Vietnam Expressway Development: Better Access to Capital Sources Needed

By borrowing capital from domestic and international credit institutions, after only four years, VEC has built relationships with major Vietnamese and international partners like the Asian Development Bank (ADB), the Japan International Cooperation Agency (JICA), the World Bank (WB), Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), Maritime Commercial Joint Stock Bank (Maritime Bank), and Global Petro Joint Stock Commercial Bank (GP Bank). Notably, with the finance from ADB, VEC has created its own position and strength and opened arteries for the Vietnamese economy.

In 2009, the Government issued Decision No. 1734/QD-TTg, the “Plan for Vietnam Highway Network Development to 2020 and beyond,” and defined the core role of VEC in the process of building the highway system. This was an important milestone in the Vietnamese highway system development for which VEC was responsible and was also the basis on which VEC outlines strategic highway development plans for the period towards 2020 and beyond.

 

Mr Nguyen Van Nhi, Deputy General Director of VEC, said: “VEC is proud of the tasks we have been assigned, but they are also very challenging. Particularly, when dealing with pilot and pioneering models, we have to both develop those models in the framework of prevailing policies for normal models and have to take down many barricades to deal with peculiar mechanisms for special models.”

 

At present, VEC is confronting new challenges: Highway investment demands a huge amount of capital while revenues from traffic tolls are limited and payback time is very long. Thus, borrowing the full capital for expressway investment is a grave risk and the funding is a real difficulty. On the other hand, preference policies for highway construction are not attractive enough to increase the involvement of more sources of capital. Hence, this challenge ought to be taken into consideration by the State and solved by specific mechanisms to boost the attractiveness of highway development investment. Another drawback is the problematic land clearance polices in many provinces, due to perceptions of local people and authorities who think of VEC projects as commercial projects, leading to more difficulties in this process. “But, VEC is actively coordinating with local people and authorities to troubleshoot this problem and propose solutions to the Government to fulfil its role and responsibility of building traffic arteries for Vietnam,” said Mr Nhi.

Before opportunities and challenges, VEC has constantly sought partners which are capable of and committed to long term investments. By borrowing capital from domestic and international credit institutions, after only four years, VEC has built relationships with major Vietnamese and international partners like ADB, JICA, WB, Vietinbank, Maritime Bank, and GP Bank.

 

ADB is a hard-to-approach credit channel. However, the bank is now a major credit partner of VEC. Speaking of this matter, Mr Nhi said: “ADB operates with many criteria, including support for the stable and sustainable development of countries in all life and social aspects like infrastructure and social welfare. VEC is one of assigned investors of national highways which have high stability, sustainably and serve social demands, because expressway systems are considered principal arteries and driving forces of socioeconomic development. Thus, it suits and satisfies ADB’s operating criteria.”

 

VEC is currently receiving ADB credit for three freeways. The 244-km Noi Bai - Lao Cai expressway costs US$1,249 million in total, of which ADB funds US$1,096 million. The project is underway, on schedule and expected to open for traffic from 2013. The 56-km Ho Chi Minh City - Long Thanh - Dau Giay highway demands a total investment of US$932.4 million, of which US$410.2 million is sourced from ADB. The project was commenced in the second quarter of 2009 and is still under construction. The ADB’s technical assistance project for Hanoi -Lang Son, Ha Long - Mong Cai, and Ben Luc-Long Thanh thoroughfares is US$26 million out of US$30.8 million in total for these roads.

 

In the coming time, VEC will continue analysing and proposing North-South main roads (Ninh Binh - Thanh Hoa, Nghi Son - Bai Vot, etc.), highways running towards the centres of Hanoi and Ho Chi Minh City, and projects belonging to the Mekong Greater Sub-region development programme which bear huge economic and social significance. Mr Nhi expects that ADB will continue its support to empower VEC leverage to fulfil its objectives.”