Highway Construction: Capital Concerns

According to the master plan for the Vietnam transportation system to 2020 developed by the Ministry of Transport, the total investment value for ground transport infrastructure to 2020 was estimated at VND1,000 trillion (US$60 billion). This is not a small figure in the context of State budget shortage in the midst of investment-prioritised investment fields.

Nearly 6,400 km of highways
Vietnam will need about VND66 trillion for transport infrastructure investment a year, including VND22 trillion for highways. Speaking of solutions to the capital issue, Mr Mai Anh Tuan, Deputy Director of the Directorate for Roads of Vietnam, said that the Ministry of Transport will ask the Government to recommend the establishment of a traffic maintenance and management fund and mobilise various sources of investment capital for traffic construction such as State budget, development credit funds, the business sector and government bonds.

Currently, the Government is applying many priority policies for road infrastructure investment, particularly for expressways. According to statistics from the Ministry of Transport, Vietnam now has 256,000 km of roads, including over 200,000 km of urban roads. Road density is 0.78km per square kilometre by area and 3.09 km per 1,000 residents by population.

According to experts, Vietnam’s traffic density is now not low relative to other countries in the region. The quality of the road system has also been significantly improved over the years. Particularly, in national highways and provincial roads, its road density is still low in comparison with the region. For the time being, about 80 per cent of national highways and provincial highways have been concreted or asphalted.

To serve the country’s long-term economic development strategy, the expressway system remains one of development priorities in the coming years, especially trunk roads with dense traffic flows and infrastructure systems of other transport modes in order to deploy synchronous, active and efficient transport services in economic development.

Based on forecasts of growing transport demand in national socio-economic development orientations to 2030, economic development orientations of four key economic regions, the transport system strategy to 2020, with an eye to 2030, will build 21 routes with a total length of 6,411 km.

Investment fund diversification
Capital funds for highway construction will be raised from various domestic and international sources. Particularly, State-funded investment capital in the form of government loan, loan guarantee and bond issue will be prioritised for financially unattractive but socially and economically effective projects. 

Vietnam will mobilise all available resources and further improve mechanisms and policies to draw investment capital from all economic sectors, including foreign investors, for highway development in the form of public - private partnership (PPP) such as BOT, BT and BTO. It will also amend regulations on financial support, tax, price, cost and rights transfer policies to enhance the commercial effectiveness of projects and the contributing responsibility of users to ensure legitimate interests of investors.

The country will continue to mobilise donors and official development assistance (ODA) sources for highway development, particularly key traffic routes. The Prime Minister also clearly directed and carefully calculated appropriate steps to enhance the effect of PPP model between foreign investors with ODA donors and international organisations.

Mr Nguyen Ngoc Hai, senior specialist of the Planning - Investment Department, said that traffic toll collection for investment payback is difficult in most highways because the collection value is very small relative to huge investment cost. For the time being, the Government and the Ministry of Transport are encouraging private investors to join forces with the State in the form of PPP.

Mr Nguyen Ngoc Bao, Deputy Director of the Central Economic Committee, said, BOT transport infrastructure projects, specially highways, are always undercapitalised, forcing investors to borrow high-rate loans from banks. In addition, BOT project planning is insufficient to form full connectivity of railways, airways and roads.

Deputy Finance Minister Vu Thi Mai stressed that BOT charges will be converted into prices in accordance with the Law on Prices and under the market economy mechanism. Upcoming BOT projects must be made transparent from the outset and supported by the public, particularly traffic toll rates.

Deputy Prime Minister Trinh Dinh Dung said that many BOT transport infrastructure investment projects have exposed a lot of shortcomings, particularly the insufficient capacity of investors, resulting in higher-than-life cost and higher traffic toll calculation.

He asked the Ministry of Transport to review an infrastructure planning strategy in the context of transport sector restructuring scheme, harmoniously develop means of transport, introduce priority projects in each form of investment, and rearrange traffic toll station planning.

Luong Tuan