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More capital needed to build 5,000km of expressway in Vietnam

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To fulfil the goal of building 5,000 km of expressway by 2030 under the plan approved by the Government, it is necessary to have specific policies to attract investment.

According to the road network plan for the 2021 – 2030 period, with a vision to 2050, approved by the Prime Minister in September 2021, by 2030 Vietnam will have about 5,004 km of expressways, an increase of about 3,841 km compared to the present. By 2050, the expressway network will be basically completed with 41 routes, totaling about 9,014 km.

The planned expressways include the North-South axis with two roads, one running from Lang Son to Ca Mau with a length of about 2,063 km and another road with a length of about 1,205 km, with 4-6 lanes.

In the Northern region, there will be 14 roads, totaling about 2,305 km, with 4-6 lanes. The Central Region – Central Highlands will have 10 roads, about 1,431 km in length, with 4-6 lanes. The Southern region will consist of 10 expressways, about 1,290 km in length, with 4 – 10 lanes.

Hanoi will have three routes, totaling about 425 km, with 4-6 lanes. Ho Chi Minh City will have two routes, about 295 km in length, with 4 – 8 lanes.
The planning gives priority to building some key roads, including the north-south expressway in the east from Lang Son to Ca Mau, expressways connecting the northern region, the central region with the Central Highlands, the Southeast region and the Mekong River Delta, and the ring roads of Hanoi and Ho Chi Minh City.

Tran Chung, Chairman of the Vietnamese Association of Road Systems Investors (VARSI), said the plan on the expressway network had been thoughtfully developed in line with the country’s socio-economic development plan. However, in the past 20 years, only 1,200 km of highways were built in the country. It is a challenge to realize the plan of building 3,800km of expressways within the next nine years.

Nguyen Van Thanh, former chairman of the Vietnam Automobile Transport Association, said the lack of a highway system will hinder the country’s economic development.

“To promote economic development, transport infrastructure, including expressways, must be invested in and developed one step ahead. In our country, the railway system is too backward, so the expressway system must be completed soon,” said Thanh.

830,000 billion VND needed

Nguyen Xuan Cuong, Deputy Director General of the Directorate for Roads of Vietnam, said that currently the country has only 1,163 km of highways, while it plans to have 5,000 km of expressways by 2030. Thus, to achieve the goal, Vietnam will have to invest up to 813,000 billion VND to build more than 3,800 km of highways.

To mobilize the capital, the state will spend more than 500,000 billion VND of state capital and attract the remaining 300,000 billion VND from private investment through the form of public-private partnerships (PPP) and part of it from ODA.

However, according to Cuong, under the PPP Law, the proportion of state budget in each project cannot exceed 50% of the total investment. This regulation raises difficulties for road projects with low traffic volume and prolonged toll collection times. Investors and credit institutions are not interested in investing in such projects.

To solve the problem, the Ministry of Transport has proposed amending the PPP Law, under which the proportion of budget capital will be adjusted in a flexible manner. Accordingly, for a BOT (build – operate – transfer) project with low vehicle traffic, state capital can be increased to 60% and vice versa.

Investment projects in the form of BOT are only feasible when the toll collection period is less than 30 years. If this period is over 30 years, the state needs to contribute more than 50% of investment capital to ensure project feasibility, Cuong said.

Besides calling for BOT investment, the PPP form can also effectively raise resources from infrastructure assets invested with budget capital through concession of operation rights. Expressway projects invested with budget capital, after completion, can organize tenders for or handing over the right to collect tolls to have money to reinvest in new projects. Cuong said that through BOT projects on National Highway 1, it is estimated that about 12 trillion VND of tolls can be collected from more than 2,000 km of BOT roads each year. This is a good source of capital for expressway projects.

Raising capital from the people

Chung added that calling for investment in transport infrastructure through PPP cannot rely too much on banks. In fact, out of eight North-South expressway projects under construction, only three projects are financed by banks. To mobilize more capital for highway construction, the State should study and establish a transport infrastructure fund to attract social resources for investment loans. This fund can mobilize resources from people at interest rates that are higher than those of banks (7-8%/year) and re-lend the capital to traffic project investors at lower interest rates than current banks (9- 10%/year).

“South Korea has successfully raised capital through the Traffic Infrastructure Fund to build highways. For Vietnam, with more than 96 million people, it is not difficult to raise billions of US dollars for highway construction. But the policy must encourage people’s participation,” Chung said.

Thanh said that raising capital for transport infrastructure development is always a big issue, even with developed countries like South Korea, China and others.

However, with high political determination and appropriate policy mechanisms, in just a few years these countries completed tens of thousands of kilometers of highways. This helped these countries have rapid socio-economic development in recent years.

By Vu Diep – VietNamNet Global – February 2, 2022

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