PPP investment in transport infrastructure: Flexible mechanism needed

14:30 | 22/12/2014 Investment

(VEN) - The government and the Ministry of Transport want to attract investment in transport infrastructure via public-private partnership (PPP). However, this requires better policies and a favorable investment environment for both domestic and foreign investors.

Lack of transparent regulations

According to the Ministry of Transport, it recorded only 22 projects with a total investment capital of about VND49.61 trillion in 2012. However, the figure increased to 24 with a total investment capital of VND68.56 trillion in 2013 and VND42.57 trillion in 2014. The capital is expected to increase to about VND45 trillion in 2015.

According to Deputy Minister of Transport Nguyen Hong Truong, about VND235 trillion worth of non-state-budget capital is expected to go to transport infrastructure projects during the 2016-2020 period. The ministry will call for private investment in construction of roads, North-South Railway, Long Thanh International Airport, seaports and inland waterways. Huge capital investment is needed for the 2014-2020 period. Given insufficient state budgets, the government is determined to mobilize domestic and foreign private capital to develop infrastructure.

PPP investment in transport infrastructure is important but how to attract investment in this area is still a question. According to Senior Director for PPPs of the World Bank Group Laurence Carter, major obstacles to PPP investment are related to land prices, traffic risks and loans from banks in addition to non-transparent policies related to land acquisition, resettlement and insufficient forecast.

Deputy Chairwoman of the Indian IL&FS Transportation Networks Ltd. Sindy Wong said that Vietnam lacked rules, institutions and laws to develop PPP investment. Vietnam is developing strongly and is also facing many challenges in infrastructure development investment like many other countries.

Measures suggested

Economic experts and representatives of ministries and businesses have suggested a series of solutions to attract PPP investment in infrastructure development. Head of the Ministry of Transport’s PPP Project Management Unit Nguyen Danh Huy said, “We will announce a list of PPP investment projects, promote franchise policies to create investment resources and set up a fund to support PPP investment projects. We will also adopt international practices related to finance and costs. For example, existing circulars on fee collection need to be adjusted in a transparent manner.”

Deputy Director of Investment Department under the Ministry of Finance Le Tuan Anh said, “A PPP investment mechanism is necessary and a specific PPP model are necessary in Vietnam. Particularly, PPP projects in the transport sector should be good to lure private investors as these projects need huge and long-term capital and face high risks.”

According to Sindy Wong, stable mechanisms and policies must be considered first when attracting PPP investment. The government and related ministries must work together to make clear policies on PPP projects implemented through joint venture models towards transparency and cost saving. PPP models can be applied in potential areas such as energy, transport, market development, education, tourism and construction of urban infrastructure, seaports and airports.

Several business representatives also suggested the need to put in place clearer land management mechanisms and better policies to address investor risks and contractor punitive and remunerative sanctions.

In response, Minister of Transport Dinh La Thang asked the ministry’s affiliates to closely manage costs, ensure the progress and quality of PPP projects and make them available for public monitoring and supervision. According to Dinh La Thang, the ministry is directing the drafting of PPP transport projects to attract various domestic and foreign investment resources. These drafts will be reviewed and evaluated by relevant authorities for better adjustment of related policies on investment in transport./.

By Duy Minh

Theo ven.vn