-Vung Tau into an international deepwater transshipment port that can accommodate bigger ships.

In August, Ho Chi Minh City officials also approved the construction of the Can Gio international container transshipment port with a total investment of US$5 billion. 

“Seaports in Vung Tau and Ho Chi Minh City can be important projects that can promote Vietnam’s position as a major transhipment hub connecting Europe or the Middle East with East Asian countries, including China,” said Hiep.

During a visit to Can Gio in July, Chinh expressed hope that this port, when operational in 2027, could attract international transshipment goods and compete with other major ports in the region such as Singapore and Malaysia. 

Currently, Singapore is the primary transshipment terminal in Asia and has the second-busiest port in the world, behind only Shanghai.

Pham Nam Long, the chief executive of Abivin, a Vietnam-based consulting firm for digital transformation in transport and logistics, said that Vietnam could reap substantial economic benefits from being a transshipment hub, given its strategic location and neutrality amid ongoing US-China trade frictions.  

“The whole shipping industry will benefit if there are several high-quality transhipment options along the main routes, which will break the monopoly in the market,” he said.