DAVIS LANGDON & SEAH VIETNAM

QUARTERLY CONSTRUCTION COST REVIEW IN VIETNAM

Q2 - 2011

Global construction consultants

Cost Management | Project Management | Legal Support Services | Specification Consultancy | Specialist Cost Engineering Consultancy Services | Feasibility Studies

TABLE OF CONTENTS

OVERVIEW APPROXIMATE BUILDING COST IN VIETNAM AVERAGE DAILY LABOUR COST MATERIAL COST TREND IN VIETNAM STATUS OF VIETNAM PRICE MOVEMENTS GOVERNMENTS SUBSIDIZED MATERIALS

OVERVIEW

Whilst sovereign debt seems to be the primary issue concerning world economics at present, it would seem from an international perspective that this scenario has already played out in Vietnam and as a function of reduced Foreign Direct Investment (FDI). As this paper has frequently stated, FDI commitments had reduced markedly since the end of 2008 however FDI disbursement as a function of the reduced FDI commitments have been notably depreciating over the past 12 months. Reduced FDI is a key reason why construction grown in 2011 will most likely be less than in 2010 but it is certainly not the only contributing factor. Fiscal measure currently being adopted by the Government and in an effort to curtail the growing trade deficit are having a significant effect on; infrastructure, property and ultimately construction. High Central Bank and Commercial Rates are affecting both demand and supply for property in terms of buyers and in terms of project start ups. Not only do the high interest rates increase the cost of borrowing to house owners and businesses but they also have detrimental impacts upon project feasibilities and hence reduce new developments. Paradoxically construction prices have again risen significantly in the second quarter of 2011 and this is attributed to domestic material price rises of namely cement and aggregate and this in turn has affected the prices of ready mixed concrete. In the second quarter of 2011 construction prices have generally risen significantly in all sectors and this is attributed to material increases. Notable material rises in the last quarter are as follows: Portland Cement (PCB40) 40mm aggregate 20mm aggregate Yellow sand Concrete blocks Structural Steel RMC M20 Grade RMC M35 Grade RMC M40 Grade Bags Cum Cum Cum Pcs MT Cum Cum Cum 12.4% 21.8% 17.4% 3.5% 22.5% 5.7% 5.5% 6.6% 6.4%

The prices of cement and aggregate are government controlled but such prices would seem unsustainable in the current market and accordingly we consider such material prices are likely to re adjusted downward over the next six months. We do expect steel, namely rebar, prices to increase in the third quarter and this would follow the current international trajectory of steel prices.

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APPROXIMATE BUILDING COST IN VIETNAM Q2/2011

US$ PSM, CONSTRUCTION FLOOR AREA
RESIDENTIAL Detached Houses and Bungalows Average Standard Apartment, High rise Luxury Apartments, High rise Terraced Houses Q1 10 485 615 780 400 Q2 10 490 620 788 403 Q3 10 497 629 808 408 Q4 10 507 642 815 417 Q1 11 520 655 835 425 Q2 11 520-620 662-782 850-980 439-496

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 Q1 10 885 720 665 Q2 10 900 730 675 Q3 10 913 740 684 Q4 10 930 757 697 Q1 11 950 770 715 Q2 11 926-1,156 787-907 720-835

Specification 1. Offices based on buildings 20-30 storeys high with floor plans minimum 1,000m2 per level. 2. Shopping centres and average standard offices exclude finishes, A/C ducting and light fittings to tenant areas, standard faade. 3. Prestige offices are fitted with raised floor, suspended ceiling, A/C ducting and light fittings to tenant areas, standard faade. INDUSTRIAL Light Duty Flatted Factories Heavy Duty Flatted Factories & Warehouses Single Storey Conventional Factories Owner Operated Factories, Low Rise Q1 10 270 385 385 375 Q2 10 280 405 405 395 Q3 10 284 411 411 401 Q4 10 290 417 417 410 Q1 11 295 425 425 425 Q2 11 253 400 410 520 410 520 411 516

