HCM City considers calling for “new styled” PPP investment

VietNamNet Bridge – Calling for non-state investment sources to develop infrastructure projects is now the top priority for HCM City.

HCM City, PPP, investment

HCM City has sent a document to relevant ministries, asking for the permission to call for PPP (private public partnership) investments in some key projects, including the Rach Chiec Bridge, the road linking the east belt road with the Hanoi Highway, and the bus terminal.

PPP unfamiliar to enterprises

According to Bui Xuan Cuong, Deputy Director of the HCM City Transport Department, no investor has planned to build transport infrastructure works under the modes of BT (build and transfer), or BOT (build, operation, transfer).

Cuong said the mode of BT was only attractive to enterprises in the past, before the real estate market got frozen. It has become no more attractive to them.

Under the mode, investors pay their money to implement the projects and would get money back from the State. In the current economic difficulties, it would be very difficult for the State to fulfill the commitments of paying money to investors after the works are completed.

BOT projects also cannot attract investors, because the current regulations do not allow setting up too many stations which collect transport fee.

The State needs to share profits and risks

According to Vice Mayor Nguyen Thi Hong, 12 percent of the investment capital for infrastructure items is sourced from the city’s budget, a sharp reduction from 20 percent in the past, which shows that HCM City has been making every effort to call for non-state investment sources.

In fact, several infrastructure projects have been developed under the mode of PPP. The project on building the Phu My Bridge that links the district 7 and district 4 is an example. The city’s authorities came forward and guaranteed for the investors to borrow capital from foreign credit institutions.

In other projects, HCM City spent money on the site clearance to give “clean land” to investors to implement the projects.

However, analysts said this is just the “PPP at early development stage,” where the State stayed outside and created favorable conditions to investors to implement the projects. Meanwhile, the state did not share profits and risks with the investors.

Le Binh, a senior executive of CII, an infrastructure developer, said it is now necessary to legalize the involvement of the state in the PPP invested project. This would help encourage investors to spend money and resources on infrastructure projects which require huge capital and bring high risks.

Three barriers

Also according to Binh, there are three problems the investors are interested in most.

First, infrastructure projects always require huge capital. Therefore, the state needs to set up detailed regulations on guaranteeing for investors to borrow money, especially from ODA sources.

Second, the State should prioritize to reimburse money to joint stock companies which issue shares, to attract more resources from the public.

Third, the State needs to organize bidding to find suitable investors for PPP. The state only controls the quality of projects and the total investment capital, while enterprises should be given the power to take initiative in implementing the projects.

Thanh Mai
HCM City, PPP, investment