Transport projects in Vietnam will be more attractive to foreign investors if new supporting policies are applied as seen in the North-South expressway project.
Vietnam needs private investment capital to construct about 1,380 km of highway.
According to Nguyen Danh Huy, head of the Ministry of Transport’s Public-Private Partnership (PPP) division, some 170 investors are interested in international bidding for the eastern cluster of the North-South expressway project. Of the total, 70 are foreign investors, who come from many countries, including the UK, Korea, Malaysia, Japan and China.
“These are good signs showing the interest of investors to invest in the Vietnamese infrastructure sector,” Huy said.
The attention of foreign investors to the country’s North-South expressway project has been rising after the government officially opens international bidding for the project this month, with many new supporting policies available to push the interests of investors.
The eastern cluster of the North-South expressway, costing VND118.7 trillion (US$5.16 billion), covers 11 sections. These include three state-invested sections connecting Hanoi and Ho Chi Minh City via key economic zones, industrial parks, border gates, and seaports. The state is contributing around VND55 trillion (US$2.39 billion) for the venture.
According to the Ministry of Transport, unlike other PPP projects in the sector, there are some advantages and supporting policies for financiers in the expressway scheme.
Deputy Minister of Transport Nguyen Nhat said the government encourages domestic and foreign investors to join these sections, with committed favorable conditions for interested investors.
Notably, Nhat said, the country takes responsibility for project site clearance and commits to hand over cleared land to those who join the eight PPP sections.
Law revision underway
Vietnam has an ambitious master plan that aims at complete transformation of the nation’s sluggish infrastructural platforms, so as to attract investment and business, promote its industrial hubs and increase its GDP.
According to Minister of Planning and Investment Nguyen Chi Dung, the country’s socio-economic development strategy for the 2011-2020 period describes infrastructure development as one of the key tasks as well as one of three strategic breakthroughs needed to be achieved, focusing on transport and urban infrastructure.
The country plans to need about US$480 billion for infrastructure investment by 2020, with additional projects in the pipeline including about 1,380 km of highway and around eleven power plants; but the state budget can only meet one third of the actual financial needs.
“Therefore, the mobilization of investment source from private sector into infrastructure development is a matter of great concern for the Vietnamese government,” Dung said.
Meanwhile, experts said that the realization of the country's ambitious plan depends on how it sorts out issues of profitability and funding.
They said the attraction of Vietnam’s transport projects to foreign investors will be further improved if guarantee policies are approved. At present, the country is yet to guarantee minimum revenues for PPP projects.
According to Vaibhav Saxena, legal consultant at Vietnam International Law Firm, the long-term nature of large scale infrastructure projects, where returns on investment take far longer to realize than those in other sectors, is one of the reasons that make investors hesitate to take the risks involved in them.
“Therefore, more favorable treatment for investors will speed up major infrastructure development projects, in turn making considerable headway in achieving national goals,” Saxena said.
According to a representative from the Ministry of Planning and Investment, the ministry is working on the draft law on PPP, in which government guarantees are lined up for discussion. The draft law on PPP will be available on the MPI’s website in the upcoming days, and will seek feedbak from the business community.
