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Economy

Vietnam's new northern port to bring big ships, big business

The existing Haiphong port is too shallow to accept large containerships.

HANOI -- A new port in northeastern Vietnam is poised to alter Indochina's industrial landscape.

Lach Huyen international port, in the city of Haiphong, is scheduled for completion in 2018 and will be capable of accommodating large containerships. This is expected to make Haiphong a major export base and double the number of containers handled in Vietnam by 2020, from the current level.

Major Japanese shipping company Mitsui O.S.K. Lines plans to take advantage of the port by creating a route between Haiphong and North America. South Korea's LG group will make the port its base for exports to the U.S., Europe and elsewhere.

Where the River Cam nears the sea in Haiphong, towering cranes give the impression that the existing port accepts large container vessels. But since the water is no more than 7 meters deep, the biggest ships cannot enter.

That has to change, given Vietnam's growing shipping needs. The country handled 10 million containers in 2014, in terms of 20-foot equivalent units -- a tenfold increase over 15 years earlier.

The Lach Huyen facility, near the mouth of the Cam, will have a depth of 14 meters. Its pier length of 750 meters will also be double that of the existing port. It will accept vessels large enough to carry 14,000 20-foot equivalent containers, seven times more than at present.

The upshot: The port will enable direct shipments to North America and Europe, eliminating the need for transloading in Hong Kong or Singapore. On the Vietnam-North America route, this will cut the transport time to two weeks, rather than three. Plus, costs will be reduced by several hundred dollars per container. 

Mitsui O.S.K. plans to launch its new route in 2018. It expects trade agreements, including the 12-nation Trans-Pacfic Partnership, to spur demand for shipments in both directions.

Vietnamese Prime Minister Nguyen Xuan Phuc has said Lach Huyen is an integral part of Vietnam's maritime strategy.

Haiphong beckons

Ho Chi Minh City, in southern Vietnam, is the country's maritime transport hub, handling more than twice as many containers as Haiphong. But the new Haiphong port is expected to spur new demand to the tune of 1 million 20-foot equivalent containers in the first year alone. One estimate suggests that if the Vietnamese economy grows smoothly, Haiphong will be handling the same amount of cargo as Ho Chi Minh City in 2020. This would mean a twofold increase in Vietnam's overall transaction volume. 

Samsung Electronics of South Korea has two massive smartphone plants in northern Vietnam, while Japanese companies Fuji Xerox and Bridgestone have facilities in Haiphong. The port project should help attract more major companies to the area, changing Vietnam's economic structure -- characterized by brisk growth in the south and slower growth in the north.

LG, which already makes TVs, mobile phones, washing machines and other products in Haiphong, plans to open a new plant there for smartphone cameras in the second half of 2017. It also intends to assemble OLED display panels there.

The electronics maker sees the city as a vital base because of its inexpensive labor -- resulting in roughly half the payroll expenses required in major Chinese cities -- as well as its advantageous location for materials imports and product exports.

"An expansion of maritime shipping capacity in the northern part [of Vietnam] may change logistics in Indochina," said an executive at a major Japanese shipping company.

Haiphong could become a base for exporting goods flowing through the North-South Economic Corridor, which runs from China to Thailand, and the East-West Economic Corridor connecting Myanmar, Thailand, Laos and Vietnam.

The Vietnamese government clearly recognizes the importance of transport links to Haiphong. A 105km expressway between Haiphong and Hanoi opened last December. A 25km highway connecting Haiphong with the neighboring province of Quang Ninh is to open next June.

Southeast Asian ports have a reputation for bottlenecks, including time-consuming customs clearance procedures. Seeking to set itself apart, Vietnam in 2014 introduced Japan's customs clearance system, reducing wait times from as many as five days to as little as half a day. It plans to connect the system with those of other Association of Southeast Asian Nations members in 2017, paving the way for unified trade procedures.

The future of the TPP is unclear, with U.S. ratification still up in the air. But even if that does not happen, Vietnam is likely to explore other avenues for boosting trade. A free trade pact with the European Union is due to take effect in early 2018. 

With growth rates of nearly 7%, Vietnam is outperforming most other Southeast Asian economies. Still, it has yet to take full advantage of its long coastline. The country's maritime strategy could go a long way toward shoring up its position as a growth leader.

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