Transactions - JUNE 12, 2019

400 miles of expressway to be built in Vietnam

by Andrea Zander

The Ministry of Transportation (MoT) in Vietnam has plans to announce the developer in August 2019, reported InfraPPP.

The project includes the development of 654 kilometers (406 miles) of the Eastern North-South Expressway in Vietnam. The expressway passes through 13 provinces and cities and consists of 11 sub-projects. Out of 11, three sub-projects will be funded by the state and the other eight will be funded through BOT (Build-Operate-Transfer) PPP model.

The BOT sub-projects include sections from Cao Bo (Nam Dinh province) to Bai Vot (Ha Tinh province); Cam Lo (Quang Tri) to La Son (Hue); Nha Trang (Khanh Hoa) to Dau Giay (Dong Nai); My Thuan 2 bridge (Tien Giang and Vinh Long). Three public investment sub-projects are Cao Bo (Nam Dinh) – Mai Son (Ninh Binh), Cam Lo (Quang Tri) – La Son (Thua Thien - Hue), and My Thuan 2 bridge (Tien Giang – Vinh Long).

Currently, MoT has approved investments for all the projects and is working on site clearance and design. All clearances and design are expected to be completed by the end of 2019.

The project’s required investment is estimated at VND118 trillion ($5.04 billion).

And recently the MoT has plans to propose to the government a draft plan on fee increases at BOT tollbooths in response to declining revenue. Fees will be raised every three years by between 12 percent and 18 percent.

The ministry has received requests from some investors, asking for fee increases; however, the government has not allowed the change.

The lack of timely solutions may lead to companies failing to sustain their initial financial plans, turning their loans into bad debts and negatively impacting the government’s call for investment in infrastructure development projects under public private partnerships (PPP), especially the ongoing North – South Expressway project.

In the first solution, the ministry will negotiate with investors and sponsoring banks to increase toll fees collected at BOT booths between 2019 and 2021. In 2019, only projects that face falling revenue will be considered.

The solution aims to secure projects’ financial plans and does not include the state budget allocated to cover the shortfall. Moreover, the increase is said to not significantly affect the transportation costs of companies.

The second solution is to maintain current fee ranges. The fee increase will only be applied to 49 mentioned projects from 2022. Some nine projects will experience failure of their financial plans and the government will have to allocate VND3 trillion ($129 million) to support them to ensure their feasibility.

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