Korean firm wins landmark deal

A source from the Ho Chi Minh City government told Vietnam Investment Review last week that LG Engineering & Construction Corporation (LG E&C)’s bid to build a road connecting Tan Son Nhat International Airport to Ho Chi Minh City’s outer beltway had been approved.
The source said city authorities would now have to consult with the ministries of transport, construction, natural resources and environment, and science and technology before submitting an initial feasibility study this quarter.
LG E&C will invest in the road, which will lead east over Binh Loi Bridge to the outer beltway in Thu Duc, under the turn-key form, meaning that the company will handle all of the work on the road – from site clearance and compensation to actual construction – before transferring the finished product to the city.
In return, LG E&C will have the right to carry out other projects in the city, such as a planned commercial building at September 23rd Park near the landmark Ben Thanh Market in District 1 and a 340-hectare luxury apartment complex in Nha Be District.
“If the project goes ahead, LG E&C is the first foreign investor permitted to invest in the infrastructure sector under the turn-key form,” said the source.
Both city authorities and foreign investors hope the groundbreaking turn-key method will pick up the pace of infrastructure work around the city, much of which has fallen behind schedule.
The slow progress has been attributed to higher-than-expected expenses associated with land clearance and compensation.
“A number of developers were forced to pay much higher compensation for house relocations than what had been outlined in previous forecasts,” said Ha Van Dung, director of the Ho Chi Minh City Department of Communications and Public Works (DoCPW), adding that the extra expenses had developers scrounged for additional investment capital.
Nguyen Viet Son, DoCPW deputy director, said the 15 kilometre road would be an important component of the city’s traffic system, especially as the airport becomes busier with the opening of a new terminal in 2006.
Currently, Nam Ky Khoi Nghia/Nguyen Van Troi street is virtually the only route for traffic to and from the airport, resulting in severe congestion and long delays.
Under the plan, the street will be widened from its current width of 14-21m to 30m.
The project is part of a broader plan to attract foreign investors and visitors to the downtown area.
To that end, the city’s airport is being upgraded to increase its capacity from its current level of four million passengers per year to 15 million by 2015.
Mayor Le Thanh Hai said the city would provide the necessary support to help LG E&C carry out its investment projects in the area, much like it has done for Korea National Housing Corporation (KNHC), which plans to develop a $900-million housing project. KNHC plans to team up with Saigon Real Estate Corporation (Resco) to build 60,000 apartments for sale to low-income people in Ho Chi Minh City.
KNHC has opened a representative office to facilitate its involvement in the rapidly growing local property market.