Vietnam

Population Population 86.16 mn Urban population 28% Population under 15 26% Population 65 and over 7% Average annual growth rate (2005 to 2008) 1.24% Geography Land area 331,689 km2 Agricultural area 28% Capital city Hanoi Population of capital city 6.1 mn Economy Monetary unit Vietnamese Dong (VND) Exchange rate (average fourth quarter 2008) the pound sterling VND 27,076 the US dollar VND 17,195 the euro VND 22,667

the yen x 100 VND 17,912 Average annual inflation (1999 to 2008) 6.4% Gross Domestic Product (GDP) VND 1,478,695 bn GDP per capita VND 17,162,000 Average annual real change in (GDP) (1999 to 2008) 7.2% Final consumption as a proportion of GDP 70.9% Investment as a proportion of GDP 43.1% Construction Gross value of construction output VND 95,964 bn Net value of construction output N/A Net value of construction output as a proportion of GDP (1999 to 2008)

6.12%

THE CONSTRUCTION INDUSTRY

Construction Outlook

Notwithstanding the sub-prime market concerns of 2007 and their subsequent manifestation into a global financial crisis during 2008, Vietnam has continued to enjoy construction growth during 2007, however growth has been modest during 2008. It is predicted that government spending will increase during 2009 primarily on the back of Official Development Assistance (ODA) invested projects and as consequence a level of construction growth will be exhibited within the infrastructure sector. Bank base rates were hiked up by 2.5% during 2008 to a peak of 13.5% and commercial lending rates are currently around 20%+. The base rate was lowered in October to 12% and further reductions are anticipated in 2009. Reductions in the Base lending rate should allow a reduction of commercial lending rates and this should help increase the flow of private domestic capital. Construction inflation costs have been considerable in 2008 arising largely as a consequence of the increases in international commodity prices (especially steel). Prices of many commodities are now reducing globally and this will reduce prices in the Vietnam Construction market accordingly. Construction costs will be lower in 2009 and this should attract some of the available domestic capital in to the property markets. The international demand for commodities is not the only significant factor affecting construction inflation, domestic demand can also have a significant effect upon construction inflation. The construction market within Vietnam is relatively small scale compared to its regional neighbours and consequently relatively small shifts in demand can culminate in erratic fluctuations of tender prices which tend to “spike” depending on the timing of the tender period. There are little reliable government hard data or tender price indices available at present and developers looking to receive competitive bids need to consider strategically issuing tender documents at the optimal time but balanced against the perceived market demand for the facility at completion

Construction Output

Development in all sectors has slowed during 2008 due to fiscal measures (namely interest rate increases) which have been implemented to reduce both inflation and the balance of payment deficit. It is further anticipated that Foreign Direct Investment will be slow during 2009 as consequence of the current global liquidity problems. Notwithstanding and as explained above interest rate reductions in 2009 should stimulate some local investment and will lower construction costs. ODA investment should help infrastructure growth. Construction output data in Vietnam are not reliable due to the nature of the political system; transparency is cited as a major hurdle for the Vietnamese Government to overcome. The three components of construction output are; state funded, local private funded and international investment. There are difficulties in

measuring and defining construction output and even in more regulated economies private local investment in construction figures are not discernable. The usual split is one third for each component so US$4 billion (2007) for state projects would equate to circa US$10 billion to US$12 billion for all components of construction output. Interestingly the construction output expressed as a % GDP for more developed nations in South East Asia is 12% to 15% and for Vietnam the figures is circa 6% to 7%. The construction output figures therefore demonstrate a real growth of 12% in 2007. Other statistical indicators such as cement and steel production show year-onyear growth of 11% and 5% respectively which are in line with the construction output statistics.