Risk sharing discord may delay north-south expressway sections

The government had completed last year the selection of contractors for the three sections in the central provinces of Ha Tinh, Khanh Hoa and Binh Thuan. The plan was to sign contracts by the end of this month so construction could begin in June.

But the projects are stuck in negotiations, with the government and contractors yet to agree on when and how much the government will contribute, whether the government will share losses if revenues fall below projections, and whether the contractors can receive advances to kickstart construction.

Nguyen Viet Huy, deputy head of the public-private partnership (PPP) agency under the Ministry of Transport, said that the law requires contractors to pay for the construction first and the government to do its part when the work is done.

However, the contractors say that a PPP contract is a risk-sharing deal between them and the government with both sides making matching contributions.

If the government only pays up after construction is done, the contractors will face many challenges in accessing credit, with banks worried that that thegovernment’s disbursement will be delayed.

Some contractors want the government to pay interest if it is slow in disbursing funds, but current regulations don’t cover this issue.

One of the contractors, the Deo Ca Group, said there were issues with the risk-sharing mechanism. The law requires that if project revenue exceeds the amount agreed on, contractors will have to share the excess amount with the government.

But there is no regulation on what happens if the revenue is lower than the agreed amount, said Tran Van The, deputy chairman of Deo Ca Group.

Without a fair mechanism on risk sharing the contractors will be disadvantaged, he added.

The contractors also noted that their peers working on the public invested North-South Expressway sections were receiving around 30 percent of contract value in advance, while this was being denied under the PPP model.

Tran Chung, chairman of the Vietnam Association of Road Traffic Investors (VARSI), proposed that contractors receive the advance they need to prepare for building the roads.

A transport ministry spokesman said that the two sides have acknowledged issues and were continuing negotiations, hoping to finalize at least two this month.

The three sections are: the 49-kilometer Dien Chau – Bai Vot section in Ha Tinh; the 49-kilometer Nha Trang – Cam Lam section in Khanh Hoa; and the 79-kilometer Cam Lam – Vinh Hao section in Binh Thuan.

They are part of the 11 sections that make up the northern cluster of the North-South Expressway, a top priority national project in upgrading Vietnam’s infrastructure.