Committed to transport funding aims

Minister of Transport Nguyen Van The

Last year saw several sections of the eastern cluster of the North-South Expressway project kick off, both involving state funding and the public-private partnership model. Amid the ongoing pandemic and limited funding, what are the key factors to advancing these efforts?

The global health crisis has made serious impacts on socioeconomic development in Vietnam and beyond. In its wake, the government issued a number of measures and solutions to help businesses with the dual mission of containing the virus and developing the economy.

For transport, the prime minister issued Directive No.11/CT-TTg last March, focusing on solutions and measures to accelerate public investment disbursement and fast-track the completion of infrastructure projects to spur economic development.

The eastern cluster of the North-South Expressway is the arterial axis, playing an important role in the country’s socioeconomic development. The Ministry of Transport (MoT) has been determined to kick off, develop, and complete the project to serve that development.

With drastic directions from the National Assembly (NA), the government, and collaboration among ministries, agencies, and localities, the transport sector strives to deal with difficulties to fulfill the set tasks, especially making all necessary resources available for the development of the North-South Expressway’s eastern cluster.

Despite having more favourable policies, private investment and foreign capital inflows into the transport sector remain lower than expected. What are the possible solutions to increase its attraction in the coming months?

First and foremost, we need a complete and stable legal framework. The Law on Public-Private Partnership Investment, which took effect on January 1, is an important legal framework with a number of new regulations and policies to encourage private investment. However, decrees and circulars guiding the law should be issued soon to bring the law into full play.

Secondly, the selection of public-private partnership (PPP) projects should be carefully considered to ensure feasibility and bankability. Transport projects often have huge total investment, and long investment returns. Therefore, to ensure their efficiency and to attract investors, state involvement and state capital is very important. Moreover, state funding in PPP transport projects must be arranged in public investment plans to ensure the initiative and prevent possible impacts on their developments.

Next, selection of investors should be made via transparent bidding to ensure that selected investors must be capable of financial capacity and experience. Also, site clearance should be carried out first with state funding so that cleared land can be handed over after the selection of investors to facilitate project developments.

Lastly, it is necessary to have appropriate policies on credits for transport infrastructure PPP projects. Transport infrastructure is a public asset, so investment mobilisation should be considered a kind of assistant funding with soft lending rate. Also, commercial lending rates shold not be applicable for them. In addition, it is important to build policies to diversify channels of funding mobilisation from investors.

In addition to the measures, the MoT believed that dealing with the challenges facing build-operate-transfer transports will have positive impacts, while creating confidence and favourable environment to attract private investors to join future infrastructure transport projects.

At present, the regulations on PPP investment includes guarantee policies on minimum revenue and foreign currency exchange. The MoT will work with other ministries and agencies, submitting to the government measures and solutions to improve the business climate to increase its attraction to foreign ventures, especially in unblocking international credits in project developments.

Will the open-market commitments in landmark free trade agreements (FTAs) like that between the European Union and Vietnam, as well as the Regional Comprehensive Economic Partnership, help brighten the picture of both private and foreign investment in the transport sector?

Overall, Vietnam’s signing of such FTAs will increase trade and investment ties between Vietnam and other member countries of the deals, thus inevitably growing demand for transportation and freight in different means of transport. This will create huge opportunities for the sector’s development.

Moreover, the commitments related to transportation in the FTAs will also create market-entry opportunities for international financiers to venture further into the transport sector, including investment in infrastructure and services, especially in the context of growing development of the transport market driven by increasing international integration.

At the same time, they also strengthen the legal foundation for Vietnamese businesses to study market expansion possibilities, including in the logistics market. In addition to that, enforcement of the FTAs opens the chance for Vietnam to approach advanced technologies, to learn from experiences about governance and administration, and to upskill and create more jobs in the transport sector.

Despite the advantages, some challenges will come. Growing participation in the local market will create competition pressures on Vietnamese players, especially in the logistics sector. In fact, Vietnam’s open-market commitments in transport and logistics in the FTAs are not too different with those made in the World Trade Organization.

Vietnamese transport businesses have been informed about the FTA commitments and those in the transport sector in particular so as to make plans for their business changes, and improvement of competitiveness.

With Vietnam implementing the Socioeconomic Development Plan for the 2021-2025 period and the Socioeconomic Development Strategy for 2021-2030, what are the opportunities for businesses and investors in the transport sector?

The draft development strategy during 2021-2030 sets three goals: continuing to accelerate the comprehensive development of infrastructure with some key projects; focusing investment on key national infrastructure projects, especially those in transport, energy, and digital infrastructure so as to deal with the bottlenecks in socioeconomic development, while intensifying cooperation with the region and the wider world; and developing an expressway network which includes investing in and upgrading airports, especially nationally-important ones.

By 2025, the country aims to complete the North-South Expressway’s eastern cluster. And by 2030, the country strives to have around 5,000km of expressways, while also developing Long Thanh International Airport and expanding Noi Bai International Airport. Vietnam will also invest in seaports to improve their capacity.

In addition, the country will carry out some routes of the North-South High-speed Railway project; develop transport connections with economic zones, industrial parks, airports, and seaports; and fast-track the progress of urban railway projects in Hanoi and Ho Chi Minh City, thus dealing with transport bottlenecks.

One of the measures to successfully realise the goals are to complete the legal framework, as well as strengthen PPP processes in order to attract private investment in development of infrastructure and supply of public services.

The MoT holds that together with the completion of a legal framework on PPP investment, demands for transport infrastructure development are huge. At present, the ministry is gearing up the completion of necessary procedures to kick off construction of Long Thanh International Airport; boosting the building of sections of the North-South Expressway project to complete the whole network for the southernmost province of Ca Mau; and the creation of other expressways, beltways, and some other important routes in order to materialise the set goals.