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 Q1 10 1,190 1,440 1,715 Q2 10 1,200 1,455 1,730 Q3 10 1,217 1,475 1,754 Q4 10 1,240 1,502 1,787 Q1 11 1,270 1,540 1,830 Q2 11 1,246 1,536 1,559 1,809 1,888 2,118

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 Q1 10 575 350 430 500 710 Q2 10 610 353 435 503 713 Q3 10 619 357 441 510 723 Q4 10 632 367 450 520 737 Q1 11 650 390 470 530 755 Q2 11 661 751 409 469 493 518 522 647 786 866

Specification Underground car park cost including temporary steel works and bottom-up Note 1. 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. 2. 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. 3. 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. 4. 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 Q2/2011

Description General Worker Concretor Bar Bender and Fixer Carpenter (formwork) Plumber Electrical Fitter Brick layer Metal Worker Construction Plant Mechanic

Jan 11 10.32 11.65 12.49 11.65 16.64 16.64 13.31 13.31 24.12

Feb 11 10.55 11.90 12.76 11.90 17.00 17.00 13.60 13.60 24.64

Mar 11 10.77 12.15 13.03 12.15 17.36 17.36 13.89 13.89 25.16

Apr 11 11.17 12.60 13.51 12.60 17.99 17.99 14.39 14.39 26.08

May 11 11.42 12.88 13.81 12.88 18.39 18.39 14.71 14.71 26.66

Jun 11 11.54 13.01 13.95 13.01 18.59 18.59 14.87 14.87 26.94

(Source: DLS Database)

LABOUR COST

60 Daily cost (USD) 50 40 30 20 10 0 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11

General Worker Bar Bender and Fixer

Concretor Brick layer

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AVERAGE MATERIAL COST TREND IN VIETNAM Q2/2011

AVERAGE PRICE (USD) Excluded: 1. Labour, plant, transport, wastage and other incidentals (and is ex-works price). 2. Tax (VAT, Import tax).

2011 NO Description Unit ex-rate 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Portland Cement (PCB40) Mild steel round bars High tensile steel bars 40mm aggregate 20mm aggregate Yellow sand Clay brick units Concrete blocks Structural Steel Clear Float Glass Laminated Glass Tempered Glass 10mm RMC M20 Grade RMC M35 Grade RMC M40 Grade Diesel Petrol (Mogas 92) Hardwood Plywood Local Homogeneous floor tiles Emulsion paint Bags Kg Kg Cum Cum Cum Pcs Pcs MT M2 M2 M2 Cum Cum Cum Lit Lit m3 m2 m2 Lit Jan 19,500 3.25 0.78 0.77 6.44 8.63 9.74 0.23 0.53 885.79 9.13 22.56 26.67 46.15 53.15 55.95 0.75 0.84 692.31 10.21 9.62 4.36 Feb 20,395 3.30 0.79 0.75 6.15 8.25 9.32 0.22 0.51 936.06 9.32 22.95 27.46 44.13 50.82 53.49 0.89 0.95 676.64 10.93 9.19 4.17 Mar 20,874 3.25 0.79 0.77 6.01 8.06 9.34 0.21 0.49 914.58 9.10 22.42 26.83 46.61 53.18 55.76 0.87 0.92 661.11 10.68 8.98 4.07 Apr 20,868 3.64 0.80 0.78 6.61 8.48 9.58 0.21 0.54 958.41 7.24 21.47 26.84 47.92 59.71 62.30 1.01 1.02 642.13 10.69 8.99 4.98 May 20,700 3.65 0.80 0.78 7.32 9.46 9.66 0.21 0.54 966.18 7.78 21.84 27.05 49.19 56.67 59.32 1.02 1.03 647.34 10.77 9.06 4.57 Jun 20,645 3.66 0.81 0.79 7.34 9.48 9.69 0.21 0.55 968.76 7.41 21.51 27.13 49.32 56.82 59.48 1.02 1.03 721.72 10.80 9.08 4.58

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Portland Cement (PCB40)

