North-south expy incentives meant to lure foreign investors

HANOI – The Ministry of Finance has approved strong financial incentives proposed by the Transport Ministry for the North-South Expressway project in a move to attract capable investors, especially those from abroad. Such incentives are aimed to minimize risks for investors wanting to get involved in this big-ticket project.

The Government has offered multiple financial incentives in preparation for inviting tenders for 20 component projects, with 17 of them under the build-operate-transfer (BOT) investment format, in the first phase of the project.

In particular, the Transport Ministry is allowed to raise toll fees in the project’s feasibility study and contract. Especially, fee adjustments can be more flexible and will not have to follow the Finance Ministry’s prevailing regulations.

Inflation of around 4% a year can be factored into toll fees. Besides, the return on equity is allowed at 14% a year, or 2-3 percentage points higher than those applied to other BOT projects.

The disbursement of investors’ capital and bank loans will follow the rates specified in their contracts in line with the progress of their projects. In other words, investors will not have to contribute their capital once upon issuance of investment certificates as regulated for other projects.

These financial mechanisms are mainly designed to attract international investors, as previous regulations have kept potential investors at arm’s length due to high risks of slow capital recovery.

The suggested return on equity ratio is about 2.15 times higher than deposit rates at commercial banks, also with the aim of luring foreign investments.

As covered in the Daily on Tuesday, the Ministry of Transport has proposed a slew of policy incentives for the North-South Expressway project.

These include the State Bank of Vietnam’s commitment to allow investors to access bank loans, while the transport ministry can apply various types of investment formats and contracts in the project that is divided into multiple components.

The ministry also asked for the Government’s permission to appoint consultants responsible for drawing up the project’s feasibility study and technical design, as well as consultants offering appraisal services for the project in phase one.

The project with four to six traffic lanes and allowing for speeds of 80-100 kilometers per hour will require an estimated VND312.4 trillion (US$13.7 billion).

The main section from Hanoi City to HCMC has 1,622 kilometers in length, of which 123 kilometers has been opened to traffic, including the Phap Van-Cau Gie, Cau Gie-Ninh Binh, and HCMC-Long Thanh-Dau Giay sections. Besides, work on the 127-kilometer Danang-Quang Ngai section is underway.

In phase one, work on some 713 kilometers is divided into 11 sub-projects, with eight public-private partnership (PPP) and BOT ones, and three others under the public investment format in 2017-2020. Besides, around 659 kilometers is developed under nine BOT sub-projects from 2011 to 2025.

The second phase from 2025 onwards is intended to extend the North-South Expressway in accordance with the project’s approved master plan.

Source: The Saigon Times