Financial worries knock highway sideways

How is the project’s progress thus far?

The 50-kilometre-long Cau Gie-Ninh Binh highway costs VND8.974 trillion ($433.5 million), of which VND800 billion ($38.6 million) is the chartered capital amount VEC was given from the state coffers for project’s implementation and VND8.174 trillion would be raised through bond issuances with the Vietnamese government acting as the underwriter.

Around 70 per cent of the work volume was completed and VND4.5 trillion ($217.3 million) was disbursed.

However, VEC could only raise VND1.4 trillion from bond issuances.

VEC would need an additional VND4.3 trillion (VND2.3 trillion for paying back loans and VND2 trillion for executing remaining construction works) in 2011 to open the project later this year.

Our recent attempt to raise VND1 trillion for the project through bond issuances failed due to low bond yields. Even if the government allows us to raise the bond yields we would not do so as it would harm project’s efficiency.

Is there any way out of the current situation?

VEC sent relevant reports to Deputy Prime Minister Hoang Trung Hai- head of the transport sector’s key project steering committee, the ministries of Finance and Transport.

We are awaiting further guidance from relevant government agencies to decide on the project’s progress.

Is the temporary halt to the project a waste problem?

The pause will cause big financial damages to the developer and a huge waste to the society.

As for damages, a half-done project which is worth VND4.5 trillion (of already disbursed investment capital) cannot generate profits. Besides, the developer has to pay 12 per cent interest rate per year for loans. VEC would have to pay debts amounting to VND9 trillion after five years.

If the project faces delays, traffic conditions will not be improved and losses remain unaccountable.

If the project got rolling, VEC would collect VND1.5 billion ($72,463) in toll per day.

What proposals does VEC propose to help address the dilemma?

VEC is a state-owned business which was founded by the government to engage in building highways.

VEC could not bring the project into use later this year as scheduled without active support from the government and relevant state bodies. Otherwise, we will have to temporarily stop construction.