6,000 km of expressways to be built in Vietnam

Vietnam needs a huge amount of money, as much as VND765,000 billion or US$48 billion, to develop its expressway network.

2,775 km of expressway will be completed by 2020

A project to build the Hanoi-Hai Phong expressway was approved by the Prime Minister on November 29, 2007.

The 105 km-long route will run through Hanoi, Hung Yen, Hai Duong and Hai Phong, allowing vehicles to travel at speeds of between 100-120 km per hour. With six lanes, the route will help to ease traffic congestion on National Highway No 5, which is badly in need of repair and grossly overloaded.

It will be built in the form of a BOT (Build-Operate-Transfer) project at an estimated cost of US$1 billion. As planned, construction work on the section going through Hai Phong will start in October, 2008 and it is expected to be open to traffic in September 2011.

Vietnam is expected to build nearly 6,000 km of expressways between now and 2020, according to a plan mapped out by the Ministry of Transport (MoT). Under the plan, which has been submitted to the Government for approval, nearly US$48 billion (VND765,000 billion) will be needed to develop the entire expressway network, including two North-South routes with a total length of 3,520 km.

In addition, six routes in the northern region are 969 km in total, three routes in the central and Central Highlands region, 264 km, six routes in the southern region, 834 km, and three ring roads of 286 km in Hanoi and Ho Chi Minh City will be built.

Where will the investment capital come from?

Deputy Minister of Transport Nguyen Hong Truong has said that the capital to develop the expressway network will mainly come from the State budget without contributions from the private sector. Therefore, the State should increase sources of revenue and allocate an appropriate proportion of the extra monies to developing transport infrastructure. The State needs to raise capital equal to six percent of annual GDP, with other sectors contributing half the costs to fully develop the transport infrastructure.

Revenue can be generated by adjusting petrol and oil taxes, increasing travel costs and introducing a tax on road users.

Based on a preliminary estimate, approximately 30 percent of the investment capital needed can be mobilised from ODA, 40 percent from capital sources in the form of BOT, 5 percent from issuing bonds and 20 percent from the State budget.

Tran Xuan Sanh, general director of the Vietnam Expressway Corporation (VEC) said that to build high-quality expressways needs a huge investment from the State as it requires a massive amount of investment capital and will take a long time to pay off. The investment capital can be derived from the State budget, assured loans and preferential incentives for land and taxes.

The MoT plans to set up an “Expressway fund” to actively mobilize capital for the construction of expressways. The fund will be sourced from petrol taxes or tax on various means of transport.

Deputy Minister Truong affirmed that though the Investment Law and instruction decree have been issued and have created excellent conditions for attracting capital, some forms of investment, such as BOT (Built-Operate-Transfer), are not yet included in the law.

It is also necessary to build a legal safety net to share risks on planning, policy and the project structure to ensure that investors will make a profit in the long run. Soon, the regulations and special policies for investors will be announced so that they can get involved in business activities relating to expressways, such as service stations, advertising, and urban development.

At the moment, Vietnam is learning the experiences of other regional countries when they developed their expressway networks and will use the VEC to push the project forward.

The VEC will be in charge of planning the national expressways and cooperating with other relevant agencies. It will be allowed to mobilize capital out of the State budget, receive the Government’s assurance to issue bonds and own and operate the high-quality expressways. By establishing and developing the VEC, the government can use its experience when developing other national expressways.

Private businesses are asking the MoT to finalise the legal issues on the role of the State when cooperating with the private sector to share risk to speed up cooperation between the private sector and the State to develop the national expressway network as quickly as possible.

Source: VOV