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2022 is predicted to be the year of high-speed investment when a series of projects will either start or complete. The current bright picture brings positive signals for the recovery of macroeconomics, especially in the real estate market. However, fear of instability is also a matter of concern for observers.
Highway construction in Vietnam: current situation
After quite a long time without new investment, Mr. Tran Chung, Chairperson of the Association of Traffic Construction Investors, said that highway infrastructure is showing good signs as many enterprises want to invest or research the expressway projects. Specifically, in January 2022, the National Assembly approved the investment plans for 12 North-South highway projects in the East in the 2021-2025 period. The 12 projects have a total cost of VND 146,990 billion in the form of public investment and site clearance.
What’s more, Vingroup will consider the investment in Gia Nghia – Chon Thanh expressway, while Deo Ca Group will invest in Dong Dang – Tra Linh and Huu Nghi – Chi Lang expressway. To support this, The Ministry of Transport has just provided Vingroup and Techcombank with approval to prepare a pre-feasibility report for the North-South West expressway construction investment project, section Gia Nghia (Dak Nong) – Chon Thanh (Binh Phuoc) under PPP method. The consortium shall submit the project report by August 31.
Both Vingroup and Techcombank are evaluated to have financial potential and investment management experience to soon carry out the North-South West Expressway, connecting the Central Highlands to the gateway of the Southeast region.
After preparing the pre-feasibility report, appraising and approving the feasibility study report, the bidding to select the project investor will be carried out by the Ministry of Transport in accordance with the Law on Bidding and the Law on PPP. The above consortium will participate in bidding to select the project investor if any necessary.
According to the planning, Dak Nong – Binh Phuoc expressway is 212 km long, of which the section passing through Dak Nong province is about 110 km, the section passing through Binh Phuoc is 102 km, with the scale of 4-6 lanes, a design speed of 80-100 km/h.
Meanwhile, to the North, Dong Dang (Lang Son) – Tra Linh (Cao Bang) and Huu Nghi – Chi Lang (Lang Son) expressway investment has been proposed by the leading consortium, Deo Ca Group Joint Stock Company. These are examples of projects that seemed to have been abandoned but recently have been relaunched.
Dong Dang – Tra Linh expressway is more than 115 km long, passing through high terrain, many valleys with complex geology, total investment of the first phase is expected to be VND 13,180 billion. As a highland province bordered by China, the traffic flow of the roads to Cao Bang is low, so the expressway project has not attracted any investor for many years.
Huu Nghi – Chi Lang Expressway is 43 km long, the total investment of the first phase is expected to be VND 7,609 billion. This project has been delayed since 2018 because the investor could not arrange credit funds, the expressway has not been connected from Chi Lang to Huu Nghi border gate.
The consortium also includes Phu My Group, Thanh Loi Construction Investment and Trading Company and Van Phu Investment Joint Stock Company. The parties undertake to raise funds of VND 2,685 billion to implement the project.
Another important project is the Bien Hoa – Vung Tau Expressway. It is an important road connecting Cai Mep – Thi Vai seaport clusters, Long Thanh airport, the Southern key economic region, and the southern region’s expressway, which should be completed soon.
This project’s feasibility report with a total investment of the first phase of VND 17,830 billion has been approved by the Government. However, according to the latest proposal of the Government to the National Assembly, this project is invested with the state budget and will be completed in 2025.
Investors’ perspectives
From the expert point of view, the key factor contributing to the flourishing of highway investment is the Vietnamese government’s supportive policies. In September 2021, the Prime Minister signed Decision No. 1454/QD-TTg approving a plan to complete and attract investment for 5,000 km of highways, with an estimated capital of over $29 billion. The plan also mentioned mobilizing all resources to participate in investment, mainly in the form of public-private partnership (PPP).
Moreover, from 2017 to 2020, the Government carried out 11 projects on the North-South Express, of which eight were PPP investments and three were public investments. However, due to the outbreak of the COVID-19 pandemic, banks allocated a large amount of credit capital to support businesses and people.
As a result, they could no longer prioritize credit for medium and long-term loans anymore. Thus, according to the Government’s assessment, expressway projects have a large total investment and a long capital recovery in the post-pandemic period thanks to taxes on tolls.
On another hand, beside signs of reboot in Vietnamese highway construction, there is still a bottleneck such as the state’s funds contribution not more than 50% of the total project investment. This regulation will not encourage the investors for the infrastructure projects in the remote areas because of low traffic flow and less funds recovery. These projects are required to increase the support rate from the state budget.
Moreover, many investors are also concerned about the risk-sharing mechanism when revenue is low. The state and local authority should undertake to disburse the fund on time and clear the site on schedule.
High-speed infrastructure in Vietnam is now a promising area since it brings a lot of benefits to society. Moreover, the authorities are increasingly paying attention to this section to attract investment. Although there still lies some risks that investors should be mindful of, many investors choose to accompany the locality to contribute funds for infrastructure investment to fully exploit its potential.
To minimize the risk while investing in expressways, investors should contact Viettonkin Consulting now via our website. With our profound understanding of the Vietnamese economy and geography, we can assure investors of a thorough and high-quality consulting service.