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HCMC struggles to attract foreign investors for key projects

By Dat Nguyen   January 14, 2021 | 04:45 pm PT
HCMC struggles to attract foreign investors for key projects
A train of the Ben Thanh Suoi Tien Metro Section in Ho Chi Minh City. Photo by VnExpress/Quynh Tran.
HCMC says it has been struggling for years to attract foreign investment for key infrastructure projects, with legal challenges and risks discouraging investors.

Of 11 key infrastructure projects that the city had sought to find foreign investors for by the end of last year, 10 received no mention of interest, according to a recent report the city has submitted to the Ministry of Planning and Investment.

Most of the 11 are public transport infrastructure projects that seek to reduce chronic traffic congestion in the city of 13 million people. They include three elevated roads, two monorails, an electric bus route and a metro route.

The only project that found a foreign investor was the $3.5 billion Vietnam International University Town which was approved for development by Malaysian real estate company Berjaya Land Bhd in 2008. However, after 10 years of delays, the company sold the project to local real estate firm Vinhomes in 2018.

The report quoted by local media mentions several difficulties in finding the right investors with deep pockets and capability, considering that the projects have big price tags and require high expertise.

Discrepancies in different sets of laws concerning public-private partnership investment and tightened requirements for accessing Official Development Assistance loans make the task more challenging, the report says.

Duong Nhu Hung, a lecturer at the School of Industrial Management at the Ho Chi Minh City University of Technology, said the risks involved is the main reason for investors’ reluctance.

Difficulty in land clearance and acquisition, as has been seen often in infrastructure development across Vietnam, is among the biggest risks, with most developers facing roadblocks in this step, which could eventually result in losses, Hung told local media.

The lack of a financial risk sharing system poses another challenge as investors are not guaranteed if the project runs into difficulties, he said.

Vietnam’s new Public-Private Partnership Law has taken effect this year, but specific guidance on its implementation and the adverse reputation of past projects are making foreign investors reluctant, experts have said.

Another challenge is that HCMC is unable to acquire more loans from the Official Development Assistance funds and international organizations like the Japan International Cooperation Agency (JICA) and the World Bank due to high public debt.

The city has listed seven projects that it is still seeking foreign capital for, four metro lines and three major complexes.

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