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Untie bottlenecks to attract private investment

Major transport projects require large capital sources, which the state budget cannot fully cover fully. Capital from other sources is needed.

 

Tháo gỡ nút thắt để thu hút đầu tư tư nhân
 

 

Over the years, billions of USD have been poured into the stock market and corporate stocks. Of 60 applications for the pre-qualification round for international biddings of the eastern segment of the North-South Expressway project, 15 are from domestic investors.

Solar power projects in Vietnam attracted about 13 billion USD in private capital within one year. According to the State Bank of Vietnam, about 633,740 billion VND (27.5 billion USD) are invested in real estate projects, including capital in banks.

Recently, Ho Chi Minh City Technical Infrastructure Investment Joint Stock Company (CII) proposed building an elevated road in HCM City with total investment of 30 trillion VND. There are many other private corporations with powerful financial capacity such as Vingroup, Sun Group, Xuan Thanh... If they join the government, capital for transport infrastructure development in HCM City would be abundant.

The Public Private Partnership (PPP) Law has been passed by the National Assembly, which is expected to attract resources beyond the budget for infrastructure development, including transportation projects. But state capital is not allowed to exceed 50% of the total investment, so PPP projects are still less attractive to private investors.

Ho Chi Minh City has more advantages than other localities in terms of conditions and application of specific mechanisms. However, it will be unable to attract foreign investors without a risk guarantee mechanism, especially for projects with long payback periods.
It is necessary to have a "breakthrough" policy to mobilize ODA capital or capital from the WB, ADB, IMF... to be able to make use of domestic resources.

PPP is a form of public-private partnership, also a long-term cooperation model, in which the public and private sectors need to share not only benefits but also risks. To attract private investors in transport infrastructure projects, HCM City should engage in publicity, transparency and harmonization of interests of the parties, and a policy of guaranteeing risks and profits for investors so that it is higher than the bank interest rate.

Fair competition

Tháo gỡ nút thắt để thu hút đầu tư tư nhân
 

 

The State can perform site clearance in advance, allocate capital in advance or when the investor mobilizes capital. For projects that have not attracted investors for a long time, the State should use budget capital to prepare investment proposal procedures and publicize detailed information on the national bidding network so that not only domestic but also foreign investors can easily access information about these projects. Also, the people who benefit and pay the service fee also know the relevant information.

Once there are many investors involved, there will be fair competition. At that time, biddable will be organized to select investors with good capacity and strong economic potential. The level of risk guarantee depends on each project, with priority given to projects with a long payback period, but investors must also accept the risk caused by their own faults.

In addition, it is necessary to have policies to support investors to issue corporate bonds, and construction bonds to mobilize resources from society and other investment channels, rather than passively waiting for capital from banks.

Capital from land fund

The PPP Law has abolished the form of BT (built-transfer), but local governments, with the role of management and administration, can still exploit the land fund where transport projects are implemented and organize land auctions to raise capital for transport projects.

Ho Chi Minh City has successfully implemented this model, using land 15m wide on each side along Nguyen Huu Tho Road (Nha Be district). For metro line No. 1 in HCM City, the public land along this route is considered a source for raising funds for other transport projects in the city. There are also many sites of public land in HCM City available for auction to raise funds for develop the city’s transport infrastructure.

From now on, relevant agencies should think about auctioning land fund along metro lines, urban railways, HCMC - Moc Bai expressway, national highway expansion projects and ring roads 2, 3, and 4.

In addition, they can combine development of urban areas and industrial zones with road construction as Binh Duong and Long An have done.

Tran Van Tuong

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