Construction & Building
Construction Industry in Vietnam: -
The construction industry is expected to contribute significantly to Vietnam's economic growth.
(Extracted from "Saigon Time Weekly" on October 17, 2009)
Along with strong domestic consumption, the construction industry plays an important role in maintaining Vietnam's economic growth on the plunging foreign investment. While other sectors of the economy like agriculture, manufacturing and services are struggling to stay afloat; the industry has achieved positive growth thanks to the Government's economic stimulus measures, lower interest rates and failing prices of building materials.
Figures from the Ministry of Construction show that the industry achieved a year-on-year growth rate of 5.4% in the first half of this year. In its report at the mid-term Consultative Group Meeting in June, the World Bank forecast that the industry could achieve double-digit growth this year. Martin Rama, a World Bank senior economist, forecast that the positive growth of the construction industry may help the economy attain a gross domestic product (GDP) growth rate of above nine months reached US$3.65 billion, as investor believe that the sector, will warm up along with the economic recovery.
Over the long term, the construction industry has much room for growth thanks to the big demand for infrastructure and housing development. In the transport sector, Vietnam plans to develop as expressway system from the North to the South, deepwater seaports in Haiphong, Khanh Hoa and Ba Ria-Vung Tau and a big international airport in Dong Nai. In the energy sector, many hydropower projects will be built between now and 2020 to meet the increasing power demand. In the tourism sector, more luxury hotels will be developed to accommodate international visitors. Tourism authorities have estimated that Hanoi will need additonal 13,000 rooms of three to five star standard and HCM 7,000 rooms by 2020. In the housing sector, the Government has approved an urban upgrading program to 2020 with total investment amounting to VND175 trillion, aiming to upgrade cities from grade four up, housing areas of low-income people and urban centers with poor technical infrastructure. Meanwhile, people also want to upgrade or build homes.
The Ministry of Construction has forecast that along with population growth and fast urbanization, the housing demand in Vietnam will rise strongly in the coming years and many new urban areas will be developed. By 2020, the urbanization rate in Vietnam is forecast to increase to 45.2% from the current 27%. At present, per capital housing area in Vietnam is 10.2 square meters, much lower compared with some regional countries like China (20 sqm) and Singapore (32 sqm).
In the period 2010-2020, Vietnam will need to develop 364 million sqm of housing space in urban areas, meaning some 36 million square meters per year. The ministry has estimated that some VND640 million (about US$36 billion) will be needed to meet this housing demand.
As a result of this positive outlook, the ministry has forecast that the construction materials market will experience strong development over the next decade.
Construction material market: -
At present, the construction material market has many kinds of products with various designs, better quality and lower process. Some locally made materials are not only consumed in the domestic market but also exported to more than 100 countries worldwide.
According to the Vietnam Cement Association, there are 105 cement production lines in Vietnam with combined capacity of over 61 million tons, putting Vietnam into the list of the world's top 10 cement producers. Last week, Vietnam consumed 40.1 million tons of cement and the figure this year is estimated at 44-45million tons. Next year, the figure will rise 48-50 million tons, and some 10 million tons will be in surplus if all cement plants run at full capacity. In the future, cement producers must seek exports outlets for the surplus cement.
In the area of the production, Vietnam has recently surprised Indonesia to become the biggest tile producer in Southeast Asia and has been recognized as the world's sixth largest tile producer. According to the Vietnam Construction Ceramics Association, Vietnam currently produces some 300 million square meters of tiles per year, much higher than 200 million square meters a few years ago. There are more than 60 tile producers in Vietnam; among them the biggest producers are Viglacera, Dong Tam and Prime Group. Besides domestic sale, Vietnam exports tiles to many countries with annual revenue of US$110 million.
Under the master plan for development of the construction material industry to 2020 drafted by the construction ministry, the output of some kinds of construction materials is expected to increase significantly by 2020. In specific, the output of cement is expected to increase 3.46 times, tiles 2.3 times, sanitary ceramics 2.62 times, construction glass 2.46 times, building materials 1.96 times, roofing materials 2.24 times, building stones 2.58 times and construction sand 2.6 times. With the increasing output, the ministry estimated that by 2020, the construction material industry will have combined production value of VND226.3 trillion, 3 times the current value. Its tax payment to the State budget is projected to increase by VND2.13 trillion per year.
The master plan outlines the development of major regions capable of supplying four key construction materials for the market. For cement, the region will cover the Red River Delta (Quang Ninh Haiphong, Ha Nam, Ha Tay and Ninh Binh) and north central region (thanh Hoa, Nghe An and Quang Binh). For tile, the region will include the Red River Delta (Vinh Phuc, Hanoi and Thai Binh) and east of southern Vietnam (Dong Nai, Ba Ria-Vung Tau, Binh Duong and HCM City). For sanitaryceramics, the region will comprise the Red River Delta (Hanoi and Thai Binh) and the east of southern Vietnam (HCM City, Binh Duong and Dong Nai). For construction glass, the region will cover the Red River Delta (Bac Ninh), central coastal region (Quong Nam) and the east of southern Vietnam (Ba Ria-Vung Tau and Binh Duong).
However, to achieve sustainable development, industry experts say the construction materials industry should tackle some problems, mainly outdated technology and environmental pollution. Due to outdated technology, the industry cannot produce some high-quality materials for modern, high-class construction works. Its products generally have lower standards compared with those produced in developed countries. Also, the outdated technology and inadequate investment in waste treatment by a number of enterprises causes serious pollution for the environment.
FORECAST FOR CONSTRUCTION MATERIAL DEMAND UP TO 2020
Material | Unit | 2010 | 2015 | 2020 |
Cement | Million tons | 50.6 - 55.6 | 79.7 - 87.6 | 101.7 - 111.8 |
Tile | Million sq m | 200 - 212 | 291 - 313 | 400 - 428 |
Sanitary Ceramics | Million units | 8 - 10 | 12 - 14 | 19 - 23 |
Construction glass | Million sq m | 88 - 96 | 131 - 140 | 196 - 202 |
Building Materials | Billion pieces | 24 - 26 | 31 - 33 | 41 - 43 |
Roofing Materials | Million sq m | 123 - 128 | 168 - 174 | 220 - 228 |
Building Stone | Million cu m | 98 - 110 | 140 - 156 | 197 - 211 |
Construction sand | Million cu m | 93 - 100 | 131 - 140 | 182 - 197 |