Expressway giant VEC owes over $3.8 billion

VEC has accumulated losses that are six times as high as is allowed by the Ministry of Transport

The liabilities of VEC in 2019 have surpassed VND87 trillion ($3.8 billion), up VND7.7 trillion ($0.33 billion) compared to the beginning of 2018. According to VEC's audited financial statement in 2018, total liabilities have accounted for 90 per cent of its total capital and have been rising ever since.

The expressway giant owes the Asian Development Bank (ADB) VND31.2 trillion ($1.36 billion), Japan Bank for International Co-operation (JBIC) VND28.96 trillion ($1.26 billion), and the World Bank VND5.4 trillion ($0.23 billion).

Most of these loans were used to fund expressway projects like Noi Bai-Lao Cai, Long Thanh-Dau Giay, and Danang-Quang Ngai and had terms of 16-40 years. However, the contracts are often valued in US dollar and Japanese yen and, in addition to interest and fees, VEC recorded a loss of VND2.1 trillion ($91.3 million) from currency exchange rate differences.

This loss causes a 390-fold decrease in after-tax profit compared to last year, approximately VND3 billion ($130,500), while both revenues from expressway tolls and interest from bank deposits are increasing. However, the losses are six-times higher than what is allowed by the Ministry of Transport.

Last year, VEC set a target of VND3.4 trillion ($147.8 million) in revenue and VND365 million ($15,870) in profit. Of these, revenue from expressway tolls was to account for 92 per cent of its revenue structure, with the remaining part coming from interest on capital contribution and bank deposits.

The financial statement estimated that the Noi Bai-Lao Cai Expressway contributed VND1.28 trillion ($55.6 million) of VEC's revenue in 2018, while the Ho Chi Minh City-Long Thanh-Dau Giay Expressway fetched VND981 billion ($42.6 million), the Cau Gie-Ninh Binh Expressway VND646 billion ($28.1 million), and the Danang-Quang Ngai Expressway VND229 billion ($9.95 million).