Chinese investors dominate bids for North-South Expressway

The Ministry of Transport (MoT) said 30 Chinese investors have obtained documents to bid for the eight sections which are to be built under the public-private partnership (PPP) mode. Of the remaining 30, 15 are from Korea, France and the Philippines; and 15 from Vietnam.

The Chinese investors who have bid for the projects, include China Railway Construction Group and its member companies such as China Railway Construction Investment Group Company and China Railway 21st Bureau Group Company. These investors partner with some Vietnamese enterprises and have submitted bids for seven out of the eight sections.

Other Chinese firms which have submitted bids include China Port Mechanical Company, China Bridge and Road Corporation, and Yunnan Investment and Construction Group Co., Ltd.

Then there are consortiums that Vietnamese firms as members, but are led by Chinese enterprises like China Railway Construction Corporation and China Railway Construction Investment Group. These have bid for two of the eight sections.

An officer of a project management unit under the MoT, who declined to be named, said that most of the Chinese investors are very strong in terms of equity and capable of raising capital at very low interest rates of 0 to 2 percent.

Some people have argued that the tardy, incompetent performance by Chinese contractors in Hanoi's first urban railway project, the Cat Linh - Ha Dong metro route, requires that management agencies take this into consideration when selecting investors for the North-South Expressway

Nguyen Danh Huy, director of the MoT's PPP department, said that Vietnam is a member of the World Trade Organization and as such, has to ensure no member countries are discriminated against.

"An international bidding process will be organized for the eight sections to select investors in compliance with Vietnamese law and international practices. Therefore, many companies from China expressing interest in the projects is completely normal," he said.

Huy noted that the public was most concerned with the quality and progress of the projects, so the relevant state agency must issue a set of bidding documents and contracts which can exert strict management from the get-go and secure the project life cycle. "We follow the bidding law, so we don't discriminate between domestic and foreign investors." 

MoT Deputy Minister Nguyen Nhat earlier had said that the government wants to attract qualified investors for the projects. He said the criteria for awarding contracts have been carefully studied to ensure compliance with Vietnamese law and international practices. "They also aim to ensure fairness and transparent competition irrespective of domestic and international investors."

Many Japanese and European investors had earlier expressed interest in the projecs but not any of them have submitted bids. 

"Investors always calculate risk and return, so we cannot say exactly why they are absent, but we can only speculate that their concerns have not been addressed," said one expert who wished to remain anonymous.

The expert added that many Chinese investors participate because they can mobilize funds from their country at low interest rates, and thus do not need the Vietnamese government's revenue guarantees.

The eight sections with a total length of 530 kilometers will run between Son La Province in the north and Binh Thuan Province near Ho Chi Minh City. Their total cost is expected to top VND100 trillion ($4.3 billion), of which VND40.3 trillion ($1.7 billion) will come from the government.

The MoT stated that it will award contracts based on three criteria: financial capability, which makes up 60 percent of the overall score, experience (30 percent) and methods (10 percent).

The deadline for obtaining bid documents is July 10, after which the ministry will start the bidding process, with construction possibly beginning next April.

Government guarantees are among the 10 points the Ministry of Planning and Investment listed in a document it recently sent to relevant ministries and agencies to collect opinions for its PPP bill.

It said the absence of guarantees related to minimum returns and foreign exchange risks have kept investors away from large projects like the Dau Giay – Phan Thiet and Tan Van-Nhon Trach road projects.

Thus, the MPI’s proposal on government guarantees, if approved, might help remove some bottlenecks in the participation of foreign investors in major transport infrastructure projects.

The bidding process of the eight North-South Expressway sections projects in the form of PPP, according to the Ministry of Transport.