Two more Vietnam expressway sections fail to entice private interest

By Doan Loan   December 7, 2020 | 08:15 pm PT
Two more Vietnam expressway sections fail to entice private interest
A section of the La Son - Tuy Loan Expressway connecting Thua Thien Hue Province with Da Nang City, central Vietnam. Photo by VnExpress/Vo Thanh.
Two more expressway projects in Vietnam should be taken off the PPP (public private partnership) shelf, the transport ministry has proposed.

The proposal was made after months of open bids attracted no interest from the private sector.

As has been reported earlier, private firms have found it difficult to access bank credit for such projects, given the risks involved.

The ministry has proposed that the investment model for two sections of the National Expressway, the 43-km National Road 45 – Nghi Son section in Thanh Hoa and the 50-km Nghi Son – Dien Chau section between Thanh Hoa and Nghe An, be shifted from private-public to public funding. Both projects are located in the central region.

This means that of 11 sections of the eastern cluster of the trans-national expressway, only three are set to be privately-funded, even though the National Assembly originally wanted eight.

Among the eight, the Vinh Hao – Phan Thiet section in the central province of Binh Thuan did not receive any bid when it opened at the beginning of the year. In June, it was re-approved as a public funded project.

In October, the northern province of Tuyen Quang also proposed that an expressway linking it with the neighboring province of Phu Tho be built with public funds after failing to attract private investors.

Experts say that funding is the biggest challenge for private sector participation in such projects.

Tran Chung, chairman of the Vietnam Association of Road Traffic Investors (VARSI), said infrastructure projects typically require large amounts of capital that can only be recouped slowly.

The long repayment time for such large sums makes banks reluctant to lend.

Another problem is that the public-private-partnership (PPP) projects have received a bad rap in recent years after residents opposed toll booth locations as well as collection, making it even more difficult for investors to recoup their investment, Chung said.

Frequent changes in taxation and management policies have also increased risks and negatively impacted the potential to attract long-term investors; and delays in disbursement of public funds is another reason for concern, he added.

Chung also said that for the North-South Expressway projects, private investors have only six months to mobilize funding, which is too short, considering the difficulties they face in this process in Vietnam.

The PPP model only works if both the government and private firms benefit from the deal, and the government needs to first establish trust if it wants to attract more money from the private sector, he said.

Echoing Chung, Phan Van Thang, deputy chairman of construction firm Deoca Group, said that although many companies are capable of building expressways, the changing policies make them worry about pouring money into a project that requires large capital and years of development.

The government can punish companies that fail to meet agreements, but there is no redress mechanism if the government reneges on its commitments, he added.

Officials expect the new Public-Private Partnership Law to attract more private investors for infrastructure development. The law, passed in June, allows the government to share financial risks with companies.

Nguyen Viet Huy, deputy head of the public-private partnership agency under the transport ministry, said investors were still waiting to see how the new law will benefit them when it takes effect next year.

Government bodies need to deal with the issue of other PPP projects that have been planned in recent years, and the government should increase financial support for road projects with traffic lower than forecast, he added.

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