Unique mechanism to untangle traffic congestion, mobilize collective efforts for crucial transportation project

Applying unprecedented mechanisms and policies has successfully resolved the obstacles faced by numerous crucial transportation infrastructure projects in the past year...

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A special expressway has been chosen to start construction in early 2024, which is the Dong Dang – Tra Linh expressway, connecting Cao Bang and Lang Son. Speaking at the groundbreaking ceremony, Mr. Tran Hong Minh, Head of the Delegation of National Assembly Delegates of Cao Bang province, emphasized that Cao Bang has always been a poor province, the main reason being the unfavorable natural conditions, far from the major economic centers of the country; the arterial transport system connecting provinces in the region is still lacking, weak, and isolated; the only form of transportation is the road.

Starting from 2015, the Dong Dang – Tra Linh expressway project seemed to be stuck due to facing many difficulties, but the project has solved the “bottleneck” and started construction under the PPP model. It is even more significant as this is the first transportation PPP project implemented under the 2020 Investment Law and Decree No. 63/2018/ND-CP dated May 4, 2018 by the Government on investment in the form of public-private partnership.

UNLOCKING THE PPP ROAD BUILDING MODEL

Initially, the Dong Dang – Tra Linh expressway project was planned by the Ministry of Transport with a length of 144 km and a total investment of over VND 47,000 billion. This is a very large investment amount due to the challenging terrain but low traffic volume, leading to difficulties in achieving investment recovery. Therefore, the investor proposed adjusting the direction of the route with 4 mountain tunnels and several valley overpasses, shortening the route length. The Dong Dang – Tra Linh expressway construction and investment project under the PPP model was approved by the Prime Minister in Decision No. 1212/QD-TTg dated August 10, 2020.

The Phase 1 of the project is about 93 km long with a total investment of over VND 14,300 billion, of which state capital accounts for 45.91%, equivalent to VND 6,580 billion, the rest is invested by the private sector, loans, and other mobilized sources. Despite that, the project still faces difficulties in ensuring financial efficiency.

 

To overcome some difficulties, Cao Bang province requested to implement special mechanisms. By November 28, 2023, the National Assembly passed Resolution No. 106/2023/QH15, allowing the Dong Dang – Tra Linh expressway to apply the state capital participation rate of not exceeding 70% to solve the capital mechanism issues.

According to Mr. Hoang Xuan Anh, Chairman of the People’s Committee of Cao Bang province, due to the special characteristics of the project being implemented in a mountainous area, the initial transportation demand is not high, and the payback period is long, making it unattractive for credit institutions to provide loans. Therefore, the investor faced difficulties in arranging capital sources for project participation.

Accordingly, the state budget capital increased by VND 3,220 billion from the central budget and was adjusted from VND 6,580 billion to VND 9,800 billion, accounting for 68.76% of the total investment amount. The remaining capital is mobilized by the private sector with VND 4,451.22 billion, accounting for 31.24%.

Completing the project will not only help the two provinces of Cao Bang and Lang Son promote regional connectivity, expand development space, and meet the aspirations of the government and people but also is expected to be a successful model in implementing special policies. From there, the strong replication of the PPP model.

REMOVING “BLOCKING” REGULATIONS

The current regulations limit the state capital participation rate in PPP projects to not exceed 50% of the total investment amount. However, many projects have presented incentives for the development of disadvantaged areas, but the initial transportation demand is not high, or have “burdened” large land clearance costs. If the 50% ratio is applied correctly, PPP projects will take a long time to recover the investment, making it difficult to mobilize capital.

Another obstacle is that according to the provisions of the State Budget Law, investing in and upgrading national highways, expressways are the central budget’s expenditure tasks, managed and allocated capital by the Ministry of Transport; local authorities are not allowed to be the managing agencies and use the local budget to invest in national highways, expressways within the central budget’s expenditure tasks.

Therefore, in the past year, the Ministry of Transport, the Ministry of Planning and Investment have proposed some special mechanisms and policies to develop transportation infrastructure, notably increasing the state capital participation rate in PPP projects; assigning local authorities as the managing agencies for investment and upgrading of national highways, expressways within the region to solve infrastructure problems; implementing special mechanisms in mining mineral resources as conventional construction materials.

According to the Ministry of Transport’s observation, thanks to the delegation of authority to local authorities as competent agencies and managing agencies, 25 projects are being implemented, including 9 public investment projects and 16 PPP projects.

Among them, key national projects such as the Chau Doc – Can Tho – Soc Trang expressway, Khanh Hoa – Buon Ma Thuot expressway, Bien Hoa – Vung Tau expressway, the 3rd Ring Road of Ho Chi Minh City, the 4th Ring Road of Hanoi, have been accelerated after many years on paper.

STRENGTHENING DELEGATION, MAXIMIZING RESOURCES

Assessing the effectiveness of special policies, Prof. Dr. Nguyen Hong Thai, Head of the Department of Economic Transport, University of Transport, said that special mechanisms and policies with breakthrough and high feasibility will create favorable conditions for the development of modern and connected transportation infrastructure across regions; at the same time, attract and effectively use capital from economic components. Thanks to that, the country will soon achieve the goal of completing 3,000 km of expressways by 2030, with an estimated capital of about VND 390,000 billion.

Furthermore, when assigning proactive authority to local authorities as investment and managing agencies, it will contribute to accelerating the project completion schedule and indirectly support attracting private investment in PPP projects.

However, Mr. Thai noted that the assigned investors must have sufficient capacity and experience to carry out the project’s tasks, from project preparation, land clearance, construction ensuring quality, progress, and enhancing the responsibilities of all parties involved…

The full content of the article is published in Vietnam Economic Magazine No. 7+8-2024 released on February 12-25, 2024. Please find it here

https://postenp.phaha.vn/chi-tiet-toa-soan/tap-chi-kinh-te-viet-nam