Prioritizing Construction of 654 Km North-South Expressway

Prioritizing Construction of 654 Km North-South Expressway

The selection of investment priorities in front of some segments of the North-South Expressway to the east during 2017-2020 is based on the ability to balance resources and transport needs.

Investment divergence

There are at least two major changes in the latest Pre-Feasibility Study Report related to the North-South Expressway route that has just been submitted to the National Assembly by the Government. The first is the name of project has been changed from " Eastern Construction Investment Project of North-South Expressway route" to "Eastern Construction Investment Project of some expressways on the North-South route in the period 2017 - 2020 ".

Mr. Pham Huu Son, General Director of Transport Engineering Design Inc. (TEDI) - Pre FS Consultancy Unit, said that apart from the separating scope of research, this can be considered as the investment divergence in the North-South expressway to the East, starting from Lang Son to Ca Mau.  Currently 1,291 km is requiring new investment and 81 km expanding from 2 lanes to 4 lanes.

The second change is the supplement of Government to the 2017-2020 project of My Thuan 2 bridge 7 km and at the same time adjusting the investment scale at Cam Lo (Quang Tri)-La Son (Thua Thien Hue) from 4 lanes( 17 m) down to 2 lanes( 12 m), excluding La Son (Thua Thien Hue)-Tuy Loan (Da Nang).

Mr. Nguyen Nhat, Deputy Minister of Transport, said that the construction project of My Thuan 2 bridge and roads leading to two bridge head will cost about VND5,125 billion will be invested in the form of public-private investment. "Because My Thuan 2 bridge has a large investment capital and short length, so it is not attractive to finance if invested in the form of Private-Public Partner (PPP). Both Japan and South Korea are ready to sponsor the preferential loans, "he said

According to the Ministry of Transport, on the north-south expressway section to the east from Ho Chi Minh City to Can Tho, the Ho Chi Minh City - Trung Luong expressway route has been completed and is being exploited since 2010; Trung Luong - My Thuan and My Thuan - Can Tho expressways are under construction in the form of PPP, expected to be completed in 2019. Therefore, the early investment implementation in building My Thuan 2 bridge is very necessary, helping to connect the expressway from Ho Chi Minh City to Can Tho.

In addition, two other segments of North-South  expressway are also proposed investment in the form of public-private investment  such as Cao Bo (Nam Dinh) - Mai Son (Ninh Binh); Cam Lo (Quang Tri) - La Son (Thua Thien Hue).

For the Cao Bo - Mai Son section, the Ministry of Transport said that it is being invested by state capital for scale of 2 lanes and the state needs putting additional capital of VND1,612 billion for completion of 4 lanes. Therefore, selecting PP investment form is not appropriate.

With section of Cam Lo (Quang Tri) - La Son (Thua Thien Hue), according to Resolution No. 66/2013/QH13 of the National Assembly on investment policy to build the Ho Chi Minh Road will need investment in the period 2014 - 2017 in the form of BT. According to the forecasting statistics of transport needs, this segment has lower traffic flow than priority ones in the 2017-2020 period, the ability attracting investors to implement PPP is very difficult.

Biding for Investor selection

If the National Assembly approves investment policy, in the 2017-2020 period, the Government will mobilize resources to invest about 654 km, divided into 11 projects, including 3 public-private investment projects, 8 PPP project including sections Mai Son-Bai Vot (Ha Tinh) and Nha Trang (Khanh Hoa)-Dau Giay (Dong Nai).

Total investment is expected to build the North-South Expressway segments, the period 2017-2020 is VND 118,716 billion, of which VND 55 trillion from budget and VND 63,716 billion from investors.

Regarding the financial options of the investment components in the form of public-private partnership (PPP), for the investor's profits, the Ministry of Transport is temporarily calculating a return of about 14% per year for equity; 10.37% per year for the loan; The service charge is  VND 1,500/PCU/​km (starting from the time the project is put into operation). It is expected to be adjusted every 3 years, each time will increase about 12%. With these factor inputs, investors can pay back the project in less than 24 years.

To ensure publicity and transparency in accordance with the Politburo's Conclusion No. 19-KL / TW dated October 5, 2017 on the policy of investing in some expressways on the North-South route to the east. The Government affirmed will proceed biding to select investor for 8 projects expected pay back within 24 years in the form of PPP.

Previously, in the report to the National Assembly, the Government supposed to have permission to assign the Ministry of Transport to decide the rising rate of road service charges in the feasibility report and this price will be independent on "socio-economic development policy  of the State in each period". "If the price rate does not agree for a rise from the beginning, there will be no basis for calculating the financial plan for the whole life project and there is no basis for bidding to select the investor." Nguyen Nhat said.

According to the leaders of the Ministry of Transport, based on the Law on Price, for the North-South expressway project, the price determined to return the capital is up to VND2,500/PCU/ km. To reduce the pressure for the transport enterprises, the Ministry of Transport suggested the starting price is VND 1,500 / PCU/​​km combined with a reasonable price increase plan.

Mr. Nguyen Danh Huy, Director General of PPP (Ministry of Transport), said that the proposed price level in each period is consistent with the growth rate of GDP per capita forecasted by The World Bank (WB) and the Ministry of Planning and Investment in the research paper "Vietnam 2035: Towards Prosperity, Creativity, Justice and Democracy" published in 2016.

The service price bracket in business time(about 24 years) is applied as follows:

the period of 2021-2023: VND 1,500 / PCU / ​​km

the period 2024-2026: VND 1,700 / PCU / ​​km

the period of 2027-2029: VND 1,900 / PCU / ​​km

the period of 2030-2032: VND 2,100 / PCU / ​​km

the period of 2033-2035: VND 2,400 / PCU / ​​km

the period of 2036-2038: VND 2,700 / PCU / ​​km

period from 2039 to 2041: VND 3,000 / PCU / ​​km

the period of 2042-2044: VND 3,400/ PCU / ​​km.

Source: Investment Newspaer

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