Expressway could be closed off to foreign investors

June 25, 2020 | 09:00
Despite the National Assembly’s approval to keep the public-private partnership investment model for five sections of the Eastern Cluster of the North-South Expressway, the opportunity for foreign investors like Taisei, Daewoo E&C, Lotte E&C, and Hyundai E&C to join the long-awaited project remains unclear, while disbursement and bankability remain a concern.
1497p6 expressway could be closed off to foreign investors
Speeding up the constructon of the Eastern North-South Expressway was important to drive economic growth

A resolution was passed last week by the legislature on adjusting the country’s scheme to develop several sections of the Eastern Cluster of the North-South Expressway. Three out of eight sections will be shifted from the public-private partnership (PPP) investment format to state funding – Mai Son-National Highway 45 (63 kilometres), the Vinh Hao-Phan Thiet Highway (106km), and the Phan Thiet-Dau Giay Highway (98km).

The remaining highway projects – including National Highway No.45-Nghi Son (43km), Nghi Son-Dien Chau (50km), Dien Chau-Bai Vot (50km), Nha Trang-Cam Lam (29km), and Cam Lam-Vinh Hao (91km) – will remain subject to the PPP funding model.

The decision was made following strong debate involving NA deputies several days ago when the majority agreed with the conversion. Phung Van Hung, member of the NA Economic Committee said, “It is the optimal scheme as it can help fast-track the development of the Eastern Cluster of the North-South Expressway.”

Experts also supported the scheme, saying that the vote will be good news for potential financiers, especially domestic giants like Vinaconex, Deo Ca Group, and Tasco as well as international ventures such as Taisei, Daewoo E&C, Lotte E&C, and Hyundai E&C.

However, it is unclear if there are any opportunities for these international groups to participate in this project, as Minister of Transport Nguyen Van The has confirmed that only domestic contractors shall be eligible for the bidding for construction of the remaining sections of the North-South Expressway this September.

Lotte E&C, a famous South Korean construction firm with a strong footprint in Vietnam, told VIR, “We are not sure about the bidding type. We were interested in two sections of the project, but we’ll check the situation of it.”

Lotte E&C is also keen on two other proposed projects – namely the Yen Vien-Lao Cai railway and a wastewater treatment plant project in Ho Chi Minh City.

International bidding for the North-South Expressway was cancelled last year because of poor results in the pre-qualification round. Foreign investors expressed their serious concerns over the poor PPP legal framework in addition.

Disbursement and bankability continue to be a problem, however.

The Eastern Cluster of the North-South Expressway covers a total of 2,109km and is costing nearly VND120 trillion ($5.2 billion), including 11 sub-projects and eight previously-planned PPP sections.

Despite being a key national transport project for the 2017-2020 period, it has been delayed for months due to stagnant site clearances. Other works are also tied down by sluggish disbursement, and difficulties in mobilising private investment due to the lack of a legal framework. The Ministry of Transport (MoT) has so far kicked off three state-funded sub-projects – Cao Bo-Mai Son, Cam Lo-La Son, and My Thuan 2 Bridge.

According to Minister The, the MoT has thus far allocated about VND17 trillion ($740 million) for this venture. In 2018, VND134 billion ($5.8 million) were disbursed for project planning and design.

In 2019, nearly VND7 trillion ($305 million) were disbursed, and this year over VND8 trillion ($350 million) are planned for allocation. So far, around VND2.7 trillion ($117 million) have been disbursed for the two sections of the project, making up 27 per cent of this year’s total allocation.

Regarding Mai Son-National Highway 45, Vinh Hao-Phan Thiet Highway, and the Phan Thiet-Dau Giay Highway, the country is estimated to need an additional VND5 trillion ($217 million) for the conversion. For the five PPP projects, it is necessary to mobilise over VND22 trillion ($957 million).

“We are closely co-operating with local authorities to speed up site clearances. We will strive to disburse all allocated capital this year,” said Minister The.

Hoang Quang Ham, member of the NA’s Committee for Finance and Budget, raised his concern over feasibility of the remaining five PPP sections as difficulties in bank loan access are causing challenges in the selection of investors and state budget constraints.

By Tung Anh

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