Gov’t determine to build North-South Expressway

Minister of Transport Truong Quang Nghia affirmed that building North-South Expressway is the Government’s major determination in response to experts’ controversial opinions about the huge capital and feasibility of the project at a workshop in Hanoi on October 25.


                          HCMC-Trung Luong Expressway in the southern region of Vietnam

Formerly, he had also asserted the government’s determination to the National Assembly.

The project needs a total capital of VND230 trillion (US$10.3 billion) including VND93 trillion ($4.17 billion) budget funds.

According to deputy Minister of Transport Nguyen Nhat, the ministry has carefully considered the proposed level of budget spending on the project amid high public debt.

Ninety three trillion dong will be mobilized from government bonds accounting for 40.7 percent of the project’s total capital, which is lower than that in previous projects when budget funds accounted for 52.8 percent.

Mr. Le Xuan Nghia, member of the National Monetary Policy Consulting Board, said that according to the ministry’s proposal, the government would change VND93 trillion from official development assistance (ODA) funds into bonds and from allocation into loans.

He said the proposal special, brave and creative and maybe the only possible way after 2017. It will force investors to consider interest rate, disbursement and payment progress.

Because of the huge investment cost which is an obstacle to lure foreign investors, the project should mobilize funds abroad and domestically, said Mr. Nghia.

Chairman of the Vietnam Automobile Transportation Association Nguyen Van Thanh said that road investment cost in Vietnam is most expensive in the world. Site clearance traditionally accounts for 20 percent of the total capital of a project, bank interest 10 percent, provisional funds 20 percent and construction 50 percent.

Mr. Thanh said that these ratios should be recalculated in the North-South Expressway project.

Explaining the high investment cost, director general of Transport Engineering Design Inc. (TEDI) Pham Huu Son said that the levels have been built in accordance with existing regulations.

The investment cost levels have been reviewed many times with the attendance of inspectorates from the Ministry of Construction, the Ministry of Finance and the Ministry of Transport to ensure sufficiency and feasibility.

Site clearance in Vietnam has been very complicated for investors who said they had to directly negotiate with affected citizens about compensation level for each intersection of expressways. In China, they have a decree on site clearance clarifying who will be in charge of the negotiation for small and big roads.

Ministry to mobilize leisure capital from citizens

Expert Le Xuan Nghia said that banks have been cautious of loaning BOT (Build-Operate-Transfer) projects because of high bad debts. Hence, there should have a mechanism directing investors to get foreign loans.

However foreign creditors have set a condition which will loan private not state enterprises. The companies together with them will establish and manage the investment fund of a project.

Investors have also expressed concerns over legal risks in Vietnam. Policies have not been clear to reclaim investment capital and regulate resources.

Mr. Nguyen Van Tinh, director general of Vietnam Infrastructure Development and Finance Investment, said that investors might accept investment risks not policy risks. According to international practice, no investor will dare to build an expressway if earning less than 15 percent profit.

The company has already worked with an Indian investor who intended to invest US$2 billion in the North-South Expressway project. However they have stopped negotiation after acknowledging that it is unclear when there will be site clearance assistance policy.

A delegation of the Ministry of Transport has met 200 foreign investors and 20 foreign banks who most expressed worry about policy and revenue risks.

Head of the Public Private Partnership (PPP) Board under the Ministry of Transport Nguyen Danh Huy reveals that at present local loans has mainly been offered for short term while traffic project needs long term credit.

In response to the experts’ concerns, deputy minister of Transport Nguyen Nhat reaffirmed that infrastructure must be built ahead to boost socioeconomic development.

The matter is to map out a suitable investment routine to suit national resources and ensure the project’s feasibility.

In the upcoming time, the ministry will convert project management boards into corporations similar with the model of Vietnam Expressway Corporation to lure investment.

Foreign capital attraction has been difficult because Vietnam has no PPP law, currently there is Decrees 15 and 30 but their stability is not high, he added.

Foreign investors usually require revenue, exchange rate and loan guarantee which Vietnam has yet to undertake.

Therefore, the Ministry of Transport is calculating to mobilize leisure capital from citizens.

The ministry would build and propose specific mechanisms to the National Assembly to mobilize the source and develop traffic infrastructure including expressways to meet economic development demand amid deep and wide integration, Deputy Minister Nhat said.

According to plan, the North South Expressway will be built first in stretches with high traffic flow such as Hanoi-Vinh, HCMC-Phan Thiet and Phan Thiet-Nha Trang. Stretches with lower traffic flow will be built at the end of the project in 2022.

Vietnam has built 764 out of 6,114 kilometers of expressways under planning, reached 14.6 kilometers of expressway per one million citizens which averages 60 kilometers in other nations. For instance, the number is 72 kilometers of expressway per one million residents in Japan, 90 kilometers in South Korea and 123 kilometers in China.

SGGP