Seeking Funds for Transport Infrastructure Development

The seminar brought together over 200 specialists from State agencies, investors and international organisations interested in transport infrastructure development in Vietnam. Speakers presented 16 keynote presentations at the workshop, focusing on four major topics: (1). Capital for transport infrastructure development in Vietnam: Current situations and problems; (2). Strategic orientation and planning of future transport infrastructure development: Choosing priorities and roadmaps; (3). Capital demand for future transport infrastructure development: Issues; and (4). Socialisation of transport infrastructure development investment: Models, principles and solutions for execution.

 

As a developing country, Vietnam has a huge demand for synchronous transport infrastructure to spur economic development. According to Dr Tran Dinh Thien, Director of the Vietnam Institute of Economics, to successfully achieve the national industrialisation and modernisation strategy, Vietnam needs modern transport infrastructure but its funding source for infrastructure development is currently getting scarce. The development of industrial centres requires the development of a modern transport infrastructure system to lay the foundation for developing logistics services and enhancing corporate competitiveness of businesses. Therefore, transport infrastructure construction must ensure a seamless connectivity with regional economies like GMS and ASEAN and connect industrial centres with world markets.

 

"World economies are being reshuffled after the economic crisis and Vietnam has moved to a new development level which has led to a decline in external capital inflows for infrastructure development in general and transport infrastructure development in particular," he said.

 

To seek investment funds for transport infrastructure, Mr Tran Bac Ha, President of BIDV, said that it is necessary to develop a mechanism for domestic and foreign investment fund and allow State Capital and Investment Corporation (SCIC) to invest in infrastructure projects. It is also important to consider setting up financial companies or assigning local financial institutions to act as lead coordinators in raising funds from other sources and loans for transport infrastructure projects.

 

Mr Nguyen Danh Huy, Director of Public-Private Partnership (PPP) Department under the Ministry of Transport, said the demand for investment in transport infrastructure between 2016 and 2020 is VND1,015 trillion (US$45 billion) but the State Budget can provide about 28 percent of the sum needed. However, according to the public investment plan for the 2016-2020 period drafted by the Ministry of Planning and Investment, the State Budget can support only 7 percent of the demand or VND66 trillion (US$2.9 billion). Thus, attracting international and domestic private investment in the form of PPP will play an important role in transport infrastructure development.

 

BIDV also launched a number of solutions to attract capital sources like diversifying long-term capital mobilisation channels, specialising the service of transport infrastructure development investment, and reducing reliance on credit institutions. Meanwhile, Vietnam needs policies to facilitate and attract foreign investors to invest in transport infrastructure projects.

 

Dr Tran Dinh Thien said that Vietnam initially needs a detailed plan for developing infrastructure. This must include matters such as better connecting Vietnam to the Greater Mekong Sub-Region (GMS) and ASEAN by roads, railways, shipping and air, instead of only focusing on connecting with China and the GMS by existing transport networks.

 

Besides, Vietnam must promote the formation of AEC transport infrastructure development strategy which will serve as a strategic framework for each economy to regulate its own transport infrastructure development strategies, ensure connectivity, support infrastructure, and boost socioeconomic development of ASEAN economies. Furthermore, it is important to adjust steel and electricity development strategies to guarantee opportunities of electrifying rail transport sector.

 

BIDV President Tran Bac Ha also said, to have enough funds for transport infrastructure development needs by 2020, Vietnam must have policies to mobilise capital and balance capital sources, particularly the Government’s spending plans. State budget and official development assistance (ODA) capital will continue to play a driving role and become effective factors to draw social capital sources into transport infrastructure development. In case the country is unable to increase priority funds for transport infrastructure development, these sources must continue to contribute some 66 percent as earlier. Furthermore, social funds must contribute some 34 percent of total investment.

 

The demand for transport infrastructure development to serve economic development requirements is very urgent. Nevertheless, a sufficient development capital source is a hard-nut-to-crack issue since the State budget is limit and ODA grants ebb. Hence, according to experts at the workshop, Vietnam needs a law on PPP to provide a regulatory framework for private businesses to access and use ODA for transport infrastructure development.