Private Participation In Developing Transportation Infrastructure: Case Study In Ben Tre Province

Vietnam’s economy is growing fast and the transport sector must meet the need of the national economy. Improving efficiency in the transport sector investment will be essential for regional access, integrated economy and efficient freight movement to and from terminals, ports, industrial zones, and for public services. Due to financial incapability for transport infrastructure, Vietnam has had to invite overseas and domestic private sector for improving financing sources. Most transport projects have been invested by the government budget and ODA funds. These sources cannot meet the demand.

Vietnam is facing an urgent need to find new means to finance transport capital investment. Therefore, encouraging private sector participation in the transport sector is critical issues for the government. To execute these issues the government needs to learn experiences in mobilizing private sector from other countries to apply for Vietnam. Vietnam should give up monopoly in some fields and give clearer policies for private sector.

Mr. Pham Hoang Anh made a research study to find the suitable ways to increase the fund supply for development of transportation infrastructure in Vietnam. His 4 objectives are to:

1. Investigate legal environment for PPP transportation infrastructure projects;
2. Investigate the current and future gaps of funding sources in developing transportation infrastructure.
3. Propose PPP models and test the applicability of these proposed PPP models for each kind of transport infrastructure projects.
4. Propose the recommendations for the local government in applying PPP models to fill the future funding gaps for the transportation projects.

He found out that there are 8 laws and legal regulations governed for PPP transportation projects. These complexities discouraged the investors especially foreign to invest. On PPP transportation projects at provincial level, there are 7 government parties participating in the project from the primary ideas to complete project. This process runs slowly and its complexity, these make the process of implementation of PPP transportation projects spend much time.

Based on his survey, he found out that most of developers in transportation projects are state-owned enterprise construction contractors so there is deformation about kind of capital in PPP transportation projects. In the case of Ben Tre province, the capital for transportation development is mainly dependent on allocation of budget (central, provincial and district budget), in which provincial budget contributes 50% in total.

Government budget supply will meet around 37% of total financial demand for transportation development. Between public supply and real demand is a huge financial gap. The role of private sector is very necessary in this situation to fill such the financial gaps. The partnership between public and private sector, private participation will possibly contribute 16% of total necessity investment capital in case of minimum contribution of private sector, around 41% at maximum contribution and 28.5% at average value of contribution.

With minimum private participation, the total obtainment capital is around 53%, and 65.5% for the average value. It reaches 78% of total financial requirement. It means that the Transport Master Plan of Ben Tre province up to 2020 will not be able to fulfill by 2020. The utmost, only 78% of the plan will be accomplished. Therefore, the Transport Master Pan is not feasible.

His thesis abstract is copied and posted.

ABSTRACT

The wave of transportation infrastructure investment has been booming in Vietnam recent years. Meanwhile the government budget is inadequate to meet huge demand for transportation improvement. Private participation is considered as a critical solution to solve this problem, their contribution is going to be expected to share financial burden with government budget in future. Therefore, the study concentrates on main issues of Public-Private-Partnership (PPP) models in order to apply for transportation infrastructure projects and current legal system related to PPP transportation projects. Thirteen PPP transportation projects were analyzed in light of financial and legal issues. An investigation was conducted among transportation sector’s participants including officers, investors, developers, expert and bank’s staff. The case study was conducted in Ben Tre province. The future financial requirement for constructing all future transportation projects in the Transport Master Plan was determined. The PPP models for each kind of transportation projects were proposed to identify private financial contribution to fill a part of financial gap. The study suggests possible solutions to solve difficulties of the government in applying PPPs for transportation development, such as diversification of financial sources, administrative reform, and more.