The North - South Expressway scheme, which the Ministry of Transport has submitted to the Government, requires a total investment capital of VND230 trillion, including VND93 trillion from the State Budget, to build a 1,300-km highway from Hanoi to Ho Chi Minh City. This project has caught the attention of experts and the public. Transport Newspaper recently coordinated with the Ministry of Transport to open a workshop on this topic to collect expert advice and assessments.
Seeking foreign funds
What concerns the public most is the feasibility of the project when the investment capital is huge, coupled with a transparent and strict supervisory mechanism. An official from the Ministry of Transport said the ministry has met some 200 investors and 20 banks from other countries and gone to many countries to study, but most of them have expressed concern over the policy and revenue once implemented.
Mr Nguyen Danh Hy, Head of the PPP Committee under the Ministry of Transport, said, most highway projects have been carried out under the public–private partnership (PPP) form in recent years. But, PPP seems not to fit this enormous project, and foreign funding is thus a priority now.
Current regulatory mechanisms and policies are barriers to foreign investors to access this, he cited. If they want to invest in Vietnam, they must convert their currencies into Vietnamese dong to carry out the project and convert their revenues in local currency into foreign currencies to bring home. For this reason, in its request sent to the Government, the Ministry of Transport proposed suggesting clearing barriers to foreign investment funds to enable the transport sector to access this source.
Mr Nguyen Van Tinh, General Director of Vietnam Infrastructure Development and Finance Investment Joint Stock Company (VIDIFI), said that highway builders in Japan can issue bonds to raise funds and this channel is also a good option for the Vietnam context. Nevertheless, it is important to clarify policies to catch the interest of foreign investors.
According to some participants, if the rate of return is under 15 per cent [a year], no foreign investors will dare to get involved. Meanwhile, domestic investors are making ends meet with highway projects. Tinh cited that his company, VIDIFI, has not received a penny from Hanoi - Haiphong Highway project although the Prime Minister decided to support 39 per cent of investment capital for the company, of which 23 per cent would come in cash.
Mr Mai Tuan Anh, General Director of Vietnam Expressway Corporation (VEC), said, highway investment necessitates financially powerful companies because this field requires huge investment capital and has long payback periods which sometimes stretch to decades. Therefore, State support for companies plays a very important role. When foreign investors engage, they are very transparent in investment process. If the expected profit margin is 14 per cent (in spite of being 1.3 times higher than bond coupon stipulated by the Ministry of Finance), they will be potentially exposed to many risks such as exchange rate difference and revenue. That is why many foreign investors often require a higher rate.
State Budget affords only 40.7 per cent
Economic specialist Le Xuan Nghia, Member of the National Financial and Monetary Policy Advisory, said the funds of domestic investors primarily come from commercial banks, while pressures on commercial banks will be VND93 trillion of government bonds plus more than VND100 trillion of domestic fund. As a result, banks will have no available funds for other projects.
The relatively high bad debt ratio will inhibit banks from lending BOT (build - operate - transfer) projects. This reality troubles domestic funding and is the reason why the Ministry of Transport is directing local firms to seek foreign funds. Currently, foreign investors are also quite interested in transport projects in Vietnam. Investing in transportation projects looks like financial investment, thus fanning their concerns over legal risks.
Deputy Transport Minister Nguyen Nhat said that the State support fund is necessary to implement the North - South Highway project. According to statistics, the State budget accounted for about 52.8 per cent of investment capital in executed highway projects. But, VND230 trillion is hardly affordable for the State Budget since Vietnam’s public debt is touching the limit. Therefore, the State budget will support only 40.7 per cent.
Densely trafficked sections will have shorter capital recovery durations than sparsely trafficked ones which will need State support. According to Deputy Minister Nhat, with the experience gained from the expansion of National Road 1 and Ho Chi Minh Highway, to ensure the progress and quality, State financial support is essential, particularly for site clearance. The rest can be filled by other sources.
According to the scheme submitted to the Government by the Ministry of Transport, the North - South Highway will have a total length of 1,300 km and will be built from now to 2020 with a total investment capital of VND229.8 trillion. Of the sum, about 40 per cent will come from the State budget (VND93.5 trillion) and the rest will be mobilised from investors. Vehicles can move at a speed of 100 - 120 kilometres per hour but the speed will be limited to 60 - 80 kilometres per hour in some sections with unfavourable terrain. The highway is divided into 20 projects, each of which will be operated independently. Traffic tolls will be collected for 25 years.
Luong Tuan
Vietnamese
