VEC warns of risk of bankruptcy

June 07, 2018 | 17:43

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If the government does not provide bailout, Vietnam's largest state-owned highway developer could face bankruptcy after spending VND90 trillion ($4 billion) on the construction of 415 kilometres of expressways in 14 years.

Vietnam Expressway Corporation (VEC) is held up by two resolutions since 2016

VEC is currently the developer of the five expressway projects of Cau Gie-Ninh Binh, Noi Bai-Lao Cai, Ho Chi Minh City-Long Thanh-Dau Giay, Ben Luc-Long Thanh, and Danang-Quang Ngai. Four of these use official development aid (ODA) and ordinary capital resources (OCR) capital.

In 2013, the prime minister approved the transfer of the total ODA capital in these projects from re-lending to direct investment by the state. Therefore, VND2.5 trillion ($110 million) that the state budget advanced for the Cau Gie-Ninh Binh and Noi Bai-Lao Cai expressway projects would be transferred into direct investment, along with VND4.4 trillion ($194 million) of capital investment bonds issued for these two projects and their interest.

However, in 2016, Politburo’s Resolution No.07-NQ/TW dated November 18, 2016 on orientations and measures to restructure the state budget and manage public debt, and the National Assembly’s Resolution No.25/2016/QH14 on the nation’s five-year financial plan for 2016-2020 were issued.

If the transfer from re-lending into direct investment by the state had not been approved, collecting tolls from the projects would not be enough to cover the due loans and VEC would surely go bankrupt.

These two resolutions in 2016 stipulated that projects “must not convert on-lending loans or government-guaranteed loans into state budget allocation,” which will push VEC to bankruptcy unless it is bailed out by the government.

The process of transferring the ODA capital in these projects into direct investment by the state (approved in 2013) was interrupted by the 2016 resolutions and VEC requests the government for exemption to finish this process as it started in 2013, as well as maintain business operations by collecting tolls to repay loans and investing in new highway projects.

On the other hand, VEC is facing many financial difficulties because VND12.747 trillion ($562 million) of ODA capital has yet to be disbursed by the gorvernment for the corporation's expressway projects, and VND5.334 trillion ($235 million) advance payments made by the Ministry of Finance (MoF) need to be returned.

VEC chairman Mai Tuan Anh said that if the transfer from re-lending into direct investment by the state was not approved, collecting tolls from the projects would not be enough to cover the due loans and numerous projects would not be able to reach the breakeven point. In this case, VEC would surely go bankrupt.

VEC’s expressways measure a length of 550km. 415km of this has been put into operation, equalling 57 per cent of the total length of the nation’s expressways, and collected VND9.731 trillion ($429 million) so far from tolls.

By Anh Minh

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