4.00 1.00

Steel Bars

USD /BAG

USD /KG Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2010 2011

3.00

0.50

2.00

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2010 Mild steel round bars (6-20mm) Portland Cement (PCB40) High tensile steel bars (10-40mm) 2011

Ready Mixed Concrete

70.00 60.00 USD /CUM 50.00 40.00 USD /pcs 0.40 0.60

Clay Brick + Concrete

30.00
20.00 10.00 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2010 RMC M20 Grade RMC M35 Grade 2011 RMC M40 Grade

0.20

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2010 Clay brick units 2011 Concrete blocks

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STATUS OF VIETNAM PRICE MOVEMENTS

CONSUMER PRICE INDEX for whole country and major cities of Hanoi and Ho Chi Minh

260% 240% 220% 200% 180% 160% 140% 120% 100%

HN

CONSUMER PRICE INDEX

2005

Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11

100.00 146.96 149.72 147.90 148.71 149.53 151.35 152.56 151.84 152.86 153.03 154.65 158.24 159.15 164.37 166.84 166.74 167.88 168.61 169.13 169.78 173.65 177.61 184.41 191.50 198.11 206.26 215.80 230.27 239.50 245.04

HCMC 100.00 146.60 150.18 148.04 149.25 150.11 150.89 153.06 151.46 152.91 152.86 155.91 159.34 159.11 162.88 165.38 166.00 167.25 168.20 168.16 168.12 171.97 174.55 180.87 187.41 192.59 199.78 208.59 222.33 232.67 236.84 VN 100.00 146.54 148.25 148.00 148.52 149.17 149.99 150.77 151.13 152.07 152.63 153.47 155.00 157.11 160.19 161.39 161.62 162.06 162.42 162.52 162.89 165.02 166.75 169.85 173.21 176.22 179.90 183.80 189.90 194.10 196.22

(Source: GSO of Vietnam)

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STATUS OF VIETNAM PRICE MOVEMENTS

PRICE INDEX: HOUSING AND CONSTRUCTION MATERIALS for whole country and major cities of Hanoi and Ho Chi Minh
HOUSING & CONSTRUCTION MATERIALS
280%

260%

240%

220%

200%

180%

160%

140%

120%

100% 2005 Jan-09 Feb-09Mar-09Apr-09May-09Jun-09 Jul-09 Aug-09Sep-09 Oct-09 Nov-09Dec-09 Jan-10 Feb-10Mar-10Apr-10May-10Jun-10 Jul-10 Aug-10Sep-10 Oct-10 Nov-10Dec-10 Jan-11 Feb-11Mar-11Apr-11May-11Jun-11 HN HCMC VN 100. 100. 100. 146. 147. 138. 151. 150. 141. 147. 149. 141. 147. 149. 142. 149. 151. 143. 153. 152. 145. 154. 153. 148. 153. 152. 149. 153. 153. 149. 153. 153. 149. 154. 154. 149. 158. 158. 151. 159. 160. 153. 163. 163. 156. 167. 166. 158. 170. 170. 162. 174. 173. 164. 174. 175. 165. 174. 174. 164. 173. 176. 164. 177. 179. 166. 182. 183. 167. 189. 189. 170. 199. 198. 175. 205. 206. 177. 210. 211. 178. 221. 221. 185. 238. 238. 193. 251. 250. 199. 255. 253. 201.

(Source: GSO of Vietnam)

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GOVERNMENTS SUBSIDIZED MATERIALS

DIESEL PRICE in Vietnam market against the world price market

USD/Liter 1.25 1.20 1.15 1.10 1.05 1.00 0.95 0.90 0.85 0.80 0.75 0.70 0.65 0.60 0.55 0.50 0.45 0.40

DIESEL PRICE 2007 - 2011

Month World market VN market

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GOVERNMENTS SUBSIDIZED MATERIALS

GASOLINE PRICE in Vietnam market against the world price market

GASOLINE PRICE 2007 - 2011

USD/Liter 1.25 1.20 1.15 1.10 1.05 1.00 0.95 0.90 0.85 0.80 0.75 0.70 0.65 0.60 0.55 0.50 0.45 0.40 Month World market VN market

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