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Private capital could aid major transport projects: experts

The North-South Highway will be around 2,100km long, run through 32 provinces and be built in three stages.

Vehicles on the HCM City-Trung Luong Expressway. Transport experts agreed that users must pay tolls for roads built with private investment.
Vehicles on the HCM City-Trung Luong Expressway. Transport experts agreed that users must pay tolls for roads built with private investment.

The 650km first stage to be completed by 2020 will include 11 sub-projects and cost an estimated VND104 trillion (US$4.52 billion).

But only VND40 trillion ($1.74 billion) will come from the Government’s coffers.

The rest will come from a public private partnership (PPP).

Even mighty economic hub HCM City faces a similar resource crunch, and will be able to meet only 10 per cent of the VND500 trillion ($21.74 billion) required for its urban transport infrastructure in 2016-20.

According to a report from the Ministry of Transport, in the past five years, transport infrastructure expansion has not met the society’s needs despite developing strongly.

Due to limitation in capital, the existing transport system has not received proper maintenance and the situation has hindered exploitation capability.

In 2016–20, the sector requires VND952.8 trillion (around $42 billion) but the Government can only provide VND292.5 trillion ($12.8 billion) or 31 per cent.

“This is a major hurdle for the transport sector to meet its development goals,” a ministry spokesman told Thanh Niên (Young People) newspaper.

Dr Vu Anh Tuan, director of the Viet Nam–Germany Transport Research Centre, said: “Build – Operate – Transfer (BOT) and other private capital mobilisation models for infrastructure are internationally popular.

“No country, whether rich or poor, can build its entire infrastructure using public funds. In developed nations, only one third comes from the government and the rest is from private sources or FDI.”

He explained that there are two kinds of transport infrastructure: ordinary, which can meet the essential needs and is funded mainly by the government or overseas development assistance; and another lead the development and create surplus value for economy.

The Government cannot fund the latter and it has to invite the participation of the private sector, he said.

“Both kinds of transport infrastructure are important.”

Transport experts all agreed that users must pay toll for roads built with private investment.

“This is the international trend and we have no other choice,” Tuan said.

“In Vietnam, many people complain about BOT but it depends on the management by the Government. If everything is clear and proper, people are ready to pay fees.”

Some BOT projects like the Ha Noi – Lao Cai, HCM City – Long Thanh and Ha Long – Hai Phong expressways have promoted economic growth, he said.

“BOT transport projects have been efficient. This is a good sign, but there are still many challenges that worry private and foreign investors.”

Dr Pham Van Hung, deputy head of the Southern Transport Science and Technology Sub-institute, said: “BOT is an important capital mobilisation channel for transport development considering the budget cannot meet infrastructure development needs.”

In case, there is a shortage of funds and a transport infrastructure project is delayed by three years, its cost would go up by 50 per cent causing all-round loss, he pointed out.