Vietnam should bring in private capital to finance transport infrastructure: HSBC

By An Hong   November 1, 2016 | 05:11 pm GMT+7
Vietnam should bring in private capital to finance transport infrastructure: HSBC
Laborers at a construction site in Hanoi on March 16, 2016. Photo by Reuters/ Nguyen Huy Kham

The state budget will not be able to cover the country's transport needs.

HSBC has encouraged the Vietnamese government to seek out private companies to build, operate and maintain infrastructure such as roads, bridges and public buildings.

In its latest report on infrastructure spending in the Southeast Asian region, HSBC said Vietnam’s spending in the past 10 years had consistently accounted for 5 percent of gross domestic product.

The bank forecasts that as the economy expands, Vietnam will need to continue to allocate a huge part of the state budget to publicly run and financed infrastructure projects between now and 2030.

Vietnam will need to invest 10-12 percent of gross domestic product to boost infrastructure in the years to come, including the newly-approved north-south highway project estimated to cost VND230 trillion or 5 percent of GDP.

But with a budget deficit of 6.1 percent of GDP last year, Vietnam will not have the funds for these projects, the bank said, adding that Vietnam has been in more severe financial distress than other countries in the Southeast Asian region.

The World Bank and IMF have also urged Vietnam to tighten its belt in the face of sharp increases in public debt.

Vietnam’s public debt nearly doubled to VND2,608 trillion ($116 billion) in 2015 from VND1,393 trillion in 2011, according to official statistics.

Last year’s public debt was estimated to stand at 62.2 percent of GDP, which was relatively close to the ceiling of 65 percent set by parliament.

According to HSBC, under soaring budget constraints, it would be a good idea for the government to turn to the private sector to bankroll its infrastructure needs.

Public-private partnerships, better known as PPPs, can offer a way to get around the limited budget, said HSBC.

The bank suggested in order to increase the number of PPP projects, Vietnam should continue the privatization of state-owned companies in the infrastructure sector.

Over the past two years, the government has divested its entire stakes in several construction companies, said Vu Anh Minh, head of the Enterprise Management Department under the Ministry of Transport.

The Transport Ministry is planning to divest from many large corporations this year including Cienco 5, Cienco 6 and Cienco 8.

About 140 transport infrastructure companies have gone public over the past five years, 50 percent higher than the target set by the ministry, official data shows.

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