Lawmakers call for private sector involvement in North-South Expressway construction

By Anh Minh May 25, 2020 | 08:20 pm PT

A section of the La Son - Tuy Loan Expressway, connecting Thua-Thien Hue Province with Da Nang City, which will be linked with the North-South Expressway. Photo by VnExpress/Vo Thanh.

The North-South Expressway should not be built using public funds since the country seeks to involve the private sector in infrastructure development, lawmakers said.

Their exhortation follows a government proposal to cancel the bidding for eight packages, all build-operate-transfer (BOT) ones, seven of which have attracted private investors in the preliminary qualification round. It has said the private bidders cannot raise the required funds.

In a release, the National Assembly Standing Committee warned the cancelation would affect the reputation of the government and the future operation of the expressway.

Allowing private firms to build and operate the expressway under public-private partnership (PPP) mode is a key policy, especially at a time when the National Assembly is considering the Public-Private Partnership Bill, it said.

The government had previously said that private investors have trouble getting credit from banks to fund infrastructure projects. For the highway packages, it estimated they need to borrow VND35 trillion ($1.5 billion), a large sum which could take years to get.

Though seven of the packages have at least two private bidders, none of them is a large corporation. Minister of Transport Nguyen Van The said though these bidders are construction firms with experience in building transport infrastructure, they could have difficulty raising the large sums of money required.

A Transport Ministry report said using public funding could result in interest savings of VND19.2 trillion ($823 million).

The eight packages are part of a total of 11 to build the expressway, a top priority national project to upgrade Vietnam’s outdated infrastructure. Work on the remaining three sections, using public funding, is underway.

Last year the ministry had tried to find foreign investors for the eight projects in the form of PPPs, but very few got through the qualification round, which meant low competition. The ministry then decided that only domestic investors would be asked to bid to also "ensure national security and expand Vietnamese firms’ capability in infrastructure construction."

Many foreign companies, especially from Europe, Japan and the U.S., said the absence of government guarantees related to minimum returns and foreign exchange risks kept them away from large PPP transport infrastructure projects.