DALLAS, Texas — Over the past generation or so, Vietnam has managed to rebuild itself as a country. Following the Vietnam War, many issues affected the economic standing of the nation, especially since the conflict had ravaged both farmland and the infrastructure in Vietnam. The south, having been propped up economically by the United States, had little development and a substantial amount of unemployment after the Americans departed. The U.S. enacted trade embargoes that exacerbated the problems and limited opportunities in the global economy. All of this pushed as much as 70% of the population below the poverty line by the end of the war. However, using market reforms to shift to an open economy has brought improvements. The Vietnamese government introduced the “doi moi” reforms, which shifted the economy to a more economical market, decreasing poverty.
By 2018, poverty declined to about 23%. Vietnam reached an average annual gross domestic product growth rate of a little more than 6%. The country also made strides to improve its infrastructure. The government has financed a multitude of public investments over the past decade or so, improving human and physical capital.
One of the main goals of any sort of infrastructure improvement is to ensure better living conditions. The Vietnam Urban Upgrading Project is one of the more prominent examples of this approach. In the early 2000s, one of the main problems for Vietnam’s infrastructure was that cities were not entirely prepared to handle the growth the country was experiencing. Consistent flooding and a lack of proper sanitation and water led to urban poverty, in particular, to rise alongside that growth. This led the Vietnamese government to invest more in low-income communities.
For the upgrading project itself, the Vietnamese government partnered with World Bank over a 10-year period beginning in 2004 to assist “more than 200 low-income areas.” The changes focused on improving existing infrastructure as well as addressing general problems of accessibility and health.
The project gave local homes and businesses alongside clinics and schools a proper water supply and drainage as well as electricity. It refurbished and repaved roads and waterways, fixed 500 km of drains and created or upgraded nearly 580 km of roads. Additionally, it laid down more than 200 km of the new roads to reduce flooding.
These changes in safety and infrastructure helped at least 7.5 million people in areas of high poverty, according to World Bank. Since the areas helped up to 70% of the bottom 40% in terms of income, many considered the project successful. It supported the idea that fixing Vietnam’s infrastructure could address problems related to poverty and dour conditions.
Vietnam’s infrastructure in the 320 seaports dotted across the country’s coast is important to the global economy. In fact, 114 of them boast increases in freight volumes from 206 million tons in 2010 to 260 million tons in 2015 thanks to improvements there. Before that, there were no deepwater seaports, and the quality of many of these facilities was poor. Vietnam had to send the cargo to nearby ports in places like Hong Kong and Singapore before finally making its way to America and Europe.
Complicating the issue was the fact that only about 44 of the ports could manage a capacity of up to 500 million tons a year. The rest were much smaller. However, by 2011, it had established the Tan Cang-Cai Mep International Terminal as the country’s first deepwater seaport. It also was Vietnam’s “first port in the country able to handle up to 15,000” 20-foot equivalent unit (TEU) transport vessels.
The terminal reduced transit from Vietnam to the western coasts of the United States and Europe by four days. The shift allowed for higher capacity and speed, which led port traffic to increase from six million TEUs in 2010 to 9.5 TEUs just four years later. A free trade agreement between Vietnam and the European Union in 2015 further supported this growth. By 2016, more than 2,000 ships had made calls at Tan Cang-Cai Mep, reaching productivity of “120 moves an hour” to the point that it is now the second-largest port by container volume in the country.
Vietnam’s transport ministry has also focused on renewing interest in railway improvements. Many see the benefits of an advanced rail system that reduces the time people and goods must travel. Success with this is visible in other Asian countries, such as Japan and China who have benefited from high-speed railways. Vietnam believes it’s capable of creating a growing rail system if it invests and develops in ways similar to other countries.
Over the past few years, a plan to improve an already existing rail system between Hanoi and Ho Chi Minh City has been pushed around. The plan would upgrade the line to reduce travel times and increase speeds to “90 kmh for passenger services and 60 kmh for freight”. Its $56 million price tag, however, has created debate over whether costs outweigh benefits. However, the successes other counties have experienced do show tangible gains.
Before COVID-19, the operating revenue of the East Japan Railway Co., for example, was just under $3 billion — and it reduced to $1.76 during the pandemic. The legislation improving the Vietnamese railways was rejected in 2010 but revitalized six years later. It has remained in legislative discussions ever since. Success in other countries in this field could show that placing money into these efforts can work.
The Metro System
There has also been considerable work done to construct metro systems. The first planned is the Ho Chi Minh City Metro, which will have three lines under construction and two under consideration. Each of the lines cost more than $2 billion with the first line expected to open in December.
The reason for the extensive investment is that there is an incentive to improve city commutes and the infrastructure in Vietnam. Roads have reached capacity limits due to limited space for more pavement as well as increases in air pollution. These problems are exacerbated by the fact that Ho Chi Minh City is the largest city in the country with 3.4 million people. Allowing for a metro system could promote local development by easing transportation issues.
The fact the Ho Chi metro will run 2.5 km through the largest shopping district in the city shows to many observers that the country is building the station with economic benefits in mind. In general, improving Vietnam’s infrastructure in its transportation sector allows for a swifter movement of goods and people to help spur economic growth.
The country has made many investments to improve the infrastructure in Vietnam. Much of it focuses on curbing poverty in urban areas while investing in ports to grow the economy by providing an open pathway connecting Vietnam to the rest of the world.
Making railways more advanced helps in the transport of goods and people and also reflects the efforts of other countries that have made similar investments. Vietnam’s infrastructure has managed to greatly expand over the past decade or so, and there are still many opportunities to advance forward in the future.
– John Dunkerley