Gov't has backup plans for North-South Expressway if no investors found: minister

09:25 | 30/12/2019
The Government has prepared a backup plan to fund the North-South Expressway (NSE) amid fears that private investors might not be financially capable of carrying out the mega project, the transport minister has said.
govt has backup plans for north south expressway if no investors found minister
Illustrative image (Source: VNA)

Minister Nguyen Van The told Dau Tu (Investment) newspaper on December 27 that he did not rule out the worst-case scenario in which no investors made it through the preliminary bidding round.

If that was the case, the ministry would immediately report to the Prime Minister and work with the National Assembly’s Standing Committee (NASC) to decide on the next move, The said.

“We will either carry on with the bidding to select the investors under the PPP (Public-Private Partnership) which will consequently result in a project delay, or ask the NASC to allow us to use the State budget for investment and earn back the money by selling the tolling rights to corporations,” he said.

“Another solution planned by the Ministry of Transport is to issue Government bonds or project bonds to carry out the projects if we can’t find the investors.”

“This is a fundamental project of the country so we’re paying extra attention to the structure quality. The whole project must be completed in line with required procedures and ensured of the quality”.

The preliminary bidding rounds for eight sub-projects of the NSE project closed last month with a total 32 investors and investor partnerships applying. The project management boards (PMUs) are scrutinising the capabilities of the potential investors.

According to Dau Tu, several PMUs had asked to extend the deadline by 15 days – the maximum amount of time permitted by the Law on Bidding.

“Apart from trying to clarify some issues regarding the financial funding agreement, the bidding team has to be extra cautious and carefully assesses the applications due to the special status of the projects,” an official of a PMU said on condition of anonymity.

Despite the deadline extension, the ministry will be able to stick to schedule and announce the results of the preliminary bidding in February 2020, said Deputy Transport Minister Nguyen Nhat.

The second and final round of bidding will open the same month to select and then announce the final winners in late July, he said.

“If everything goes smoothly, all work to pick the investors can be wrapped up by the end of August 2020,” Nhat added.

Eight sub-projects of the NSE are expected to cost 118.7 trillion VND (5.1 billion USD), of which 55 trillion VND will be funded by the State while another 63.7 trillion VND will be mobilised from investors.

How Vietnamese investors will be able to guarantee such a large amount of money has been the biggest concern so far, especially when outstanding loans of domestic banks are already very high.

According to a State Bank official speaking anonymously, transport projects under the Build-Operate-Transfer (BOT) and Build-Transfer (BT) models over the last few years usually required a large investment which led to a high demand for bank loans, but the payback period was very long.

That put pressure on banks trying to balance their credit, he said.

“So far the total amount of outstanding loans and credit agreements for BOT and BT projects already touches the banking credit limit for the sector,” he said.

“If banks can’t raise their authorised capital, it will be very difficult to facilitate funding for eight PPP sub-projects of the NSE.”

VNA

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