Vietnam struggles to find investors for trans-national expressway

By Dat Nguyen   April 29, 2018 | 01:18 am PT
Vietnam struggles to find investors for trans-national expressway
Investors are reluctant to invest in the north-south expressy because of unsatisfactory legal frameworks.
Local investors can’t raise enough funds while foreign ones find the project too risky.

Vietnam is struggling to attract private sector funding for the trans-national expressway due to unfavorable regulations, according to a recent workshop.

In November last year, Vietnamese lawmakers urged the construction of 11 sections of the north-south expressway to be completed by 2021 at an estimated cost of VND118 trillion ($5.2 billion).

Concerns over public debt, however, only allow the government to cover 25 percent of the project’s cost while investors are reluctant to pour money in, experts at the joint workshop by the Ministry of Transport and the World Bank said on Thursday.

"Unlike traditional projects, the north-south expressway requires the involvement of public-private sector cooperation, and commercial funding,” Vietnam News quoted Achim Fock, acting country director of World Bank Vietnam, as saying.

But interested local investors have been having trouble raising enough funds since the government passed a rule requiring them to own at least 20 percent of total investment instead of the previous 10 to 15 percent.

Investors say banks refuse to give them such big loans because of shortage of long-term credit.

“Until now, transportation projects in Vietnam have only been invested by local investors and credit institutions on a small scale,” said deputy transport minister Nguyen Ngoc Dong, as cited by Giao Thong (Transport) Newspaper.

The new requirement was originally issued to rule out incompetent investors, a concern previously voiced by international investors and the World Bank.

But that’s not enough for Vietnam to attract foreign investors who view the country’s infrastructure projects as risky, largely because the country lacks a guarantee mechanism that would ensure government intervention in case of losses, Dong said.

According to Dong, foreign investors are ready to pour in the funds but first, Vietnam needs to make the international bidding process transparent and incorporate a risk sharing mechanism.

“We need to build a consistent legal framework so projects can go ahead and attract new funds,” Dong said as cited by Thanh Nien.

Currently, the law on public-private partnership investment has yet to be enforced and existing regulations are conflicting.

Should the government fail to attract private funding, Dong said the transport ministry will consider channeling all investment from public funds and letting private companies bid for the right to manage tollgates.

The Ministry of Transport plans to start construction of the highway by the end of 2019.

The 11 sections of the north-south expressway will stretch 654 kilometers (406 miles) from Nam Dinh Province near Hanoi to Vinh Long Province to the southwest of Ho Chi Minh City.

It is part of the ongoing 2,000 km long transnational expressway which is set to be finished by 2025.

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