HCMC struggles to attract private investment in sports, cultural projects

By Vien Thong   December 13, 2023 | 08:36 pm PT
HCMC struggles to attract private investment in sports, cultural projects
A ballet adaptation of Nguyen Du's "The Tale of Kieu" performed at the HCMC Opera House on June 20, 2020. Photo by VnExpress/Thanh Nguyen
Ho Chi Minh City has approved 23 public-private partnership (PPP) sports and cultural projects, but experts are worried that private investors are hesitant to support them.

The projects aim to build, renovate, or upgrade performance arts centers, theaters, and sports facilities, but there's a growing concern about their appeal to private sector investors.

The revenue to cost ratios for some theater and stadium projects are not enough for investors to pour money into, said Vu Tu Thanh, deputy regional managing director of the U.S.-ASEAN Business Council, an advocacy group that promotes trade ties between the U.S. and ASEAN members.

Thanh pointed out that the revenue-to-cost ratios for some theater and stadium projects aren't sufficient to attract investment. He highlighted that, unlike in other countries where private sector thrives in these areas, price regulations in Vietnam pose significant risks for investors.

"In many countries, sports and cultural projects are predominantly funded by the private sector, which often profits significantly from this model. However, in Vietnam, price regulations on these projects introduce considerable risk for investors," he explained.

"In other countries, the government does not usually invest in sports and cultural projects, leaving it up to the private sector, which makes a lot of money from this arrangement. But in Vietnam, these projects are subject to price regulation, creating a huge risk for investors," he explained.

These factors drive private investors away from such PPP projects, Thanh concluded.

Le Dinh Vinh, Director of Vietthink law firm, noted the reluctance of investors to finance new theaters and stadiums, considering the limited profit potential from ticket sales alone.

Echoing this, Ngo Thanh Tung from Vietnam International Law Firm remarked that the social welfare nature of these projects means a long road to profitability for investors.

This reliance on government grants makes these projects less attractive to profit-seeking investors, Tung added.

Thanh and Vinh proposed alternative approaches, such as encouraging investments in renovating existing facilities which require less initial funding, and allowing the private sector to operate these facilities for better maintenance and utilization.

Karasawa Masayuki, a representative from the Japan International Cooperation Agency’s Vietnam office, suggested that HCMC authorities explore models beyond the current build-transfer (BT) format.

He recommended considering the build-operate-transfer (BOT) model, where investors operate the project for a period before transferring it back to the government, as it may offer more incentives for private investment.

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