Hanoi-Haiphong Expressway investor at risk of bankruptcy

The state has yet to pay its committed capital to Hanoi-Haiphong Expressway​​​​​​​

Vietnam Infrastructure Development and Finance Investment JSC (Vidifi) keeps petitioning the prime minister and relevant ministries and agencies about the mounting expenses of the delayed Hanoi-Haiphong Expressway.

According to Nguyen Van Tinh, Vidifi general director, in 2007 as Highway 5 was heavily overloaded, the prime minister decided to construct the Hanoi-Haiphong Expressway.

The project was completed and exploited since December, 2015. And after three years, although the Hanoi-Haiphong Expressway is the most modern expressway in Vietnam, the project developer still loses VND2.5 billion ($109,000) a day as it has taken up hefty loans for project construction, part of which was to be offset from the state budget. However, the money from the state has not arrived yet, resulting in high interest payments.

Since 2007, because of state budget difficulties, the expressway project was not invested under the PPP (Public-Private Partnership) format and changed to invest by the pilot policy. Under this format, Vidifi was allowed to borrow from Vietnam Development Bank (VDB) with the interest rate of 14-15 per cent per year in 2008-2011, and about 10 per cent in recent years. The state capital in the project will be gradually paid from the budget and can be collected from land use and land rent fees from urban areas established after the road construction.

The government promised to pay the VND4.069 trillion ($176.91 million) compensation for land clearance, as well as repay foreign principal loans ($200 million from KEXIM bank – Korea and $100 million from the German Development Bank). In addition, the prime minister allowed Vidifi to use VND4.723 trillion ($205.35 million) from the land use fees collected from the Gia Lam urban area. Also, Vidifi was allowed to co-operate with partners to implement urban projects to receive land use fees in Gia Lam urban area. However, Vidifi has not received any of these financial resources yet.

"The inability to collect fees from Gia Lam urban area may disrupt the project’s financial plan, potentially resulting in bankruptcy or failure to repay foreign loans,” mentioned Vidifi’s report.

According to Vidifi, Gia Lam urban area has basically completed the land clearance, and had its investment policy approved and received the decision of land allocation to implement the project. Meanwhile, the project investor is still conducting procedures to pay land use fees. Vidifi has asked to receive the promised land use fees as previously committed by the state.

As late payments are causing difficulties, Vidifi thinks of selling the right to collect tolls on the expressway to foreign partners. Vidifi has revealed that there are investors from Australia and the EU who are interested in the project and are considering transferring part of the Hanoi-Haiphong Expressway project.

However, through the working sessions, foreign investors were confused and have yet to enter into negotiations because of concerns about the state's commitment to support the project.

10 years since the beginning of the Hanoi-Haiphong Expressway, despite being assessed to meet international standards, Vidifi is still at the risk of bankruptcy due to delayed payments from the State.