Incentives to stoke landmark project interest

Dau Giay-Phan Thiet Expressway project

Mark Moseley, the World Bank’s Task Team Leader for the Dau Giay-Phan Thiet Expressway project (DPEP) said it was a unique opportunity for foreign investors to be involved in an infrastructure project in Vietnam.

The  DPEP, costing $757 million,  is  a  critical  link  to  the  national  North-South  Expressway  corridor  of  Vietnam. Spanning approximately 100 kilometers, the four-lane highway will link two key cities, Ho Chi Minh City and Phan Thiet, in the country’s southern region. The government two years ago entrusted this public-private partnership (PPP) project to privately-owned Bitexco Group, the first investor. Moseley said the incentives granted to the project by the government and the WB would reduce risks for investors and make the project more feasible.

The Ministry of Transport said the government would fund land acquisition for DPEP which is about $107 million. In addition, the project will benefit from two separate sources of WB funding. One of these will be viability gap financing (VGF), which the WB’s International Development Association is proposing to provide to the Vietnamese government. The government, in turn, will provide as a grant to the project company. The other source of proposed WB funding is a loan which the government will receive from the International Bank for Reconstruction and Development (IBRD), which is to be on-lent to the project company.

Both the VGF funds and the IBRD loan funds will be made available during the construction period. “These two sources of funding, when combined with the equity contribution from the private sector, are designed to cover the entire capital costs of the project. In other words, there should be no need for commercial bank financing,” said Moseley.

According to the WB, the winning bidder will be the one requiring the lowest capital grant. Deputy Minister of Transport Nguyen Ngoc Dong affirmed that the requirements would be fair for both investors, as the first investor Bitexco would have to follow the same criteria as the second investor. That means Bitexco has agreed to be bound by the results of the competitive process, both in terms of accepting the winning bidder as its future partner, and in terms of having the basic economic parameters of the transaction determined by the VGF grant number proposed by the winning bidder.