North-South expressway project lacks potential investors

SGI

After announcing the cancellation of international bidding, the Ministry of Transport recently decided to go for domestic bidding in order to looking for investors for the BOT (build-operate-transfer) North-South expressway project.

A section of Long Thanh-Dau Day expressway.

A section of Long Thanh-Dau Day expressway.

But once again, the second bidding went unnoticed as many private investors did not want to spend capital on the BOT projects.

Talking with Saigon Investment on this issue, Associate Professor Dr. Nguyen Quang Toan, former head of the Road Subject at the University of Transport, said that there was no lack of capital, but the important factors were the bidding conditions. It has not been attractive enough for potential investors.

Therefore, it has not yet found investors interested enough in undertaking this project. For about VND 118,000 billion to build the North-South expressway, the State budget will contribute VND 55,000 billion, and the rest VND 63,000 billion will be mobilized from the private sector through eight BOT North-South expressway projects.

JOURNALIST: - Sir, what do you think about the cancellation of the international bidding for the BOT North-South expressway?

Dr. NGUYEN QUANG TOAN: - The reason for canceling the international bidding for the BOT North-South expressway is because not many investors were able to pass the preliminary selection stage, and competitiveness was not high enough. This means that the eight BOT projects of North-South Expressway were not really attractive to the investors.

Therefore, the Ministry of Transport must reconsider the problems of the North-South Expressway project, if they don't want to fail yet again. In order for the BOT North-South Expressway projects to be more attractive, the Ministry of Transport must change the bidding conditions in a way that would be more beneficial to investors. BOT bidding is like selling a product, it can be sold at a high price if many people want to buy.

In short, whether a BOT project is attractive or not, it is in the eyes of investors, not in the eyes of the Ministry of Transport who make the project. The ministry only gives the first article, but investors will evaluate the opportunity to participate in the project, so that the two sides meet. Cooperation is needed to make changes accordingly. There are difficulties in organizing bidding at this time as BOT issues are not resolved and banks strictly control capital for BOT projects.

With the BOT transport project, the State needs to carefully calculate the benefits gained in cash and virtual benefits, to decide investment. A road via BOT can improve infrastructure, improve investment environment and promote development. These benefits cannot be obtained by BOT investors, so there is a need for cooperation between the State and the private sector, to share risks to promote development.

- After the Ministry of Transport announced that it would hold a domestic bidding to select the North-South Expressway investors, many domestic investors expressed their concerns about difficulty for bank loans to do the project. What do you say about this?

- It must be affirmed that when the State does not have enough capital resources to build the North-South expressway, it is forced to call for investment capital. Difficulty in raising capital partly shows investors' weak financial capacity, and its inability to raise enough capital for the project. The state lacks resources, so it is necessary to find investors with strong financial resources to do the projects, but it is unable to lower financial requirements to select weak capacity investors.

Domestic investors have experience in BOT but have financial difficulties, but they can fully cooperate with investors with sufficient financial resources to do the projects. We have struggled with domestic investors to have many opportunities to do the North-South expressway, but investors who cannot raise capital should not participate in the bidding.

Therefore, in order to attract more private investors, the State may change the bidding selection requirements in a more open way. The private sector must also make efforts to assert its role. Thus, it is State and private investor cooperation.

- Among the 60 sets of applications for pre-qualification for international bidding in the North-South expressway project, only 15 sets of documents were submitted by domestic investors who had experience in BOT. What does this show?

- Investors who have experience such as Deo Ca Investment Group, Tasco Joint Stock Company, Son Hai Group Co., Ltd, Phuong Thanh Construction and Investment JSC, and Hung Thang Group JSC, have the advantage of experience in doing BOT projects, but it will be difficult to mobilize more resources from equity capital or loan capital from commercial banks to make these eight BOT North-South expressway projects. This is also a fact that should be considered when organizing domestic bidding to select investors for the BOT North-South Expressway in October.

The last bidding for the BOT North-South Expressway did not attract much attention from domestic investors, partly because of some strict bidding conditions. However, it must be acknowledged that there have been too many risks for investors who have implemented BOT projects in the past.

These are the terms that have been signed in the BOT contract which are not complied with by the parties; the bottlenecks of the BOT project have not been thoroughly resolved by the authorities in the direction of protecting the lawful interests of investors; state agencies still use administrative decisions to intervene in the process of collecting and raising fees of BOT projects; and there is not yet a strong enough legal framework for BOT at the legal level because the draft PPP Law (public-private partnership) is still awaiting National Assembly approval.

These barriers discourage private investors. They do not want to invest in BOT, so no new investors with strong financial strength can participate in the bidding for the BOT North-South Expressway.

- The amount of VND 63,000 billion mobilized from the private sector to make the BOT North-South expressway project is not too large compared to the hundreds of thousands of billion dong of private capital proposed to invest in thermal BOT power projects recently. In your opinion, what is the difference between transport projects and thermal power projects?

- Investment capital in thermal power BOT projects has increased so fast that the transmission system cannot cope. The reason is from profit of BOT project in each field. Thermal power BOT projects, despite the risk of fluctuations in fuel prices, depreciation of machinery, all electronic products are consumed. The investor has sufficient economic benefits through the sale of all electricity output to the State.

With BOT in transport sector, investors cannot get all benefits from the project, they can only get a part of economic benefits from the fee collection and other benefits such as infrastructure improvement, investment environment, regional linkages, that contribute to economic growth of localities, BOT investors cannot obtain. Therefore, public-private cooperation is needed to promote local development. 

- So, in your opinion, what should you do to make the upcoming BOT North-South expressway bid more efficient, and can the State find investors with financial capacity to do the projects?

- The State cannot do everything such as in the fields of infrastructure development. Cooperation between the State and the private sector in infrastructure development is needed. In order to succeed in investing in the BOT North-South expressway project, state agencies also need to improve the institutional framework for BOT investment; resolve problems related to BOT; create a ground that is attractive enough; ensure competition and fairness; protect the interests of BOT investors to arouse the confidence of private investors; and thereby promote private capital flows to develop transport infrastructure.

- Thank you very much.

Ha Phuong

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