Foreign groups keen on transport projects

October 11, 2023 | 15:00
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While international companies are increasingly interested in Vietnam’s transport infrastructure, there remain barriers to successful market entry.

Hong Kong’s HAECO Group on September 27 worked with authorities of Vietnam’s northeastern province of Quang Ninh on the possibilities of investing in cargo terminal items, aircraft repair hangars, and more.

HAECO has over 50 years of experience, owning 16 member companies and undertaking technical services, maintenance, and repair of aircraft for more than 300 airlines around the world. The company is among several international businesses that are keen in Vietnam’s transport sector, which is working on policies to create a more favourable environment in order attract more investment in its green transition path.

Foreign groups keen on transport projects
Foreign groups keen on transport projects

Also in September, Chinese companies have been showing their interest in some transport infrastructure project in the Southeast Asian nation. In particular, China Railway Engineering Corporation (CREC) is seeking opportunities in infrastructure projects in Vietnam, anticipating growing local demand.

CREC’s chairman Chen Yun said at a meeting with PM Pham Minh Chinh in mid-September that his corporation is keen on railway projects in the development planning approved by the Vietnamese government.

CREC is the general contractor for construction projects including railways, roads, hydropower, airports, seaports, and more. The group now has over 380 branches in 105 countries, with approximately 290,000 employees.

In Vietnam, the company is the general contractor of the Cat Linh-Ha Dong rail line with a contract value of $640 million; the Dak Nong wind power project valued at over $18 million; a factory in the Mekong Delta province of Tien Giang worth $5 million; and several others. Now, it eyes the possibility of studying options for building a 388km Hanoi-Lao Cai-Haiphong railway line.

Like CREC, PowerChina is also keen on large-scale infrastructure projects in Vietnam, including high-speed railway component projects and in energy.

PowerChina has expertise in providing investment and financing, planning design, and engineering construction for clean and low-carbon energy, water resources, environment, and infrastructure. The group ranked 100th on the Fortune Global 500 list and ranked 29th of the 500 top enterprises in China last year.

The company has been present in the Vietnamese market since 2000, joining the construction of Lai Chau and Son La hydropower projects, the Vinh Tan Coastal thermal power centre, and as the general contractor for wind power and solar power projects with a total capacity of 7GW. The total contract value of these projects has reached more than $6.5 billion.

At the Global Sustainable Transport Forum 2023 in China last month with PowerChina and CREC, many international businesses expressed their strong interest in Vietnam’s infrastructure development potential, including the development of the North-South Expressway, high-speed railway projects, and more.

Vietnamese Minister of Transport Nguyen Van The said that Vietnam agrees with the notion that countries need to strengthen connectivity and jointly promote hardware-connected transportation to create greener transportation corridors.

“Vietnam is ready to negotiate, sign, and implement bilateral and multilateral transport facilitation agreements to create smooth traffic connections for a stable global logistics supply chain,” he said.

The country’s infrastructure development will create better conditions for businesses and investors, experts have said. However, while the government has taken strong steps to develop infrastructure, many issues remain in the way.

“In order for foreign investors to finance large-scale infrastructure projects, most must turn to lenders who, unlike investors, are much less risk tolerant. This is an issue that hampers successful implementation of many public-private partnership (PPP) projects in Vietnam. The key issues here are well known, and include protections around termination risk, change in law, and others,” said Duong Bao Trung from Freshfields Bruckhaus Deringer LLP.

“Several other countries have demonstrated the effectiveness of the PPP model in Asia, namely China and India. There are also numerous development finance agencies in Vietnam supporting the development of bankable PPPs,” he added.

Vietnam Railways (VNR), operator of the country’s railway system, is one example. Legal barriers have so far hindered VNR from making its next steps with potential partners, including Saigon Newport Corporation, Lotte E&C, Toyota, and others.

“Only when the legal framework for the railway industry becomes more favourable will we be able to attract investment in future development,” said a VNR official.

Expert Bui Xuan Phong added that the state must have a supporting policy, spending more resources on rail transport. “Investing in railways not only looks at economic benefits, but also looks at the way that railway development eases pressure on other modes of transport,” he noted.

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