Boosting PPP Investment in Expressway Projects in Vietnam

Over the years, transport infrastructure projects invested in the form of PPP have played an important role in the nation's socioeconomic development. Vietnam will strive to have 5,000km of highways by 2030 and the room for road transport infrastructure is huge for development, thus opening up many opportunities for PPP transport investment projects.

Each year, Vietnam needs to spend an average of about US$25 billion on infrastructure development. Only State funds will be certainly not enough to cover all the needs of infrastructure development. Therefore, it is necessary to maximize and effectively mobilize private resources. To attract the private sector, it is necessary to have effective and consistent mechanisms, policies, implementation and management from central to local levels to ensure harmony of interests between the public and private sectors. The introduction of the PPP Law is considered a huge policy push to engage the private sector in infrastructure investment.

One of the important infrastructure projects is North-South Expressway. The practical implementation of PPP projects exposes certain shortcomings that need to be resolved promptly and thoroughly, showing the attention and support of the State in shaping a fair investment environment and building up the confidence of investors and financial institutions to encourage them to participate in the country's transport infrastructure network development.

The Government submitted a report to the National Assembly's Standing Committee on proposals to remove obstacles for eight operational PPP projects and BOT contracts whose investors are facing the risk of going bankrupt because they cannot collect fees or suffer a sharp drop in revenue. Proposals include premature termination of contracts and arrangement of payment for investors.

Mr. Ngo Truong Nam, General Director of Deo Ca Group - the investor of Deo Ca Tunnel Project, one of eight projects in difficulty, said, this project includes a chain of tunnels (like Deo Ca Tunnel, Co Ma Tunnel, Cu Mong Tunnel and Hai Van Tunnel) and uses seven toll stations to recover the investment capital, including one on La Son-Tuy Loan Highway.

La Son-Tuy Loan Expressway was planned for official operation in 2018 but it was behind schedule while changes in legal policies led to the failure in toll collection. The investor has not been able to arrange the funds to cover the project since 2018 while it still has had to fulfill its debt repayment obligations. The Government proposed supplementing the State budget of VND2,280 billion to provide the fund for the project.

Some projects have also experienced a sharp decline in revenue because they cannot collect tolls, including the Thai Nguyen-Cho Moi BOT Project (Bac Kan province), which consists of two components - Renovation and upgrading of National Highway 3 and construction of the new Thai Nguyen-Cho Moi Highway, which was put into use since 2017. As traffic toll collection is not allowed on National Highway 3 but on a new section, its revenue met just 8.7% of the given financial plan as of August 2022.

Authorities should soon take measures to remove them, not only to rescue stuck projects and save investors from bankruptcy but also to create public confidence to engage other sectors in PPP investment projects, especially national and local important projects.

Source: Vietnam Business Forum