HCMC thirsts for private infrastructure capital

14:10 | 16/04/2019 Finance - Banking

(VEN) - In a bid to draw additional private funding for major infrastructure projects, Ho Chi Minh City is reassuring investors that conditions for investment will be far more attractive in the long-run.

hcmc thirsts for private infrastructure capital

“The city urges foreign organizations and companies to be patient and continue their investment and cooperation with the city,” said Ho Chi Minh City People’s Committee Chairman Nguyen Thanh Phong at a March 27 international workshop on public private partnerships (PPPs) in the environment, water, health and education sectors.

The city, Phong promised participants, would work with ministries and departments to complete legal documents and adjust them in order to “make changes to turn the city into a long-term destination for investors”.

Phong explained that PPP cooperation was vital due to the city’s shortage of funds for public infrastructure and services, with the number of such projects accounting for only five percent of public investment projects. The city budget accounts for only eight percent of the city’s total investment fund, said Le Thi Huynh Mai, deputy director of the Ho Chi Minh City Department of Planning and Investment.

World Bank Country Director for Vietnam Ousmane Dione said that to ensure success, Vietnam must recognize PPP as a long-term cooperative model in which both the private and public sectors share benefits and risks. If benefits and risks are not allocated equitably, prospects of failure are high.

Ho Chi Minh City is currently engaged in several PPP infrastructure projects. These include four main roads in the Thu Thiem New Urban Area with total investment capital of VND12 trillion, the nearly VND10 trillion project on dealing with tidal flooding in the city, and the VND3.1 trillion Thu Thiem 2 Bridge project.

Some of the PPP models used so far in Ho Chi Minh City include build-operate-transfer (BOT), build-transfer (BT), and build-own-operate (BOO).

PPP models help reduce pressure on public debt, develop infrastructure synchronously, and create strong competition among economic sectors. However, their implementation faces many challenges that need to be addressed in order to improve investment efficiency and draw additional capital.

Victoria Rigby Delmon, senior counsel at the Water Supply and Sanitation Global Practice of the World Bank, said the city has limited experience in investment and development. Most of its projects are either chosen from particular sources or proposed by investors, especially BT projects, in which all agreements are made between the investor and the city, which lead to a lack of transparency and competition.

Sebastian Eckardt, a World Bank economist based in Ho Chi Minh City, said it was necessary to improve accountability in public services and strengthen management of public debt and fiscal risk.

Ngoc Thao