Capital planning for mammoth Hanoi-Can Tho expressway upgrading and expansion project is put under the microscope in anticipation of a National Assembly review for bond financing.
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Under Document 2738/BGTVT-KHDT the Ministry of Transport (MoT) submitted to the prime minister in late April 2013 regarding capital resources for 17 road sections under 1,887 kilometre long Hanoi-Can Tho expressway upgrading and expansion project the capital need will be offset through issuing government bonds.
These road sections have failed to attract private equity capital for implementation. Accordingly, the MoT proposed the prime minister source National Assembly approval for government bond issuance to handle the project.
Earlier, in its January plan the MoT wanted the capital for handling these 17 road sections will be offset using project bonds with the government acting as the underwriter and the Vietnam Development Bank acting as distribution organization.
However, this January plan was viewed as unfeasible by the Finance, Planning and Investment inter-ministries. “The project bonds issued by businesses could hardly be feasible despite enjoying the government guarantee since bonds would incur high distribution expenses against low credibility rate,” stated MoT chief Dinh La Thang.
In light of MoT’s April plan, in respect to National Highway 1 expansion project’s 1,887km Hanoi-Can Tho section, except 27km long Ninh Thuan-Binh Thuan section the entire route would consist of 37 projects, including 17 projects under build-operate-transfer (BOT) form stretching 562km at an estimated investment of VND42.502 trillion ($2.02 billion); two projects using state budget capital which are in the development pipeline covering 60km valued at VND3.387 trillion ($161 million) and 17 projects (as mentioned above) sourcing government bond capital stretching 678km with a total investment capital of VND47.843 trillion ($2.2 billion).
Thanks to financial incentives, sourcing capital for BOT projects has proven favourable. As of April 18, 2013 the MoT had kicked off the construction of six BOT projects after they found investors. “The MoT is ramping up efforts to be able to start construction of remaining BOT projects in the second quarter of 2013,” said Deputy Minister of Transport Truong Tan Vien.
For projects intended to go underway using government bond capital, the MoT is basically finalising appraisal work. “Difficulties in handing the April plan involves to sourcing National Assembly approval since National Highway 1 is not listed among projects eligible for using government bond capital,” said deputy chairman of Vietnam Bridge and Road Association Nguyen Ngoc Long.
Long stressed the need for BOT and government bond funded projects going parallel to boost capital usage efficiency. To address capital woes, the MoT also seeks government approval to appoint several capable businesses to handle urgent road sections, first using their investment capital, then later getting refund.
Under the April plan, construction of a bypass and road expansion stretching over 627km sourcing government bond capital will be completed in 2013. Expansion of the remaining 1,038km and road surface enforcement will be completed before the end of 2016.
