Vietnam construction industry-Market size, future trends, current scenario and opportunities. It also includes major difficulties faced by companies to setup their business.

3. 72%
18%
10%
Inflow of FDI in 2014
Manufacturing and Processing Industry Construction Others
Key Objectives
To understand Vietnam Construction industry

4. Market Overview
The Vietnamese construction industry recorded a compound annual
growth rate (CAGR) of 16.12% during (2009–2013).However,
industry growth slowed from 19.7% in 2011 to 7.0% in 2013.
Reason-
• A sudden severe or prolonged fall in price in the property market.
• Banking system characterized by non-performing loans (NPLs).
• Slow-moving or inactive real estate sector.
The industry’s output is expected to record a nominal CAGR of 11.43% over
the forecast period (2014−2018). With improved credit facilities to middle and
low-income population, the Residential Construction segment is expected to
drive the Construction market in Vietnam during the coming years
Reason-
• Government’s focus on industrial and residential construction.
• Expansion in the tourism and retail sectors.
• Investments in infrastructure projects.

5. Trends and Development
 The Vietnamese construction market, both residential and non-residential
seeing a rapid growth.
 Vietnam needs $150 billion in infrastructure investment just to 2020 for that
the Government and its international donors (such as Australia) will fund
50% of this, and the other 50% will need to be funded by the private sector.
 The industry ranked as the second-largest recipient of foreign direct
investment with total capital of VND10.0 trillion (US$465.4 million); real
estate attracted 16 projects and a capital of VND14.9 trillion (US$692.3
million).
 The Vietnamese construction industry delivered a strong growth rate
during the review period (2014), due to Vietnam’s stable economic
conditions and despite a slowdown between 2011 and 2013, due to a slump
in the property market.

6.  The central bank and five state-run banks announced a VND70 trillion
(US$3.3 billion) loan package in 2014, to allow investors, developers and
suppliers to lower prices and cut costs to increase sales.
 Ministry of Finance announced a reduction in tax burdens applied to the sale
and leasing of apartments and houses. Under this, a 50% reduction in VAT
was implemented for sale or lease of commercial housing.
 AECOM, a US engineering and construction company, has been
commissioned by the World Bank to provide consultancy services on
the development of the water supply and sanitation systems in Vietnam.
AECOM is also the consultant for the new town development of the Long
Hung Commune in Soc Trang province (Southern Vietnam), providing
transportation, waste management and utilities infrastructure engineering,
design and planning services

7. (a) Non Residential construction
 With a considerable number of foreign manufacturers setting up production
bases in the country, demand is also on the rise for industrial properties,
including industrial parks, warehouses and logistics facilities.
 As a relatively low-cost, alternative production base in the Asian region,
Vietnam has welcomed the strong demand for industrial properties from Foreign
manufacturers thus driven the need for infrastructure and supporting facilities,
such as factory buildings, warehouses and utilities that meet international
standards.
 Spending in the non-residential infrastructure segment will grow at a CAGR of
5.7%, from US$18.2 million in 2005 to US$31.6 million in 2015. Key drivers of
this segment will be the construction activities carried out in electricity, gas,
water, transportation, and communications.

8. Government Initiative
 The Vietnam Ministry of Planning and Investment (MPI) estimates that the
country should be investing US$200 billion in infrastructure development
during the 2010-2020 period.
 The government plans to invest US$79.9 billion in power generation and
the development of the electricity network, according to the National
Electricity Development Strategy for 2006-25 so as to increase development
in upcoming years.
 The government also plans to develop 117 industrial zones by 2015 with
orientations through 2020. The industrial zones would require a strong
infrastructural support in the form of transport facilities, sewerage, and
electricity transmission facilities.

10. (b) Residential construction
 The construction industry market in Vietnam is dominated by the low-cost
and affordable housing sector. With the sustained growth of the country’s
economy over the years, the purchasing power of the population has
increased, particularly of the middle class population.
 Vietnam’s growing middle-income class and its influx of foreign investment
has resulted in rising demand for better quality homes and commercial
buildings and has also boosted the upmarket property segment, which is
dominated by foreign developers.
 The increasing population, coupled with an increasing rate of urbanization
from 26.5% in 2005 to 31.6% in 2015, will stimulate demand for housing
units, there by increasing spending on residential construction in the next
ten years.

11. Government Initiatives
 Introduced new ‘Housing Law’ and the ‘Law on Real Estate Business’
(passed in November 2014), which reduce the restrictions on foreign
ownership of residential and commercial.
 The new Law on Real Estate Business permits foreign entities and individuals
to purchase constructed facilities for use as offices, factories or for other
business functions.
 Foreign nationals and enterprises are also allowed to lease the purchased
houses and facilities.
 The number of households is estimated to grow at a CAGR of 2.3%, from
17.2 million in 2005 to 21.5 million in 2015. This will boost the demand for
housing units, thereby increasing the spending on housing during 2005-15.

12. 1. Vietnam national cement corporation (VINACEMENT)
2. Song Da Construction Corporation (SONG DA)
3. Vietnam construction import-export joint stock corporation (VINACONEX)
4. Housing and urban development corporation (HUD)
5. Hanoi construction corporation (HANCORP)
6. Vietnam machinery installation corporation (LILAMA)
7. Construction pottery and glass corporation (VIGLACERA)
8. Construction machinery corporation (COMA)
9. Vietnam construction consultancy corporation (VNCC)
10. Vietnam infrastructure development and construction corporation (LICOGI)
11. Vietnam water supply, sewerage and environment construction investment
corporation(VIWASEEN)
12. Song Hong construction corporation (SONG HONG. CORP)
13. Bach Dang Construction Corporation (BACH DANG)
14. Central Construction Corporation (COSEVCO)
15. Building Materials Corporation No. 1 (FICO)
16. Vietnam Industrial and Urban Development – Investment Corporation (IDICO)
17. Commerce and construction investment joint stock corporation (CONSTREXIM)
18. Development Investment Construction Joint Stock Corporation (DIC. CORP)
Key Players

13. Risk and Challenges
State-owned enterprises: In Vietnam, massive state-owned companies
are awarded most of the large projects. Cold approaches and open
tenders doesn't work.
Overseas Aid: Many projects in Vietnam are funded by foreign
development agencies, in particular from Japan, Korea and China. As a
result, head contracts are awarded to companies from those countries.
Inflation: Construction sector is one factor impact of inflation, growth and
high inflation pushed so how to regulating is a difficult problem with the
government. Vietnam is depending on credit capital for construction
industry and real estate which affect the growth of construction industry.
Legal and Taxation: Legal and taxation regulations are still not fully developed
and pose significant operational risk for foreign investors. There are a massive
32 corporate tax payments to be made each year which takes an average of
872 company hours to complete

14. Building material: Material manufactured in Vietnam are generally have
lower standards compared with those produced in developed countries. As a
result of this, prices of building material are higher as they are mainly procured
from other countries.
Corruption: Investment in the industry was considered at a high risk of
corruption. Construction contracts were particularly prone to corruption
because of their size, technical complexity, extensive approval processes and
easy concealment of sub-standard workmanship and materials.
Human Force: The income of construction labour is always lower than general
average income of all sectors in state sector as given in the table that is why
construction 11 sector has lack of skill employees, even semi-skill employees.
Low transparency in Real Estate: Vietnam current land and property laws
still do not provide clear guidance on issues related to the legal nature and
rights of land ownership and usage, and lack implementation mechanisms
and procedures for land distribution and transfers.