this manufacturing hot spot is growing by leaps and bounds -- but an improvised approach to project management could hold it back
Ho Chi Minh City, Vietnam
BY SARAH FISTER GALE
Vietnam has growing pains.
Asia's newest manufacturing powerhouse boasts the world's ninth-fastest-growing economy, as an increasing number of manufacturers such as Samsung and Nike set up shop in the country. But there's a problem: Vietnam's ailing infrastructure can't support the rapid transformation. If it hopes to sustain growth between now and 2020, the country needs an estimated US$200 billion to build new roads, bridges, ports, power plants and other infrastructure, according to the United States Agency for International Development.
The infrastructure gap creates major project opportunities and challenges as Vietnam's government struggles to meet the demands of its nearly 91 million residents and a growing roster of manufacturers. Vietnam's government, foreign governments, global banks and private-sector organizations are pledging to fund infrastructure projects, but financing is only half the battle.
Vietnamese organizations must mature their project management practices to ensure the country's economy—and project environment—reaches the next level, says Phuc Dinh Cong, PMP, project engineer, Turner Construction, Hanoi, Vietnam. Organizations must attract and groom project talent to effectively navigate new regulations, mitigate risks and clear a massive project backlog, he says. Right now, project management tends to be improvised.
“Infrastructure is a bottleneck of the Vietnam economy,” Mr. Cong says. “Almost all projects are late, they're double or triple the original cost and a few are having quality issues. Advanced project management will help resolve this.”
Lured by the country's cheap labor, stable government and financial incentives, global organizations such as Intel, Nissan and Bridgestone have built factories in Vietnam throughout the current decade. Exports encompassing everything from shoes to smartphones accounted for an impressive 86.4 percent of Vietnam's GDP in 2014 (the latest figure available), according to the World Bank—up from 55 percent in 2004.
“Almost all projects are late, they're double or triple the original cost and a few are having quality issues. Advanced project management will help resolve this.”
—Phuc Dinh Cong, PMP, Turner Construction, Hanoi, Vietnam
There's no end to this growth in sight. The nearly finalized Trans-Pacific Partnership free-trade agreement creates even more incentives for manufacturers to ramp up production in Vietnam, and another wave of foreign direct-investment projects is on the way. For instance, Procter & Gamble Co. recently broke ground on a US$100 million Gillette razor plant in Binh Duong province, while Samsung will spend US$2 billion to boost the production capacity of its electronics plant outside Ho Chi Minh City.
Population (2015): 91.7 million
Size: 330,972 square kilometers (127,789 square miles)
GDP (2014): US$186.2 billion
GDP growth rate (2014): 6%
Primary industries: Agriculture, manufacturing
Gross national income per capita (2014): US$5,350
Sources: The World Bank, CIA World Factbook
“Vietnam is Southeast Asia's new growth hub for low-cost manufacturing,” says Rajiv Biswas, Asia Pacific chief economist, IHS Global Insight, Singapore. “Within just five years, the macroeconomic situation in Vietnam has improved considerably, but economic reforms will need to be sustained to maintain the high growth rate over the medium term.”
A glut of late and over-budget projects has ensued. The most common faults, such as land clearance disputes, poor resource allocation, lack of stakeholder cooperation and even safety issues, can be attributed to the lack of project management experience, Mr. Cong says.
For example, a US$2.5 billion project in Ho Chi Minh City to build a 19.7-kilometer (12.2-mile) urban commuter rail line has been delayed for 30 months because of land-acquisition and compensation challenges. Funded largely by the Japanese government and built through a joint venture of Japan's Sumitomo Corp. and Vietnam's Cienco 6, the project likely won't meet a 2020 deadline that already had been extended. And a highly publicized rail project in Hanoi built by China Railway Sixth Group has seen its budget balloon from an estimated US$553 million in 2008 to US$868 million, while suffering endless delays and several accidents, including a pedestrian who was killed by steel that fell from a crane.
The challenges are familiar to Hien Thi Nguyen, a Hanoi-based project consultant who is overseeing community engagement and education for more than 20 rural water and sanitation projects funded by the Asia Development Bank. She says many projects lack proper monitoring and stakeholder coordination. The reason? “Our education system for engineers focuses more on teaching technical rather than management knowledge,” Ms. Hien says.
More sophisticated training and a sharper focus on fundamental skills can elevate the project management culture and narrow the talent gap in Vietnam, Mr. Cong says. Although organizations train teams to navigate the legal restrictions that govern public-investment projects, they don't develop project talent knowledgeable in communication, risk management, scheduling and estimating skills. “They just talk about the laws,” he says. “They wait for risks to happen, then they try to deal with them.”
A light rail project in Ho Chi Minh City
Samsung Electronics launches a project at Saigon Hi-Tech Park last year.
