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Jul 08, 2019 / 12:34

Vietnamese investors call it hard to join North-South Expressway construction

Few Vietnamese companies have participated in projects of VND4-5 trillion (US$172-US$215 million). This means there`s little chance for domestic investors.

Financial criteria and experience requirements are said to be "outmatching" the capacities of many Vietnamese investors in bidding for North-South Expressway, VnExpress reported.

According to the Vietnam’s Ministry of Transport, the project management board has sold more than 120 sets of prequalification documents for eight North – South Expressway projects. Among the buyers, there have been 26 domestic investors and 14 foreign bidders from South Korea, France, the UK, China, among others.

The deadline for bidding document submission will be July 10 and the Ministry of Transport will evaluate the documents according to the criteria set out.

Vu Duc Nhan, deputy CEO of Phuong Thanh Tranconsin JSC, told VnExpress that the Ministry of Transport requires an investor to have an owner’s equity of 20% of the cost of a North-South Expressway project.

This means that if a project costs between VND5 trillion (US$215 million) and VND10 trillion (US$430 million), an investor needs to have at least VND1 trillion (US$43 million) in owner’s equity. 
Da Nang - Quang Ngai Expressway will be connected to the North-South Expressway. Photo: Dac Thanh
Da Nang - Quang Ngai Expressway will be connected to the North-South Expressway. Photo: Dac Thanh
"Some Vietnamese enterprises have recently participated in major expressway projects such as Ha Long – Van Don, Bac Giang – Lang Son, and very few investors have enough capital and experience as required”, Nhan said.

The investor also needs to have experience in projects of the same scale, Nhan said, adding that a tightened credit policy on build-operate-transfer (BOT) projects is another hindrance for Vietnamese contractors.

He stressed banks are charging an annual interest rate of 11%, higher than the 7.8% rate estimated by Ministry of Transport when issuing invitation for tender. Many BOT projects are struggling to collect recover investment due to lower traffic than estimated, making investors reluctant to take on expressway projects.

Tran Van The, deputy chairman of major transport investor Deo Ca Group, said few Vietnamese companies have participated in projects of VND4-5 trillion (US$172-US$215 million). This means there's little chance for domestic investors. 

Economist Ngo Tri Long said that there have been poorly qualified contractors who are unable to execute the projects and have to transfer them, that’s why high bidding requirements are necessary to find capable contractors.  

"We treat investors fairly. It’s better to award the contract to a capable foreign bidder than leaving it in the hands of unqualified Vietnamese contractor. The the slumps in Da Nang – Quang Ngai highway built by domestic enterprises is an example," said Ngo Tri Long.

Contrary to the above-mentioned point of view, Dr. Le Dang Doanh said that it is necessary to have policies to prioritize domestic enterprises to participate in the North-South Expressway project, or to have criteria for domestic enterprises to bid jointly.

"North-South Expressway runs along the country and implies security and defense importance, some foreign businesses should not be allowed to take over the construction," Doanh stressed.

Nguyen Danh Huy, head of the Department of Public-Private Partnership Management under the Ministry of Transport, said that requirements for the North-South Expressway have been elaborated according to government regulations, and both Vietnamese and foreign firms must comply with them.

A domestic investor who lacks capability could partner with another domestic or foreign investor to bid jointly, Huy added. 

It is expected that the total investment of the eight projects will be over VND100 trillion (US$4.3 billion), of which VND40 trillion (US$1.735 billion) sourced from the state budget for site clearance and resettlement.