North-South expressway fails to find investors despite relaxed requirements

North-South expressway fails to find investors despite relaxed requirements

Concerns over capital recovery, bank loans and the scant number of vehicles traveling have discouraged local investors from joining the North-South expressway project, even though some requirements have been relaxed.
18:30, 29/10/2019
Vehicles travel on the HCMC-Long Thanh-Dau Giay Expressway, part of the North-South Expressway. Concerns over capital recovery, difficulty in accessing bank loans and the scant number of vehicles traveling on projected roads have discouraged local investors from joining the eight sections of the north-south expressway. (Photo: Anh Quan)

Pham Hong Son, general director of the Project Management Board No. 2, noted that after the Ministry of Transport had issued bidding papers for domestic tenders for the National Highway 45-Nghi Son subproject, only four applications were submitted, compared with the 14 applications previously received from both domestic and international tenders.

The largest bottleneck facing local investors is the capacity of capital mobilization, Thanh Nien newspaper reported, citing Son.

A representative of the Ho Chi Minh Road Project Management Board stated that most investors are keen on the commercial viability of projects, meaning the number of vehicles projected to travel on these roads should exceed the approved capacity. On the other hand, if the number of vehicles is too low, the process of capital recovery will slow down, discouraging investors from getting involved in these projects.

Besides this, investors may face some risks to interest rates, revenue and planning stages, the representative pointed out, adding that it has been hard to find investors for the subprojects.

In addition, investors working under the private-public partnership (PPP) format are required to have equity accounting for at least 20% of the total capital needed, instead of 30% as before.

Although the requirement on financial capacity was relaxed, investors’ financial capacity must still be strong enough to give the firm access to bank loans. PPP projects normally need up to 80% of their financing from bank loans.

A representative of a project management board took the long-delayed Trung Luong-My Thuan Expressway project as an example, saying that conditions for the execution of the project were favorable, but the banks have not approved it for over a year.

The representative also said that banks tend to offer loans to prestigious investors and projects with high potential for revenue.

Assistant Professor Dr. Nguyen Quang Toan stated that one of the reasons strong investors had been discouraged from participating in build-operate-transfer (BOT) projects is that some of the obstacles the investors faced have not been eliminated by the competent agencies.

Toan proposed that the State agencies increase the State budget for funding those that have failed to find investors to reduce the financial burden on investors.

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