Port escapes storm

illustration photo

>> Investors look to push up Lach Huyen port

>> Lach Huyen port close to reality

After three years of negotiations, in what is a landmark agreement, Japan’s Molnykit Company and Vietnam’s Vinalines last week inked a memorandum of understanding to set up a public-private partnership (PPP) joint venture. The venture will have chartered capital of $30 million with Vinalines holding a 51 per cent stake.

The deal will see the building of two berths at Lach Huyen port under PPP. Estimated capital for the project is around $320 million. “This is a milestone as the first PPP seaport project in Vietnam,” said Ngo Thinh Duc, Deputy Minister of Transport.

Located in Haiphong city, about 100 kilometres northeast of Hanoi, Lach Huyen deep seaport is a crucial for the handling of imports and exports in the northern key economic zone. The project is also expected to ease congestion at Haiphong ports which are the main gateway for imported and exported goods in northern Vietnam.

Vietnam Maritime Administration forecasted that in 2012, the demand for cargo handling at Haiphong ports would be 45 million tonnes while the ports’ current capacity is only 30 million tonnes per year. Lach Huyen deep seaport is expected to become operational by 2015 with annual capacity of 60 million tonnes.

Molnykit Company is an entity representing Mitsui O.S.K Lines, Nippon Yussen Kaisha and Itochu, which the Japanese government introduced to join this first ever PPP seaport project in Vietnam.  
Nguyen Canh Viet, general director of the state-owned Vinalines, said both sides had hammered out an agreement for the project despite what were initially large differences over capital arrangement and risk sharing mechanisms.

One of the negotiation deadlocks was that the Japanese partners had demanded the Vietnamese government commit to purchase the project in case the joint venture makes a loss.

“The Japanese partners later quitting this demand was a breakthrough for the joint venture to take shape,” said Viet. The two berths are designed to accommodate 100,000 dwt vessels with annual handling capacity of six million tonnes.Le Trieu Thanh, deputy general director of Vinalines, said JBIC had agreed to loan the joint venture $203 million for the two berths at Lach Huyen port.

Construction of the first berth will be completed in 2014. It will come online the same year while the second berth will go live in 2015. These two births are Component B of Lach Huyen port. The Vietnamese government will invest around $821 million to build Component A – or infrastructure comprising channels, the waterfront and breakwaters.

This component will be funded by Japan’s official development assistance and the Vietnamese government’s corresponding capital. Lach Huyen port is Vietnam’s second PPP project. The first was the Dau Giay-Phan Thiet expressway in southern Vietnam with the participation of Bitexco Group and the International Financial Corporation, a member of World Bank Group.