Pacific Ocean Group Ltd (POGL) from China wants to join the transport infrastructure sector in Vietnam and invest in the North-South Expressway project under the PPP (private-public partnership) mode.

Construction work on eastern section of the North-South Expressway will start next year, and is scheduled to finish by 2021.

He said the group is considering executing the project under one of two modes.

Under one mode, EPC (engineering, procurement, construction), the Chinese contractor, will be in charge of designing, providing technological equipment and construction. Vietnam will supervise the contractor.

The other mode of investment, BOT (build, operate, transfer) will specify the responsibility of the contract in both construction and maintenance. The contractor will have to ensure the high quality of construction from the beginning of the project.

The Chinese commitments are described as good news as many investors have not shown interest in the project, mostly because of the high requirements, including stockholder equity which must be equal to 20 percent of projects’ value, slow site clearance, and the inconsistency of legal provisions.

These were the risks mentioned by Le Xuan Nghia, former deputy chair of the National Finance Advisory Council, when discussing the barriers faced by investors.

Pham Van Khoi, chair of Phuong Thanh Investment & Transport Construction, said that clearing sites has always been a big problem. Local authorities commit to allocate ‘clean land’ to investors, but then never allocate land on time. As a result, project implementation is delayed, while contractors have to pay big money for loans.

Investors have also expressed concern about the provision that they must have stockholder equity at least equal to 20 percent of project value.

Experts say that while the requirements can ensure safety for banks, it puts investors at a disadvantage because investors’ capital is limited, while the investment rate in infrastructure projects is always high.

For instance, if many investors join forces to set up a joint venture to develop a project, banks may refuse to give loans for fear that the parties will not reach a consensus.

Investors continue to hesitate because of the technical problems in site clearance and the lack of policy stability. Nghia sees another problem when state agencies set the cap on PPP  investors’ profit at 14 percent.

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Thanh Lich