Spiky path for private funding of future transport initiatives

Vietnam wants to see 3,000km of expressways up and down the country within three years, Photo: Le Toan

The Government Office on February 14 issued Document No.42/TB-VPCP on the investment preparation for expressway projects in the 2021-2025 period, in which Deputy Prime Minister Le Van Thanh has asked relevant ministries, agencies, and localities to complete preparations on schedule to facilitate the National Assembly’s approval in May.

Many actions have been taken to gear up preparations for new projects this month, including Bien Hoa-Vung Tau Expressway, Khanh Hoa-Buon Ma Thuot Expressway, and others.

Specifically, for the Beltway 3 and Beltway 4 projects, relevant ministries and agencies are asked to make reports to the prime minister in February and to complete all procedures for submission to the Politburo and the National Assembly before March 20.

For the eastern cluster of the North-South Expressway and the Long Thanh International Airport project, leaders of the Ministry of Transport (MoT) have held a number of meetings this year and taken many fact-finding trips to quicken preparations.

Once completed, it is hoped that the expressway will significantly contribute to economic recovery and socioeconomic development for the remainder of the decade and beyond.

Also in 2022, many airport projects will be carried out, including the upgrading of Phu Bai and Con Dao airports, the construction of Terminal T3 of Tan Son Nhat International Airport, and a new terminal at Cat Bi Airport. Meanwhile, many expressways in the southeastern region, the Mekong Delta region, and others connecting seaports, industrial parks, and economic zones are also being prepared.

MoT Minister Nguyen Van The said, “In the context that the state budget is still limited, the MoT would consult with the government on projects’ execution following the Law on Public-Private Partnership Investment, thus helping relieve the burden on the state budget and strengthening the private sector’s resources, including foreign loans, ensuring to soon have in place the best transport system.”

Hyundai Engineering Vietnam, TAIYU Vietnam, Lotte Engineering and Construction, and others are eyeing opportunities to join new transport projects.

In particular, Lotte is venturing further into the Vietnamese transport infrastructure segment, with the metro lines in Hanoi and Ho Chi Minh City among the focus of expansion. The company is also interested in the North-South Expressway, the North-South High-Speed Railway, and Long Thanh Airport.

According to the Infrastructure Working Group of the Vietnam Business Forum, its members both support and welcome the progression of key infrastructure projects that will support the development of local economies and internal trade.

A representative said, “Members in particular commend and support the progress of the following projects: the dredging of the Cai Mep channel that will increase the competitiveness of Cai Mep Port; Ring Road 3; Ben Luc-Long Thanh Ring Road and Phuoc An Bridge connecting the Southern Key Economic Region to Cai Mep Port; and development of new and additional cargo capacity at Long Thanh International Airport.”

However, the road for private investors to join the projects remains tough. Tran Chung, chairman of the Vietnamese Association of Road Systems Investors, told VIR, “Private businesses and investors still find it hard to venture into transport projects, especially key national ones due to legal barriers, especially bank loan guarantees.”

He said that during 2021, when the long-awaited Law on Public-Private Partnership Investment took effect, less private investment was poured into the sector. The failure to attract qualified investors and solving the problem related to bank loan guarantees for eight sections under the public-private partnership (PPP) model under the eastern cluster of the North-South Expressway project in 2016-2020 is an example.

Among those, the Cam Lam-Vinh Hao section successfully found a financial source in 2021. Meanwhile, the Dien Chau-Bai Vot PPP section had a credit loan contract signed this month, making it the last PPP of the venture to achieve this. “The PPP model can only be feasible if legal barriers, especially the bank loan guarantee, is solved,” Chung noted.

According to a representative from the American Chamber of Commerce, the pandemic has highlighted the importance of infrastructure writ large, particularly transportation and energy infrastructure, to maintaining economic growth and resilient supply chains.

“Our members value the investments Vietnam is making to improve transportation infrastructure, including ports, airports, roads, and bridges. We recommend additional measures to streamline customs clearance and other port logistics procedures, as well as consideration of more flexible entry procedures for air cargo personnel,” the representative added.

The MoT has proposed using state funding for the 12 new sections of the expressway. To fast-track the implementation, in Resolution No.18/NQ-CP dated February 11, the prime minister decided on direct contracting in 2022 and 2023 for engineering packages for sections.

Like the North-South Expressway project, many others are in a similar situation, thus hindering private investment inflows into them.

Vietnam is now home to over 1,160km of expressways, which is one of the lowest ratios of kilometres per population in Southeast Asia.