For years, the Government of Vietnam has been significantly invested in infrastructure. Though, the backward status quo in infrastructure network in Vietnam, in transport and construction sectors in particular - was, has been and will be a big obstacle in the economic growth of the country.
The total investment in infrastructure development is huge, with some US$ 160 – 170 billion at comparable price of 2010 or US$ 200 – 218 billion at accumulated one till 2020. In the current context, limit of public debt stimulated by National Assembly should not be over 40% of GDP, while capital source from Government would only meet some US$ 80 billion or 50% of that required investment.
What the matter?
The question is how to efficiently mobilize a capital source of US$ 80 billion or more from commercial capital market without any guarantee by the Government? By doing so, the national debt will not be increased. This topic has been attracted a special attention by number of international investors and donors. In a long-term (10 years), mobilization and utilization of ODA in investing infrastructure are so difficult. Thus, FDI would be very an important investment capital and expectable to be a radical measure.
Transport and construction infrastructure status quo
Transport
Vietnam has some 310,000 km of road of which national one is 21,000 km; 3,350 km of railway; 67,000 km inland water road; 200 million tons of annual pass capacity by its seaports and 60 million of annual pass capacity by its airports.
At present, as international standard, Vietnam has no express way, nor express rail way (currently using its railway of 1,000 mm gauche), deep seaport, international transshipment port; high freight due to poor infrastructure; lack of modern loading facilities, warehouse system, advanced management skill…More over, there has been no linkage between transport procedures, logistics and multi-purposed transports. Thus, low infrastructure investment has lead to low competitiveness and low international transport market share as well.
In terms of FDI, so far there has been no investment projects in transport and airport infrastructure, but seaport sector with 24 projects amounting to US$ 3.37 billion, or 47% of total FDI in infrastructure in Vietnam. The leading location in attracting most invested seaport projects is Ba Ria – Vung Tau province, 13 projects with US$ 2.75 billion or 82% of total registered capital in this sector, next locations are Ho Chi Minh city and Quang Ninh province with US$ 320 million and US$ 143 million respectively.
Construction (water supply, drainage and waste treatment)
Water supply: There have been 3 FDI projects so far with total registered capital of US$ 73 million, namely Dinh Vu by Machiels Oveseas (Belgium) in 1999, Binh An by Sadec Malaysian Consortium and Emas Utilities Corp. (Malaysia) in 2008 and Great Lead by Hongkong investor in 2010 of US$ 19 million, US$ 35.8 million and US$ 18.2 million respectively. They are still very modest that could not meet the demand on water supply in Vietnam, especially the ones in industrial parks.
Drainage and waste treatment:As of 2009, there have been 27 projects from ODA with total registered capital of VND 32,440 billion (some US$ 1.7 billion). Most of them are located in large cities with high density of population, factories, industrial parks and craft villages. Thus, waste water from living activities and production are heavily contaminated. However, such projects require big capital but insufficient counter-capital given by local governments of Vietnam resulting very slow implementation, slow fact finding and design, site clearance and compensation, lack of coordination and experience in managing specific projects…
What to be done?
In 2011-2020 period of time, the estimated capital need for both transport and construction infrastructure sectors is US$ 76 billion accounting for 45% of total infrastructure development (MPI report of Sept. 2010). The infrastructure development is a very important issue for a nation that can pave the way for its sustainable economic development and improvement of investment climate in particular. In order to achieve its targeted objectives in this sector, some key measures need to be timely taken:
- To perfect legal framework related to infrastructure development;
- To guarantee progress of site clearance and compensation appropriated to the one of implementation of specific project;
- To build mechanism, policy and incentives for maximizing forces from all social components to invest in infrastructure under any investment form;
- To speed up investment promotion for infrastructure projects of which using Public – Private Partnership model (PPP) will be a focal point;
- To pay attention to training and enhance management capacity of key persons in such infrastructure projects.
Tokyo, Apr. 16, 2011
By Le Huu Quang Huy
Counsellor, Vietnam Embassy to Japan