February 9, 2014 1:30 am JST

Slow economy puts Vietnam's infrastructure projects on the shelf

MANABU ITO, Nikkei staff writer

HO CHI MINH -- Faced with a slowing economy and deteriorating fiscal health, Vietnam is being forced to suspend more and more of its large infrastructure projects.

     Vietnam plans to build four nuclear reactors in the southern province of Ninh Thuan, but concerns are mounting that the project could be delayed for up to six years.

     According to the initial plan, construction of the first two reactors is scheduled to start in 2014, with operation slated for 2020. The government has yet to make a final decision, but a delay is likely in the cards. At an energy meeting in mid-January, Prime Minister Nguyen Tan Dung hinted at pushing back construction till 2020.

     A lack of skilled engineers, an inadequate legal system and Japan's nuclear disaster in Fukushima Prefecture have all been cited as reasons for the delay. But the biggest factor is the country's economic slowdown.

Fading optimism

Vietnam was on a high note when it started considering construction of nuclear power plants in 2001. Its economy grew at an average annual rate of around 7% in the following ten years, but that figure fell to around 5% for the two years through 2013.

     Government debt has also snowballed, topping 900 billion yen ($8.7 billion) in 2013, and calls for reining in public spending are growing stronger.

     A high-speed railway project to connect the country's north and south using Japan's shinkansen bullet train technology has also been bogged down. The government planned to partially open the line in 2020 in cooperation with Japan, but the Ministry of Transport decided in December to shelve it for the time being.

     In June 2010, the project was voted down at the country's Congress due to the huge costs involved, which were estimated at around 6 trillion yen. Japan proposed building an experimental line at a lower cost, but the government was reluctant to go ahead with the plan.

     A $7 billion project to build an international airport in the country's southern Dong Nai Province has also stalled. Like the high-speed rail project, it too came under strong criticism last year.

     Hanoi has long used large infrastructure projects as a means of asserting its power and prestige as a nation. The changes being made to the country's infrastructure projects highlight the government's shift to a more realistic approach in devising growth strategy.