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TABLE OF CONTENTS
1. 2. 3.
OVERVIEW.............................................................................................................. 3 APPROXIMATE BUILDING COST ......................................................................... 5 AVERAGE DAILY LABOUR COST IN PRIVATE SECTOR CONSTRUCTION PROJECT IN VIETNAM ........................................................................................... 6
4. 5. 6.
AVERAGE MATERIAL COST TREND IN VIETNAM .............................................. 7 STATUS OF VIETNAM PRICE MOVEMENTS ........................................................ 9 GOVERNMENT'S SUBSIDIZED MATERIALS ...................................................... 10
OVERVIEW
Notwithstanding the events of the last twelve months, it would seem that the nation states are not reverting back to the ideologies of command economics and import substitution. The Western economies conscious of their large fiscal deficits are beginning to again to talk of small government and privatisation. We are now beginning to observe the displacement of ideology by economic reality, in essence, state intervention is again giving way to free markets to manage both crisis and growth. It would seem the maxim to be ideological is to preconceive reality (Irving Kristol b. 1920 d. 2009) is a maxim well practised within the modern economic environment. Previously this paper had expressed concerns with regard to the risk of global trade protection and the clear impact this would have had especially upon developing countries and export led developed countries such as those within South East Asia. Notwithstanding the WTO Doha deadlock of 2008 and the clear depreciation of global foreign direct investment we are not witnessing waves of trade tariff hikes. In essence the continued development of free trade (possibly bilateral rather than multilateral) will continue to provide a powerful booster to global economic growth in 2010 and beyond. Vietnams economy over the past 10 months of 2009 has generally fared better than most both in terms of GDP growth (forecast in 2009 as +3%) and also with regard to its fiscal management. During 2008 Vietnam was experiencing Consumer Price Inflation (CPI) of over 25%, Commercial Bank Lending of over 20% and significant Vietnam Dong devaluations. Such macro factors (combined with external factors such as commodity hikes and global credit uncertainty) invariably led to major construction inflation during 2008 and ultimately the cooling off of prices during late 2008 and early 2009. The Vietnam economy during 2009 has not had an easy ride, Foreign Direct Investment (FDI) has dropped 70% when compared with 2008 this is no worse or better than global statistics on FDI however commodity export led countries such as Vietnam do remain particularly vulnerable to such investment drops. Vietnam initiated its own fiscal stimulus package in 2009 (over USD$ 1 Billion) and a large portion of this package comprised an interest rate subsidy that has actually stimulated the private sector, most notably in commercial development. Fears of further VND devaluation have temporarily subsided however the Vietnam trade deficit is widening and this will invariably put pressure on the government to consider devaluation. The Vietnam government has recently announced that it will continue to maintain interest rates subsidies through fiscal
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OVERVIEW
measures further into 2010 and accordingly this is like to lever further pressure on a VND devaluation. Construction prices during Q3.09 have increased around 1% since the last quarter, in general this is attributed to an increase in new tenders for projects notably in South Vietnam. The increase in costs however is not pronounced as contractors continue to fill their order books. Construction output had dropped significantly in 2008 and we are not expecting any notable increase in 2009, notwithstanding, the fact that output has stabilised must be seen as positive. Although FDI has dropped the market has remained stable due to Local Private Investment which has increased as a function of interest rate subsidies as derived through the government fiscal stimulus programme. Material prices have generally remained static except for oil which has followed the trend in global price dynamics. Labour prices are generally rising in line with CPI however as yet they do not represent a significant price sensitive item within the construction cost equation. During the final quarter of 2009 expect further drops in the cement price arising from over supply, it would seem that price drops are already being experienced within the Ready Mixed Concrete market. Also expect steel prices to increase in line with relative iron ore appreciation globally. Steel and oil prices will continue to remain volatile and the current global price rises of these commodities is as much to do with restocking rather than production demand. In conclusion we see construction prices moving slightly upwards during the remainder of 2009. In 2010 we suspect a higher level of ODA disbursement into infrastructure and continued interest rebates which will fuel the local private development sector. We suspect FDI to remain sluggish in 2010 however certain micro reforms in some government sectors may allow for the opening up of areas such as the telecommunication market and retail this could help attract much needed FDI.
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Specification 1. Average Standard Apartments to be 30-50 storey 60-90 m2 per flat. 2. Average Luxury Apartment to be 30-50 storey 100-150 m2 per flat. 3. Apartments and Houses include air conditioning, kitchen cabinets, kitchen cooktop, exhausted hood but exclude loose furniture and home appliances
OFFICE /COMMERCIAL Prestige Offices, High Rise Average Standard Office, High Rise Shopping Centers
Specification 1. Offices based on buildings 20-30 storeys high with floor plans minimum 1000m2per level. 2. Shopping centres and average standard offices exclude finishes, A/C ducting and light fittings to tenant areas. 3. Prestige offices are fitted with raised floor, suspended ceiling, A/C ducting and light fittings to tenant areas.
