MPI says infrastructure in poor ‘cause of bad thinking

The Ministry of Planning and Investment (MPI) has submitted to the government, the plan on building the infrastructure system in 2011-2020, pointing out that the current infrastructure remains very poor due to the unreasonable way of thinking.

In its report, the ministry has pointed out that despite the heavy investment, the infrastructure system remains weak and backward. The transport infrastructure system, for example, is lagging behind the world in all terms of quality, equipments, operation and management. The highways in Vietnam now just account for 0.1 percent of the total roads, while the proportions are much higher in Thailand (13.3 percent) and South Korea (3.3 percent).

Vietnam still does not have high-speed railways, modern seaports and airports, and still cannot meet the demand for multi-modal transportation. Meanwhile, the national electricity grid remains weak, which explains why the power loss in the transmission is very high at 9-10 percent. The irrigation system, which is always bad, has been degrading seriously with only 19 percent of irrigation canals solidified.

Meanwhile, the urban traffic infrastructure conditions show a lot of shortcomings which cannot catch up with the rapid development of new urban areas. The proportion of the land fund reserved for the traffic is very low, 6-7 percent in Hanoi, and 8 percent in HCM City.

MPI has blamed the current problems on the bad way of thinking and unreasonable mechanisms for developing infrastructure. Vietnam still cannot attract investors into the infrastructure sector, because there has been no mechanism on risk sharing between the state and private investors. There also has been no reasonable mechanism on infrastructure fee collection in order to attract private investors. Meanwhile, the government does not have a reasonable policy to put land resources into investment for development.

The “term-of-office” way of thinking creates short term projects

In general, high ranking officials, when taking their office, always want to make something breakthrough to leave their marks during their leadership period. A lot of them try to draw up imposing investment projects, and in many cases, the projects only bring short term benefits, because they do not care about the long term influences. Therefore, the investment efficiency of a lot of investment projects is modest.

“The way of thinking based on the administrative borders and the decentralization mechanism in the context of unqualified local officials all have led to the ineffective investment, which is a waste to the state budget,” the MPI’s report said.

It’s necessary to encourage private investors to invest in infrastructure

MPI has proposed the government to set up innovative measures in order to settle the current problems, while it has also suggested reserving capital funds for developing infrastructure from now to 2015 and 2020.

According to the ministry, in the next 10 years, since Vietnam plans to change the growth model, the ratio of the society’s investment on GDP would reduce to 33.5-35 percent of GDP. Therefore, during this period, the total investment capital of the whole society would be about 17,470-17,960 trillion dong, or 710-720 billion dollars.

Of this amount, the volume of capital possibly allocated for infrastructure development could be 5300-5350 billion dong, or 201-215 billion dollars, meeting more than 50 percent of the total demand for investment and development as per the approved plan (385-395 billion dollars).

An official of MPI said that Vietnam will not rely too much on ODA (official development assistance) capital, but it needs to set up innovative solutions in both the viewpoint and the mechanism in order to encourage private investment in the infrastructure system.

Also according to MPI, from now to 2015, Vietnam would need 2200-2300 billion dong, or 110-115 billion dollars to fulfill the approved projects. Of this amount, 1100-1500 billion dong would go to transport infrastructure projects, 427 trillion dong to power projects, and 220 trillion dong to rural infrastructure.

Source: Tien phong

Tags: invest in Vietnam, Vietnam FDI, Vietnam FDI 2011, Vietnam investment