Vietnam Can Hardly Raise Funds for New Colossal Road Project: Ministry

Tuan Minh

15:52 10/10/2016

BizLIVE - The Vietnamese finance ministry has warned that it will be difficult to mobilize funds for a $10.3-billion expressway project proposed by the transport ministry.

Vietnam Can Hardly Raise Funds for New Colossal Road Project: Ministry

Vietnam is facing difficulties to raise funds for a new expressway project. Photo: Internet

The Vietnamese Ministry of Finance has called for a thorough review of a colossal expressway project connecting Hanoi and Ho Chi Minh City, due to financial constraints that the country is facing.
According to a proposal by the Ministry of Transport, the expressway will span 1,372 kilometers and have a cost of 230 trillion dong ($10.3 billion), of which 40% will be sourced from the state budget and the remainder from private investors.
The new project will help reduce pressure on National Road 1A, which can hardly be expanded. Further, a high-speed railway along the country could cost $55 billion, four times that of a four-lane expressway, said Deputy Minister of Transport Nguyen Nhat.
The finance ministry has argued that a sum of 93.53 trillion dong ($4.2 billion) to be financed by the government, equivalent to 2% of the country’s GDP, does not match the medium-term public investment plan as well as laws on public investment and state budget.
In addition, the country’s major financial indicators such as public debt and fiscal deficit are approaching the ceilings, thus it is unfeasible to mobilize funds via channels like government bonds, ODA and preferential loans.
“In case it proves impossible to mobilize funds from the state budget for the project as anticipated in the proposal, [we] recommend delaying the kickoff of the project,” the Ministry of Finance said in a statement.
Meanwhile, local BOT (building-operation-transfer) developers now have narrow access to bank credit as they have borrowed too much in recent years.
Therefore, the finance ministry suggested the transport ministry reach out to financing from foreign investors who can secure loans at reasonable interest rates.
Vietnam’s public debt is poised to tough the mandated 65%-of-GDP threshold this year after reaching 62.2% of GDP in 2015.