INDUSTRIAL Light Duty Flatted Factories Heavy Duty Flatted Factories & Warehouses Single Storey Conventional Factories Owner Operated Factories, Low Rise
Specification 1. Flatted factories and industrial office buildings exclude manufacturing equipment, special services provisions, air-conditioning and electrical distribution system to tenant areas.
HOTEL Resort Hotel 03 Star Budget Hotel inclusive of F.F.&E 05 Star Budget Hotel inclusive of F.F.&E
Specification 1. F.F.&E, includes interior decoration and loose furniture etc. but excludes hotel operated equipment costs (e.g. cutlery, crockery, linen, uniform, etc.)
OTHER Basement Car Parks (< 3 levels) Elevated Car Parks (< 4 levels) Primary and Secondary schools Student Hostels Sport Club inclusive of F.F.&E
Q3 09 520 600 285 390 410 430 430 540 650 745
Specification 1. Underground car park cost including temporary steel works and bottom-up Note 1. 2. 3. 4. The costs for the respective categories given above are averages based on fixed price competitive tenders. It must be understood that the actual cost of a building will depend upon the design and many other factors and may vary from the figure shown. The costs per square metre are based on Constructions Floor Areas measured to the outside face of the external walls/external perimeter including lift shafts, stairwells, balconies, plant rooms, water tanks and the like. All buildings are assumed to be built on flat ground, with normal soil and site condition. The cost excludes site formation works, external works, land cost, professional fees, finance and legal expenses. The standard for each category of building vary from country to country and do not necessarily follow those of Vietnam.
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AVERAGE DAILY LABOUR COST IN PRIVATE SECTOR CONSTRUCTION PROJECT IN VIETNAM Q3 2009
AVERAGE DAILY COST (USD)
Description General Worker Concretor Bar Bender and Fixer Carpenter (formwork) Plumber Electrical Fitter (incl. Electrician) Brick layer Metal Worker Construction Plant Mechanic
Apr-09 8.71 9.82 10.54 9.82 14.03 14.03 11.23 11.23 20.34
May-09 8.74 9.86 10.58 9.86 14.09 14.09 11.27 11.27 20.42
Jun-09 8.79 9.92 10.64 9.92 14.17 14.17 11.34 11.34 20.54
Jul-09 8.83 9.97 10.69 9.97 14.24 14.24 11.39 11.39 20.64
Sep-09 8.91 10.06 10.78 10.06 14.37 14.37 11.49 11.49 20.82
12
11
10
8 1-Apr 1-May 1-Jun General Worker 1-Jul 1-Aug 1-Sep Brick layer
General Worker
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Excluded : 1. 2. Labour, plant, transport, wastage and other incidentals (and is ex-works price) Tax (VAT, Import tax)
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Steel Bars
1.5 5 4 USD /BAG USD /KG 1 3 2 1 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 0
0.5
2009
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 2008 RMC M20 Grade RMC M35 Grade 2009 RMC M40 Grade
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 2008 Portland Cement (PCB40) 2009
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150%
140%
130%
120%
110%
100% 2005 J-07 F-07 M-07 A-07 M-07 J-07 J-07 A-07 S-07 O-07 N-07 D-07 J-08 F-08 M-08 A-08 M-08 J-08 J-08 A-08 S-08 O-08 N-08 D-08 J-09 F-09 M-09 A-09 M-09 J-09 J-09 A-09 S-09 CPI in Hanoi CPI in HCMC 100 109 114 111 112 113 114 115 116 116 117 119 124 128 134 135 137 145 147 148 151 149 148 146 144 146 149 147 148 149 151 152 151 153 100 110 115 109 112 114 115 115 115 116 117 119 126 126 134 135 138 147 147 146 151 148 147 145 142 146 150 148 149 150 150 153 151 154
CPI in whole country 100 109 111 111 111 112 113 114 115 116 116 118 121 124 129 133 135 141 144 145 148 148 148 147 146 146 148 148 148 149 149 150 151 152
AVE PRICE INDEX HOUSING AND CONSTRUCTION MATERIALS for the whole country and major cities of Hanoi and Ho Chi Minh
150%
140%
130%
120%
110%
100% 2005 J-07 F-07 M-07 A-07 M-07 J-07 J-07 A-07 S-07 O-07 N-07 D-07 J-08 F-08 M-08 A-08 M-08 J-08 J-08 A-08 S-08 O-08 N-08 D-08 J-09 F-09 M-09 A-09 M-09 J-09 J-09 A-09 S-09 In Hanoi In HCMC 100 109 114 109 111 113 114 117 116 116 118 120 128 127 130 133 136 142 149 148 150 148 147 145 142 146 151 147 147 149 153 154 153 153 100 107 112 110 113 113 116 115 113 117 118 121 126 128 130 137 137 142 148 146 151 146 145 145 144 147 150 149 149 151 152 153 152 153
In Whole country 100 111 113 113 114 115 117 118 118 119 120 123 127 130 132 137 140 142 145 147 150 150 148 143 137 138 141 141 142 143 145 148 149 151
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