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|VEC has requested assistance so that it can work on reaching progress targets|
Untying the knot related to the financial restructuring scheme of five key ventures valued at VND108.87 trillion ($4.7 billion) will help Vietnam Expressway Corporation (VEC) fulfil its mission.
VEC recently requested its management authorities to seek approval of the National Assembly Standing Committee allowing the group to continue implementing the prime minister’s Decision No.2072/QD-TTg issued in 2013, regulating adjustment of the investment capital structure of five major highway projects, with VEC acting as the developer. The projects involve the construction of Cau Gie-Ninh Binh, Noi Bai-Lao Cai, Danang-Quang Ngai, Ben Luc-Long Thanh, and Ho Chi Minh City-Long Thanh-Dau Giay expressways.
Decision 2072 delivers a mechanism that industry experts say “helps VEC tackle difficulties and boosts the financial capacity in mobilising capital sources for national highway network development”. In light of this, the prime minister gave the thumbs-up to shift entire official development assistance capital (ODA) sources that are used at these five projects in the form of re-lending into direct state capital investment.
Likewise, the VND2.5 trillion ($108.7 million) sum taken from the state budget in the form of deposits to feed Cau Gie-Ninh Binh and Noi Bai-Lao Cai expressways, and another VND4.4 trillion ($191 million) sum in works’ bonds with government guarantees, will be shifted into direct state capital investment.
Other kinds of commercial loans at these five projects will continue the existing re-lending scheme as per current regulations. VEC will be collecting fees at these projects to pay back debts.
After six years of implementing Decision 2072, VEC has seen significant improvements in its operation with an average of 20 per cent growth in revenue from investment activities.
To continue implementation, VEC however faces two mechanism-related hurdles related to Resolution No.07-NQ/TW dated 2016 of the Politburo, on orientations and measures on state budget restructuring for public debt management, and Resolution No.25/2016/QH14 of the National Assembly on the national five-year financial plan to 2020, which does not allow shifting of loans for re-lending and state guaranteed loans into direct state capital investment.
Because of the resolutions, the ministries of Planning and Investment, and Finance could not include the direct state capital investment at VEC projects into annual state budget estimates, making it difficult for VEC’s operations.
In November 2018, the National Assembly enacted Resolution No.71/2018/QH14 on revising the mid-term public investment plan for 2016-2020 in which it tasks the government ‘to not distribute foreign loans to VEC’.
This means that VEC’s investment into its highway projects this year, especially those projects using ODA sources, such as Ben Luc-Long Thanh and Danang-Quang Ngai expressways, will stall due to not receiving capital for implementation. This could lead to the threat of incurring penalties due to failure in contract execution from international contractors at these projects.
VEC, therefore, has proposed that the Commission for the Management of State Capital at Enterprises and the Ministry of Transport (MoT) ask the government to continue the plan on ODA capital allocation to their highway projects.
This would ensure reaching the progress target of the projects, while minimising casting impacts on people’s life in the vicinity of the projects as well as avoiding incurring claims from foreign contractors.
VEC recently updated statistics on total investment of the five major highway projects which now fetches VND108.87 trillion ($4.7 billion), down from the VND125.57 trillion ($5.45 billion) which was previously approved by the MoT. After the update, the part of state capital investment into these projects was scaled down from VND69.8 trillion ($3.03 billion) to VND48.4 trillion ($2.1 billion).