BT projects need clarity in regulations

(ĐTTCO) - Saigon Investment had run an article in July on various problems affecting Build and Transfer (BT) projects in Ho Chi Minh City, and how some projects under this form of investment have been shelved or put on hold as the State has failed to clear funds to complete them. Saigon Investment now looks further into these problems.

Phan Dinh Phung Sports Center has been shelved for last ten years due to dispute with investor.

Phan Dinh Phung Sports Center has been shelved for last ten years due to dispute with investor.

Payment methods lack clarity

The People's Committee of Ho Chi Minh City recently notified the investors constructing the parallel road to the Long Thanh Highway that the City authorities would take back the land allotted for this purpose from the Nam Rach Chiec Company Ltd and the Tien Phuoc Real Estate Joint Stock Company. This BT road project was planned for completion in two stages connecting to the Ho Chi Minh City-Long Thanh-Dau Giay Highway.

The first stage of this project was designed to cover the length of 2.7 kms, connecting Mai Chi Tho Street in District 2 to Do Xuan Hop Street, and the second stage was intended to cover 600 meters, joining D11 Street to Road Belt 2. The project was expected to be completed in two years from the day of ground-breaking. When completed, the roads would connect Nam Rach Chiec Residential Area to the Ho Chi Minh City-Long Thanh-Dau Giay Highway, and Mai Chi Tho Street to Road Belt 2, helping to ease traffic congestion at the An Phu intersection in District 2.

Under the above agreement, the People's Committee of Ho Chi Minh City was to hand over to the investor a land area of about 14.8ha in An Phu Ward in District 2. From this 14.8ha land area, 8.8ha was intended for residential and commercial use and also for office space, while the remaining land would provide public utility facilities. Some people later expressed the view that the exchange of 14.8ha of clear land for the construction of these roads was a great loss to the State, because the price the City authorities set was much lower than the amount the investor put into building the roads. Hence, the People's Committee of Ho Chi Minh City on 12 February 2020 issued Document 117/UBND-NCPC to temporarily stop the payment for this BT project.

Another BT project that has been lying shelved for nearly ten years is the construction of the Phan Dinh Phung Sports Center at 8 Vo Van Tan Street in District 3. This project is located on a golden piece of land in District 3, facing Pasteur Street, Nguyen Dinh Chieu Street, Nam Ky Khoi Nghia Street and Vo Van Tan Street on four sides. In 2007, the City authorities had decided to build a new international standard sports center there to be able to host big international tournaments. The project was expected to be completed between 2010 and 2012.

At that time, the Prime Minister had agreed to Ho Chi Minh City selling the existing house and land at 257 Tran Hung Dao Street in District 1 to pay the investor, who supposedly was to be paid an amount of about VND 989 bn. In 2013, the cost of the project rose to nearly VND1,352 bn, and City authorities offered to add another land plot along Phan Van Dat Street in District 1 to pay the investor the additional amount. Soon after that, the project design changed, raising the cost to nearly VND 2,000 bn.

Due to problems in further payments, construction on the project could not get underway. The Phat Dat Company said the agreement previously stated that the investor would get payments from City authorities in the form of two land plots in District 1, estimated to be worth as much as the investment cost. After the construction cost increased, however, the value of the two pieces of land failed to equal that of the investment cost. Additionally, the investor thought that the project had not taken off because of a regulation introduced in 2018 to reconsider use of public land as payment method to investors.

In October 2019, the Government issued Decree 69/2019 providing guidelines for use of public property as payment to investors, applicable to BT projects. Under this decree the project was again set to restart. However, a representative of the Phat Dat Company said that so far legal procedures are not yet complete and the company was still awaiting instructions from competent agencies and the People’s Committee of Ho Chi Minh City.

Categories of BT projects

Between 2011 and 2015, the total social investments in Ho Chi Minh City were valued at about VND 1.18 trn, almost amounting to 31.7% GRDP of the City. The amount increased much more between 2016-2020 to reach around VND 2.1 trn, almost 35% of GRDP. Ho Chi Minh City is currently launching 22 projects at a total investment capital of VND 64,244 bn; completing investment procedures for 166 projects with a total investment capital of VND 324,770 bn; and calling for investments in 293 projects in transportation, environment, healthcare, culture, education and other fields, with a total capital of VND 910,426 bn.

In BT investment projects in the period 2015-2017, the City raised VND 20,338 bn from the private sector, with investments in infrastructure, bridges, roads, water, environment and resettlement housing, making significant contribution to the socio-economic development of the region. The BT projects were carried out mainly by domestic investors, or joint ventures between domestic and foreign investors or just foreign investors alone.

However, the legal grounds for BT projects still face some problems, and some policies and laws are not supportive enough. The enforcement of legal regulations on BT projects is still lax, or there are even legal loopholes which are likely to cause loss to public properties, especially land properties and work premises. In contrast, some BT project investors have received unfair benefits in both build and transfer activities. They received pieces of land or work premises as payment for investments, and they used these to implement other projects. This caused a lack of transparency and unfairness in the business environment.

During a recent survey of City projects, Mr. Vo Van Hoan, Vice Chairman of the People’s Committee of Ho Chi Minh City, said that the committee had directed relevant agencies to review all projects that are in the pipeline. Currently, there are three kinds of projects. The first are BT projects which are in their final stage and which will continue to progress. The second are BT projects which have had their contracts signed and are being implemented and which will continue to be carried out in accordance with Decree 63/2018/ND-CP, but the payments will be made in accordance with Decree 69/2019/ND-CP.

The third set are BT projects which have been brought to a temporary halt. The People’s Committee of Ho Chi Minh City is now preparing the process of implementing these projects, and is further requesting the central Government to introduce procedures that will make ministries and competent agencies collaborate in facilitating these projects in the future.

Do Tra Giang

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