Investment
Foreign investors keen on Vietnam’s expressways
However, there currently remains a lack of legal framework on transferring the operation rights of expressways in Vietnam.
Many foreign investors have shown their interest in expressways projects in Vietnam, however, a detailed legal framework is needed to actualize the investment inflow, experts said.
During a recent meeting with Prime Minister Nguyen Xuan Phuc, former US Ambassador to Vietnam Pete Peterson said that foreign investors have expressed interest in the operation of some expressways in Vietnam.
Specifically, they want to operate the Hanoi-Hai Phong expressway project, where the Vietnamese government can recover most of the invested capital.
PM Phuc said the deal, if successful, will benefit both Vietnam and international investors. He urged Peterson to work with the competent Vietnamese agencies so that the two sides can enter negotiations.
Besides, France’s VINCI Concessions Group has also shown interest in the Cau Gie-Ninh Binh expressway project. It intended to spend some VND9.2 trillion (US$396.5 million) to operate the expressway for 30 years.
VINCI Concessions Group also wants to exploit Ho Chi Minh City-Long Thanh-Dau Giay Expressway, which is also attractive to some Japanese investors.
Expecting to acquire the right to operate HCM City-Long Thanh-Dau Giay Expressway, Japan’s Index Consulting and its partners – Deloitte, Nishimura & Asahi, and Padeco – last month worked with the Ministry of Transport (MoT) on the results of a one-year study about possibilities of transferring the operation rights of the expressway in Vietnam.
With support from the Japan International Co-operation Agency (JICA), the study is expected to help potential Japanese funders learn about the investment opportunities of the life-line 55-kilometer highway located in the country’s south-eastern region.
Specifically, Index Consulting proposed two solutions. If the expressway is kept unchanged with four lanes, the company will pay US$796 million for the rights to operate the expressway for 30 years.
If the expressway is expanded to six lanes by 2020 at a cost of US$406 million, the Japanese investor will pay US$1 billion for the 30-year operation rights.
Mai Tuan Anh, chairman of state-owned Vietnam Expressway Corporation (VEC), saw the study as a positive signal for the Ho Chi Minh City-Long Thanh-Dau Giay Expressway project as it proves the capacity to return loans as scheduled, while having the funding to develop new projects.
Lack of legal framework
Currently, there remains a lack of legal framework on transferring the operation rights of expressways in Vietnam.
According to Anh, VEC in 2016 signed a co-operation agreement with France’s VINCI Concessions, with transfer of the rights to operate expressways developed by VEC being among the three main parts. The Ho Chi Minh City-Long Thanh-Dau Giay and the Cau Gie-Ninh Binh routes – among VEC’s most trafficked expressways – were their targets.
However, the plan has so far hit a snag due to the lack of a legal framework, with the transfer of expressways’ operation rights being new to Vietnam, Anh said, explaining VEC is developing and operating five expressways under a loan package. The group must collect tolls to pay its debts. Thus, the corporation cannot separate the roads to sell the operation rights of two to VINCI.
“We need a detailed legal framework for the transfer of expressways’ operation rights. For example, in the scheme the investor wants to expand in the future, it is necessary to have a risk allocation mechanism, particular for site clearance, between the state and the investor. The other is price fixing among other things,” Anh said.
The other barrier is that VEC is waiting for the Politburo’s approval of the scheme on financial restructuring for its five expressways. Thus, the transfer and the mechanism for them will be considered when approval is made.
Therefore, experts said the Index Consulting study is expected to be a good foundation to take next steps, but interested investors still have to wait for the improvements in the legal framework.
Foreign investors want to operate the Hanoi-Hai Phong Expressway project
|
Specifically, they want to operate the Hanoi-Hai Phong expressway project, where the Vietnamese government can recover most of the invested capital.
PM Phuc said the deal, if successful, will benefit both Vietnam and international investors. He urged Peterson to work with the competent Vietnamese agencies so that the two sides can enter negotiations.
Besides, France’s VINCI Concessions Group has also shown interest in the Cau Gie-Ninh Binh expressway project. It intended to spend some VND9.2 trillion (US$396.5 million) to operate the expressway for 30 years.
VINCI Concessions Group also wants to exploit Ho Chi Minh City-Long Thanh-Dau Giay Expressway, which is also attractive to some Japanese investors.
Expecting to acquire the right to operate HCM City-Long Thanh-Dau Giay Expressway, Japan’s Index Consulting and its partners – Deloitte, Nishimura & Asahi, and Padeco – last month worked with the Ministry of Transport (MoT) on the results of a one-year study about possibilities of transferring the operation rights of the expressway in Vietnam.
With support from the Japan International Co-operation Agency (JICA), the study is expected to help potential Japanese funders learn about the investment opportunities of the life-line 55-kilometer highway located in the country’s south-eastern region.
Specifically, Index Consulting proposed two solutions. If the expressway is kept unchanged with four lanes, the company will pay US$796 million for the rights to operate the expressway for 30 years.
If the expressway is expanded to six lanes by 2020 at a cost of US$406 million, the Japanese investor will pay US$1 billion for the 30-year operation rights.
Mai Tuan Anh, chairman of state-owned Vietnam Expressway Corporation (VEC), saw the study as a positive signal for the Ho Chi Minh City-Long Thanh-Dau Giay Expressway project as it proves the capacity to return loans as scheduled, while having the funding to develop new projects.
Lack of legal framework
Currently, there remains a lack of legal framework on transferring the operation rights of expressways in Vietnam.
According to Anh, VEC in 2016 signed a co-operation agreement with France’s VINCI Concessions, with transfer of the rights to operate expressways developed by VEC being among the three main parts. The Ho Chi Minh City-Long Thanh-Dau Giay and the Cau Gie-Ninh Binh routes – among VEC’s most trafficked expressways – were their targets.
However, the plan has so far hit a snag due to the lack of a legal framework, with the transfer of expressways’ operation rights being new to Vietnam, Anh said, explaining VEC is developing and operating five expressways under a loan package. The group must collect tolls to pay its debts. Thus, the corporation cannot separate the roads to sell the operation rights of two to VINCI.
“We need a detailed legal framework for the transfer of expressways’ operation rights. For example, in the scheme the investor wants to expand in the future, it is necessary to have a risk allocation mechanism, particular for site clearance, between the state and the investor. The other is price fixing among other things,” Anh said.
The other barrier is that VEC is waiting for the Politburo’s approval of the scheme on financial restructuring for its five expressways. Thus, the transfer and the mechanism for them will be considered when approval is made.
Therefore, experts said the Index Consulting study is expected to be a good foundation to take next steps, but interested investors still have to wait for the improvements in the legal framework.