Workers on a production line on the outskirts of Hanoi
PHOTO BY HOANG DINH NAM/AFP/GETTY IMAGES
Ms. Hien says project teams she works with rely heavily on local government contractors and receive project-management training in the form of classes, seminars and coaching. The project teams are establishing a provincial project management unit at the community level to establish a more formal planning and delivery process for all infrastructure projects. “Our goal is that they will learn to manage these projects by themselves,” she says.
“You have to localize your team both to lower costs, and to ensure you get buy-in from staff and local stakeholders.”
—Mark Olive, Arcadis, Ho Chi Minh City, Vietnam
Training for requirements management also is necessary. Worried that it can't contain urban development sprawl, Vietnam's government has introduced more stringent permitting and site-design regulations, says Mark Olive, general manager, global design and engineering firm Arcadis, Ho Chi Minh City, Vietnam. “Now there are many stages of project planning before you can even break ground,” he says.
Project managers constantly must keep all stakeholders updated so no decisions are based on outdated legislation, which can create project delays. To ensure that they have the right knowledge, project owners must effectively communicate with a variety of local and government stakeholders to secure building licenses, land ownership, permits and proof of concept, Mr. Olive says. “By keeping up to date with legislation and addendums, the project manager can ensure more timely approvals from the authorities,” he says.
Foreign companies can facilitate such engagement by partnering with local firms or hiring local talent—which also ensures the size and the scope of each project meets new rules, Mr. Biswas says. “Their regulations are complicated and always changing, so companies need to find experts who have a strong understanding of the Vietnamese system and how it operates,” he says. “There are a lot of opportunities but there is also a lot of bureaucracy. But many foreign multinationals have already invested in major projects in Vietnam for many years, and it will get easier over time.”
“Many foreign multinationals have already invested in major projects in Vietnam for many years, and it will get easier over time.”
—Rajiv Biswas, IHS Global Insight, Singapore
Mr. Olive says most of the Vietnamese talent on his teams lack experience with project management. “They come to us with solid engineering education and we train them in our project management methods,” he says. Despite the added training costs, hiring local talent has long-term benefits for project teams—and Vietnam, he says. “You have to localize your team both to lower costs, and to ensure you get buy-in from staff and local stakeholders,” he says.
Despite obstacles, the country's economic promise—and project management potential—is real, Mr. Cong says.
“The demand for projects and project management is for sure growing. The attitude has changed significantly. That's good news for Vietnam—and project management practitioners.” PM
We asked: What skills or training could help project managers in Vietnam reach the next level?
“Vietnamese project managers are weak at coordination, both horizontal and vertical, and monitoring. This is where they need training.”
—Hien Thi Nguyen, project consultant, rural water and sanitation project for Central Region, Asia Development Bank, Hanoi
“They need fully rounded experience and an understanding of modern practices in design, commercial management, planning, and health and safety. Soft skills such as interpersonal skills and sensitivity to multiple cultures are also very important.”
—Mark Olive, general manager, Arcadis, Ho Chi Minh City
“Communication management is very important. Having an IT system to organize and manage project information resources can help a lot.”
—Phuc Dinh Cong, PMP, project engineer, Turner Construction, Hanoi
Vietnam is growing quickly. These four projects aim to meet the needs of the country's nearly 100 million people.
RIDING THE RAIL
To reduce the glut of scooter traffic in Vietnam's largest city, the Ho Chi Minh City Management Authority for Urban Railways is building a US$2.5 billion light rail system. Japan is funding nearly 90 percent of the project, which will create a 19.7-kilometer (12.2-mile) line with 14 stations, including a four-level station at the city's Saigon Opera House. However, delays likely will push back its scheduled 2020 opening.
With energy shortages common throughout the country, the US$2.5 billion Vung Ang 3 1,200-megawatt coal-fired power plant in the central province of Ha Tinh, one of Vietnam's poorest areas, is sorely needed. The government formed a public-private partnership with Samsung's engineering unit, Samsung C&T, to build the plant. Construction is scheduled to begin in 2018, with commercial operation slated to start in 2022.
THIRST FOR CLEAN WATER
The Saigon Water Company will invest VND4.3 trillion in water quality projects in the Cu Chi district of Ho Chi Minh City over the next three years. The first phase, launched in 2015, will deliver a pumping network and underground water treatment stations to Cu Chi town and 10 surrounding communities. Water filtration devices also will be installed in 98,400 homes.
Construction could start as early as the end of this year for the US$2.5 billion Hon Khoai port in the southernmost province of Ca Mau. The port primarily would handle coal imports for power plants in the Mekong Delta region as well as oil and other commodities. Funding for the five-year public-private partnership project will rely heavily on loans from the Export-Import Bank of the United States.
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