North-South Expressway: domestic investors fear foreign competition

By Doan Loan   July 6, 2019 | 10:40 am GMT+7
North-South Expressway: domestic investors fear foreign competition
A section of the Da Nang - Quang Ngai Expressway which will be connected to the North-South Expressway. Photo by VnExpress/Dac Thanh.

Vietnamese investors fear experienced foreign counterparts with deep pockets will outmatch them in bidding for North-South Expressway contracts.

Vu Duc Nhan, deputy CEO of transport firm Phuong Thanh Tranconsin Jsc, told VnExpress that the Ministry of Transport requires an investor to have an owner’s equity of 20 percent of the cost of a North-South Expressway project.

This means that if a project costs VND5 trillion ($215 million), an investor needs to have VND1 trillion ($43 million) in owner’s equity. 

The investor also needs to have experience in a similar project in scale, he added. "Very few Vietnamese companies have that money. Only some have recently invested in major national highways."

A tightened credit policy on build-operate-transfer (BOT) projects is adding to the burden, Nhan said. Banks are charging an annual interest rate of 11 percent, higher than the 7.8 percent the Ministry of Transport estimated earlier when calling for investors.

Many BOT projects are struggling to collect enough tolls due to lower traffic than estimated, making investors reluctant to take on expressway projects, he added.

Echoing Nhan, Tran Van The, deputy chairman of major transport investor Deoca Group, said few Vietnamese companies have participated in projects of VND4-5 trillion ($172-215 million). "This means there's little chance for domestic investors. Only by lowering requirements will they have an opportunity."

Economist Ngo Tri Long said that the country has seen bad examples of domestic investors having to sell a project to another due to their incapability, therefore the requirements are necessary. "We treat investors fairly. Better let a foreign investor take the project if they can do it better."

The Ministry of Transport said it will stick to the regulations. Nguyen Danh Huy, head of the Department of Public-Private Partnership Management under the ministry, said that requirements for the North-South Expressway have been made according to government regulations, and both Vietnamese and foreign firms must follow them.

A domestic investor who lacks capability could partner with another domestic or foreign investor, he added. 

Forty investors have acquired bidding documents for eight Public-Private Partnership (PPP) sections of the North-South Expressway, according to the transport ministry. They comprise 26 domestic and 14 foreign firms from South Korea, France, the U.K., Hong Kong and mainland China.

The ministry will select suitable investors based on three criteria: financial capability, which accounts for 60 percent of overall score, experience (30 percent) and methods (10 percent).

Deadline for securing bidding documents is July 10, after which the ministry will start the bidding process for the eight PPP components.

The government will cover land acquisition costs, and tolls will be set according to a specific frame and remain unchanged for years.

It has specified 11 components of the North-South Expressway among its top priorities this year. Three of them are publicly funded and the rest will be built under PPPs. Work on the eight PPP sections could begin next April, the ministry had said earlier.

The 11 sections are expected to cost VND118 trillion ($5.06 billion), with VND55 trillion ($2.36 billion) sourced from the state budget.

Together, the projects will cover 654 kilometers of the 2,000-kilometer expressway, starting from northern Nam Dinh Province to Vinh Long Province to the southwest of Ho Chi Minh City.

 
 
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