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Vietnam Today

Transport infrastructure needs private investment

Released at: 11:20, 08/09/2015

Transport infrastructure needs private investment

Conference told inadequate public funds increase the importance of public-private partnerships.

by Hung Nguyen

Solutions to improve the use of investment and attract investors to transport infrastructure projects are being sought as financial resources from the State budget, official development assistance (ODA), and government bonds have become limited, together with concerns over public debt.

Acknowledging the importance of seeking investment for Vietnam’s infrastructure, the Bank for Investment and Development of Vietnam (BIDV) cooperated with the Central Committee’s Commission for Economic Affairs to hold a conference on September 7 entitled “Capital for Transport Infrastructure: Demand and Solutions”.

According Mr. Nguyen Danh Huy, Director of the PPP Department at the Ministry of Transport (MoT), a ministry report showed that total demand for investment in transport infrastructure in the 2016-2020 period is around VND1,000 trillion ($44.51 billion), coming from government bonds (VND376 trillion, or $16.73 billion), accounting for 37.2 per cent, ODA (VND285 trillion, or $12.68 billion), accounting for 28.2 per cent, and funding from private investment (VND348 trillion, or $15.48 billion), accounting for 34.4 per cent.

However, the plan on public investment in the 2016-2020 period from the Ministry of Planning and Investment indicated that the budget could only cover about 7 per cent of demand, or VND66 trillion ($2.93 billion). Public-private partnerships (PPPs) will therefore play a crucial role.

In order to use the investment for transport infrastructure efficiently and to encourage the participation of the private sector, Mr. Tran Dinh Thien, Director of the Vietnam Institute of Economics, said that initially Vietnam needs a detailed plan for developing infrastructure. This must include matters such as better connecting Vietnam to the Greater Mekong Sub-Region (GMS) and ASEAN by roads, railways, shipping and air, instead of only focusing on connecting with China and the GMS by existing transport networks.

Mr. Tran Bac Ha, Chairman of BIDV, said that credit for transport infrastructure investment in 2020 will account for 3.2 per cent of all credit in the economy (assuming average annual credit growth of 15 per cent). Regarding disbursement, he pointed out that the ratio of short-term capital to long-term lending of the banking sector must be controlled at less than 60 per cent. 

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