Japan in push to build infrastructure in Vietnam

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Tokyo’s overseas aid agency is to team up with Japanese companies to build a Y140bn ($1.7bn) port in northern Vietnam and is considering a possible Y300bn project to develop a large airport to serve the southern commercial hub of Ho Chi Minh City.

The port project will be one of the first public-private partnership deals in Communist-ruled Vietnam, underscoring Tokyo’s determination to make better use of state financing to win its companies a bigger role in infrastructure development by Asian neighbours.

Officials cite data suggesting that in Asia alone, spending on electricity provision, transport, telecoms and water sanitation will total about $750bn a year over the next decade.

The Japan International Co-operation Agency expects to sign an agreement before the end of April for the first tranche of what is planned to be Y120bn in loan financing for development of the Lach Huyen Port, a Jica official said.

The deepwater port, which will be built just over 100km east of the capital Hanoi, is meant eventually to replace the nearby port city of Haiphong as the gateway to northern Vietnam.

A Japanese consortium including trading house Itochu and shipping groups Nippon Yusen KK and Mol would invest a further Y20bn in the project through a joint venture to be formed with Vietnam National Shipping Lines, the official said.

Japan’s ruling Democratic party has pledged to increase dramatically the role government plays in promoting Japanese companies’ interests overseas, a mission that Naoto Kan, the prime minister, has described as a recreation of “Japan Inc”.

As part of the effort, Tokyo last year allowed Jica to resume making private sector-oriented overseas investments and loans after an eight-year hiatus, a move officials hope will create business opportunities while also fuelling infrastructure development that will promote regional economic growth.

Jica recently launched a feasibility study on the development of Long Thanh International Airport near Ho Chi Minh City, another public-private project the Jica official said could involve more than Y300bn in loans and investment.

The study should be completed by early 2012, the official said.

The potentially transformative Long Thanh and Lach Huyen projects have been under discussion for a number of years but progress has been held up by the challenge of securing significant funding during a difficult period for the Vietnamese and global economies.

Japan is keen to build closer economic ties with Vietnam, which officials say is badly in need of the infrastructure expertise boasted by Asia’s most advanced major economy.

After personal lobbying by Mr Kan last year, Vietnam agreed to use Japanese suppliers for two civil nuclear reactors. The two countries also agreed to jointly develop Vietnamese sources of rare earths, helping Japan to reduce its dependence on Chinese supplies of these minerals which are needed to make key components for mobile phones and hybrid cars.

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