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Nguyen Danh Huy, head of the Public – Private Partnership Department under the Ministry of Transport (MoT), made the remark during a recent workshop aimed at calling for BOT investment in some sections of the north-south expressway project, the first event of its kind held by the ministry. Previously, most BOT road investors had been assigned to undertake the execution.
Now there would not be an open pathway for incapable investors and those lacking experience in executing large-scale projects.
Bidding transparency urged
Bidding for the execution of the expressway sections goes some way to enhance financial transparency. However, Nguyen Duc Kien, deputy head of the Economic Committee under the National Assembly (NA), held that the capital mobilization for these sections remain a thorny issue.
Kien elaborated that the giant project is in need of VND118 trillion (US$5.07 billion), including VND55 trillion (US$2.36 billion) mobilized from the State budget, and VND20 trillion (US$860 million) for site clearance. The remaining capital is to be allocated for sections which pose a high risk of payback due to low traffic density.
A public private partnership (PPP) format used for the expressway project is set to facilitate the transfer of cleared ground for investors so that they could save costs and maximize profits from applying cutting-edge technology into the construction process, the NA official said.
Nguyen Van Loi from the association for Vietnam transport infrastructure investors said that domestic firms are likely to meet financing-related criteria, but fail to satisfy those in relation to execution experience.
Investors are required to have previous experience in undertaking similar projects whose total investment capital reaches 50 per cent of the expressway sections, Loi said. As such, many domestic firms would fail to meet this requirement due to a lack of experience in deploying large-scale projects.
This regulation incidentally puts domestic investors at a disadvantage in comparison to powerful foreign corporations.
Vu Tien Loc, Chairman of the Vietnam Chamber of Commerce and Industry, said state agencies should create favorable conditions for domestic firms to participate in large-scale projects.
Loc cited that many countries allocate a certain proportion of large projects ordered by the state to local firms or encourage foreign investors to forge links and undertake joint ventures with domestic companies in realizing these projects.
Huy from the Public – Private Partnership Department revealed that domestic firms account for 50 per cent of the total financiers who have expressed their interest in the expressway project, along with an array of investors from the UK, Malaysia, the Republic of Korea, Japan, and China.
He called upon competent agencies to define clear bidding procedures and binding progress and quality control contracts which require investors to make commitments to executing the project at a secured process and the best quality.
Strong commitments
The State makes commitments to transfer cleared land to investors prior to the beginning of the execution. Localities, which are home to 11 sections of the expressway, are required to set up landmarks for these sections within May, Huy said.
Indeed, the most common issue that foreign investors raise is about foreign currency guarantees, minimum revenue guarantees, and commitments to toll hikes from State agencies.
Nguyen Xuan Bac, deputy head of the Credit Department under the State Bank of Vietnam, affirmed that foreign currency guarantees must comply with current legal regulations, adding that the central bank will make foreign exchange guarantees and take on measures aimed to stabilize exchange rates if necessary.
He also warned that foreign investors should consider risks relating to exchange rates which could hamstring their payback.
Exchange rates are subject to the country’s current provision regulation as the Government and the central bank have been pursuing policies to achieve macroeconomic stability in order to create a favorable business climate for investors.
Regarding revenue shortages, Bac said that some BOT projects failed to increase tolls as scheduled since the Government previously had issued a resolution on tightening the control of toll collection at BOT projects.
Given this, Huy from the Public – Private Partnership Department unveiled that the MoT plans to collect information on BOT projects that have sustained revenue shortages and will then submit a relevant report to the Government for consideration.
As for the north-south expressway project, a road map for toll hikes has been clarified without any changes during the implementation of the PPP contracts.
Le Tuan Anh, deputy head of the Investment Department under the Ministry of Finance, noted that toll levels set for the expressway project are adjusted in line with the Law on Price. A resolution by the NA also stipulates the maximum toll level stands at 3,400 VND (14.6 US cents)/vehicle/km.