Business
Government invites foreign investment in transport project
Deputy Transport Minister Nguyen Ngoc Dong has pledged to create the most favorable conditions for calling international investment capital in the eastern North-South expressway.
Dong said during a recent seminar co-hosted by the Ministry of Transport (MoT) and the World Bank to acquire experts' experience in public-private partnership (PPP) investment model before launching the project.
A key challenge in infrastructure development in Vietnam is that the country's public investment on infrastructure only meets 25 to 30 percent of demand, Dong said, adding that the Vietnamese government is now calling for the involvement of private companies in transport projects under PPP model, including Build-Operate-Transfer (BOT). In many countries, the PPP model is a tool to improve the efficiency of public services and ease financial pressure on governments.
According to Dong, the MoT has called for investment to develop road infrastructure in the BOT model since 1997. However, only domestic investors and credit organizations have so far taken part in BOT projects.
The North-South Expressway project has faced many challenges relating to inefficient and unsynchronized legal frameworks, and difficulties related to long-term credit. In particular, the law on PPP investment has yet to be enforced, he said.
At the seminar, representatives from the ministries of transport, finance, planning and investment, World Bank, State Bank of Vietnam, and economists proposed measures to clear obstacles regarding risk sharing and bidding mechanism, and capital resources.
Participants discussed a general strategy on the project, risk sharing between authorized agencies and investors, banks and capital market in the construction of expressways in Vietnam, building of effective PPP model based on bidding policy and legal framework, as well as basic difficulties to submit to the high-level meeting scheduled for May.
Nguyen Danh Huy, general director of the transport ministry's Public Private Partnership Investment Project Management Department, said that there are currently about ten laws related to public-private partnership investment, but their content remains conflicted and overlapped.
Achim Fock, acting country director of the World Bank Vietnam, said that investment in high-quality expressways is an area where Vietnam lags behind. The length of high-quality expressways per 1,000sq.km is 2km for Vietnam, compared to around 8km in India, and 13km in China.
The North-South Expressway will connect Vietnam much better, and will create a more integrated economy, he said, adding that this will increase competitiveness, and ultimately the prosperity of the country and its people.
"Unlike traditional projects, the North-South Expressway requires the involvement of public-private sector cooperation, and commercial funding," he said.
According to the MoT, the total investment needed for the North-South Expressway is US$5.3 billion. The State budget will allocate $2.42 billion, while the remaining $2.88 billion must be sourced from investors.
The revenue cannot come from the public sector alone, especially given concerns on overall public debt, Achim Fock said, highlighting the significance of the share between public sector and private investors.
He said that World Bank and other development partners can also bring experiences from elsewhere to help Vietnam.
According to the Resolution 52 dated November 22, 2017 of the National Assembly, the eastern North-South expressway project began in 2017 and will be basically completed in 2021. The legislature also adopted several resolutions on mechanisms and policies during the implementation. The planned expressway will cover 2,109km in total, and stretch from the northern province of Lang Son to the southernmost province of Ca Mau.
The Ministry of Planning and Investment proposed amending Decree No.15/2015 on PPP investment, which is due to be approved by the government in the near future, thus laying an important legal foundation for the project and other BOT transport projects.
Only domestic investors have so far taken part in BOT projects.
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According to Dong, the MoT has called for investment to develop road infrastructure in the BOT model since 1997. However, only domestic investors and credit organizations have so far taken part in BOT projects.
The North-South Expressway project has faced many challenges relating to inefficient and unsynchronized legal frameworks, and difficulties related to long-term credit. In particular, the law on PPP investment has yet to be enforced, he said.
At the seminar, representatives from the ministries of transport, finance, planning and investment, World Bank, State Bank of Vietnam, and economists proposed measures to clear obstacles regarding risk sharing and bidding mechanism, and capital resources.
Participants discussed a general strategy on the project, risk sharing between authorized agencies and investors, banks and capital market in the construction of expressways in Vietnam, building of effective PPP model based on bidding policy and legal framework, as well as basic difficulties to submit to the high-level meeting scheduled for May.
Nguyen Danh Huy, general director of the transport ministry's Public Private Partnership Investment Project Management Department, said that there are currently about ten laws related to public-private partnership investment, but their content remains conflicted and overlapped.
Achim Fock, acting country director of the World Bank Vietnam, said that investment in high-quality expressways is an area where Vietnam lags behind. The length of high-quality expressways per 1,000sq.km is 2km for Vietnam, compared to around 8km in India, and 13km in China.
The North-South Expressway will connect Vietnam much better, and will create a more integrated economy, he said, adding that this will increase competitiveness, and ultimately the prosperity of the country and its people.
"Unlike traditional projects, the North-South Expressway requires the involvement of public-private sector cooperation, and commercial funding," he said.
According to the MoT, the total investment needed for the North-South Expressway is US$5.3 billion. The State budget will allocate $2.42 billion, while the remaining $2.88 billion must be sourced from investors.
The revenue cannot come from the public sector alone, especially given concerns on overall public debt, Achim Fock said, highlighting the significance of the share between public sector and private investors.
He said that World Bank and other development partners can also bring experiences from elsewhere to help Vietnam.
According to the Resolution 52 dated November 22, 2017 of the National Assembly, the eastern North-South expressway project began in 2017 and will be basically completed in 2021. The legislature also adopted several resolutions on mechanisms and policies during the implementation. The planned expressway will cover 2,109km in total, and stretch from the northern province of Lang Son to the southernmost province of Ca Mau.
The Ministry of Planning and Investment proposed amending Decree No.15/2015 on PPP investment, which is due to be approved by the government in the near future, thus laying an important legal foundation for the project and other BOT transport projects.
