Construction Around the world: Vietnam

Jakarta, Indonesia – With the fast pace of technology and industrialization sector in Asia, each country’s construction industry has also developed through time. Vietnam is not an exception. Axis Capital Group, a construction company based in Singapore and is delivering high-quality heavy equipment created an overview for the latest in Vietnam’s construction industry.

According to Compound Annual Growth Rate (CAGR), the Vietnamese construction industry recorded a compound annual growth rate of 16.12% during the review period from 2009-2013. However, industry growth slowed from 19.7% in 2011 to 7.0% in 2013, due to a slump in the property market, a banking system characterized by non-performing loans (NPLs) and a sluggish real estate sector. Nevertheless, industry outlook is favorable, due to the government’s focus industrial and residential Construction. Expansion in the tourism and retail sectors, coupled with investments in infrastructure projects, will support industry growth. The industry’s output is therefore expected to record a nominal CAGR of 11.43% over the forecast period (2014−2018).

The Vietnam construction industry has considerably developed since 1986 as a result of “Doi Moi” or all-round renovation process, stepping in the general development trend and the process of gradual globalization and regionalization. However, despite the pace of economic reforms, obstacles and risks have continued to plague the construction industry. A study from CAGR shows factors causing the failure of the construction projects in the country:

1. disregard of the significance of project planning process and project planning,
2. lack of experience in executing complicated project,
3. poor design capacity and frequent design changes,
4. lack of knowledge and ability in managing construction projects
5. lack of financial capacity of owner,
6. poor performance of contractors,
7. lack of a systematic approach to managing the project and entire organization,
8. corruption and bribery in construction projects,
9. the delays in payment, and
10. Economic volatility and high inflation.

The study further provides insights on the factors contributing to the failure of construction projects across the Vietnam construction sector. Construction spending in the country rose up to 6.8% annually, second to China in AECOM report 2014. Construction market has also been increasing to 50% in 2004 despite the conflicts and complaints that have been filed against construction sector in the country while its profitability is almost 80%. It is also suggested that along with Indonesia, It is suggested that Vietnam is expected to exhibit increasing market openness over the next 12 months.