return icon

Crunch time for expressway PPPs in Vietnam

The key Eastern Cluster of the North-South Expressway venture has run aground, prompting the Ministry of Transport to reconsider investment scenarios to improve the bankability of each component project

with new alternatives opening and closing the doors for private investment.

1486p9 crunch time for expressway ppps

The North-South Expressway will stretch over an impressive 2,100km



The Ministry of Finance (MoF) has raised concerns over the limited state funding for the development of the vital national transport project after the proposal of the Ministry of Transport (MoT) to transform three of the eight public-private partnership (PPP) sections into public investment projects.

“If approved, the number of totally state-funded sections will jump from three to six, thus increasing total investment and site clearance costs to VND54.36 trillion ($2.36 billion),” the MoF said in a recent report to the government.

Meanwhile, the country’s mid-term public investment fund approved by the National Assembly (NA) is VND55 trillion ($2.39 billion). This means that there will be no funding left for the five remaining PPP sections in the 2016-2020 period. Moreover, up to now, VND16.59 trillion ($721.3 million) has been allocated for the project, with only VND6.8 trillion ($295.65 million) disbursed, which makes it unlikely that the remaining VND37.77 trillion ($1.64 billion) will be allocated and all the funds can be disbursed during this period.

The MoF’s concern is reasonable amid the current state budget constraints, although the MoT made the proposal to speed up the three PPP sections. At a recent meeting, the government agreed to the proposal in principle, but it needs to secure the NA’s approval before the projects can be kicked off in August.

This means that the MoT’s proposal – the first of three scenarios – proves less effective in raising the bankability of the projects. Although the MoT has built second and third scenarios, they are also less feasible.

As per the second scenario, the MoT proposes to transform the eight PPP sections into public investment projects, and then transfer the operation rights under operation and maintenance contracts to investors to make returns on the investment. This plan is not bankable because, according to analysis by the MoF, it is already difficult for the state coffers to arrange funding for the proposed three PPPs.

“If the first scenario is approved, the room for private investors will be narrowed, as fewer projects will be available to the same number of players. If the second scenario is selected, there will be no opportunities left at all,” Le Net, lawyer at LNT & Partners, told VIR. Recently, the Ministry of Defence has proposed the prime minister to add its Truong Son Construction Corporation to the priority list of direct contracting to develop the three PPP sections, while the names of many other powerful construction firms under this ministry were also put forward.

This makes competition fiercer for construction giants such as Vinaconex, Deo Ca Group, and Tasco JSC.

If the third scenario gets the green light, both domestic private and foreign investors will have more opportunities and maybe international giants such as Daewoo, Lotte, and Hyundai can rejoin the race. However, this scenario comes with several risks as project development would depend heavily on the results of bidding to select capable investors. If investors cannot mobilise funding, the whole project could be thrown in jeopardy.

The North-South Expressway, which is set to cover 2,100 kilometres, costs VND118.71 trillion ($5.16 billion) and has 11 sub-projects (three of which will be state-funded), is tied down by limited funds allocated from the state budget and difficulties in mobilising private investment due to the lack of supporting legal framework. Both investors and lenders want a guarantee mechanism, minimum revenue commitments, and foreign exchange conversion guarantees – all of which are missing from current rules.

While the MoT had pinned high hopes on attracting private financiers to join the project by opening international bidding, it had to cancel this because of poor results in the international prequalification round and has been forced to cater to more capable domestic groups. Mobilisation of private investment has proved difficult, as lenders still hesitate to offer loans, making bankability an issue.

Build-operate-transfer (BOT) initiatives have been a controversial topic for years in Vietnam because of the high risk of losses and the lack of a completed legal framework and risking-sharing mechanisms. A series of BOT transport schemes with better financial plans than the eight PPP sections were stuck with credit, such as Huu Nghi-Chi Lang, Van Don-Mong Cai, and Trung Luong-My Thuan. Many of them even halted construction for up to two years due to difficulties in accessing loans.

To rouse investor and lender interest, all of these problems are required to be solved. Now most stakeholders are pinning high hopes on the draft law on PPP, which will likely be submitted to the NA for approval in May. VIR

Bich Thuy

Bill clarifies legal authority for in-principle approval of PPP projects

Bill clarifies legal authority for in-principle approval of PPP projects

Legal authority for approving in principle a Public-private Partnership (PPP) project would be given to the National Assembly or the Prime Minister, according to the bill on PPP investment being crafted by the Ministry of Investment and Planning.

Expressway component projects to be shifted to public investment

Expressway component projects to be shifted to public investment

Three component projects of the North-South Expressway master plan are expected to be shifted from the private-public partnership model to the public investment model.


Supply shortage pushes up prices of many drugs

The prices of anaesthetics have increased due to supply disruptions, said insiders at some hospitals and dental clinics.

Vietnamese paragliders to fly high at World Cup

They are among the 120 best pilots in the world, gathering in Gochang, a county in North Jeolla Province.

Three police officers dismissed from force after beating teenagers

They are Captain Chau Minh Trung, Lieutenant Nguyen Quang Thai and Lieutenant Doan Tan Phong.

Vietnam has “golden chance” to welcome new FDI wave

Vietnam has a “golden chance” to attract a new wave of foreign investment, especially to economic zones (EZs) and industrial parks (IPs), according to Deputy Minister of Planning and Investment Tran Quoc Phuong.

Foreign movies generate more revenue than locally produced films

After one week of release, the film ‘Suddenly Winning the Lottery’ earned VND 71 billion and remained firmly at No. 1 on the box office revenue chart. The film is one of the foreign films generating more revenue than locally produced films.

Ministry to keep coal-fired thermal power projects

To avoid legal risks, thermal power projects in the 8th national power development plan need to be retained, especially BOT (build, operate, transfer) projects, which involve foreign investors, the Ministry of Industry and Trade (MOIT) said.

EVFTA advantages threatened by tough competition

Although Vietnam is hoping for stunning growth in seafood exports, particularly in the likes of basa fish and shrimp, the nation’s share in the EU market and utilisation of its trade deal with the bloc remain under some pressures.

Vietnam wastes 160 tons of agricultural by-products a year

If 1 million by-products in the seafood industry were processed into valuable products, they would bring in US$4-5 billion. Vietnam produces 160 million tons of by-products a year.

Vietnam records high digital banking growth

Vietnam is one of the countries with the highest growth rates in digital banking though it is still a developing economy, according to international organizations.

Shopee empire is being shaken up

Aspiring to become a super app, Shopee is facing challenges, including in the Vietnamese market.

Corporate bond market reform adds safety net for investors

The fresh and stringent legislative framework for the corporate bond market is slated to pave the way for a better debt sector in Vietnam, while the interests of issuers and investors could be safeguarded.

Call of the past

The past artisans might have not imagined that the vases they made would become special cultural values, which are being hunted and those prices paid equal many years of hard work.

Young Khmer-Vietnamese woman earns high profits from flower "massage"

In the first half of the year, Chal Thy could not succeed but finally was able to learn how to pat and massage flowers so that sweet nectar would be secreted.

Nam Dinh museum preserves traditional rural way of life

The Rural Museum, located in the tranquil village of Binh Di in Giao Thien Commune, Giao Thuy District, is about 110km from Hanoi.

M&A in Vietnam forecast to slow down in H2 2022

M&A activities in Vietnam is forecast to slow in the second half as investors become more conservative about several macro trends impacting the country’s economy.