VietNamNet Bridge – The Ministry of Planning and Investment (MPI) has insisted on prohibiting state-payment BT (build – transfer) projects because of the high risks.

Under the Investment Law, BT means the investment form signed by a competent State body and an investor in order to construct an infrastructure facility; and, upon completion of construction, the investor shall transfer the facility to the State of Vietnam and the Government shall create conditions for the investor to implement another project in order to recover the invested capital and gain profits or to make a payment to the investor in accordance with an agreement in the BT contract.

The proposal by MPI relates to the later mode.

Mismanagement behind the ban?

The VND4.1 trillion BT project on upgrading the Highway 20--linking HCM City and Da Lat City has been kicked off. Under the BT contract, the government will pay the principal and interest to the investors in 2018-2022.

Prior to that, at an online conference between government agencies and local authorities in late December 2013, MPI Minister Bui Quang Vinh proposed the government to stop state-payment BT projects because of a lot of mishaps.

According to Vinh, state-payment BT contract, by the nature, means the state borrows money from investors and pays immediately. Therefore, a lot of enterprises with weak financial capability also undertake the projects though they have to borrow capital at high interest rates of up to 17 percent per annum.

With such high interest rates, the required investment capital for the projects would be very high.

MPI has every reason to propose to remove the state-payment BT investment mode. A lot of projects of this kind have seen the real investment capital double the initial estimates.

A report of the Ministry of Transport showed that in the last 3-6 years, the total investment capital of the projects increased by 180 percent on average, the figure which is much higher than the 10 percent additional estimates designed for every project.

The Hanoi People’s Committee in late 2013 decided not to implement the 41 projects approved before. In HCM City some BT projects including the Tham Luong – Ben Cat waste water treatment plant, the Binh Tien Bridge and Road project are meeting troubles in capital refund.

The proposal by MPI on stopping state-payment BT projects has been advocated by government agencies. However, investment experts think it is necessary to think carefully before making decisions, emphasizing that the difficulties in BT project management should not be the reason behind the ban.

The experts said that Vietnam needs huge capital for infrastructure projects and it should call for investment from different sources. Meanwhile, BT proves to be the investment mode that most attracts investors.

According to Le Net, a lawyer from LNT & Partners, there are two biggest problems in BT projects – the time and the investment cost management.

In many cases, the State has always been late in handing over the site clearance, investors have the right to raise the investment capital because they have to pay biggest interests for the loans.

As a result, the investment capital the state had to pay for one project was high enough for two projects. However, he believes the problems can be settled.

TBKTSG