Road projects lack sufficient funding from State budget

Many major traffic infrastructure projects have sufficient capital from foreign sources but lack funds from the State budget to be spent on site clearance and other costs, according to ministry officials.

According to Nguyen Hoang, head of the Ministry of Transport’s Planning and Investment Department, most projects have sourced capital from Official Development Assistance (ODA) from foreign donors and others with preferential interest rates.

Ngo Thinh Duc, deputy Minister of Transport, said that US$1.53 billion had already been sourced for the 139-kilometre Da Nang-Quang Ngai section project, one of the biggest sections of the North-South Highway project.

In addition, the World Bank (WB) has agreed to fund $580 million for the North – South Highway project as requested by the Vietnamese Government.

The Ministry of Transport has also received a loan of $80 million from the International Development Association (IDA) for 35 years, including a 10-year grace period.

In addition, the ministry received a loan of $500 million from the International Bank for Reconstruction and Development for 25 years, including a 10-year grace period and at Libor interest rate plus 1.25 per cent.

It has also received a loan of $725 million from the Japan International Cooperation Agency (JICA) to carry out the project.

The ministry said it had mobilised $1.61 billion for the 56-kilometre Ben Luc – Long Thanh Highway project, which is also a part of the North – South Highway project.

Mai Tuan Anh, deputy general director of VEC Corporation, said the Asian Development Bank (ADB) had agreed to loan $635 million and JICA also agreed to loan $634.8 million to develop the Ben Luc – Long Thanh Highway project this year.

The WB would also fund $305 million for the ODA project to upgrade four national roads and 11 big bridges with a total length of 89km nationwide.

Further, JICA will loan $850 million to the project to build the automobile-only Tan Vu-Lach Huyen Road, which will stretch from Cat Hai Island to the northern port city of Hai Phong via Dinh Vu Peninsula.

Deputy Minister Duc said the country lacked capital for site clearance work and other fees to develop these projects, which could cost billions of US dollar.

The Financial Internal Return Rate (FIRR) is as low as only 3.7 per cent, and the preriod for recovering the capital is as long as 33 years.

Thus, when the Da Nang – Quang Ngai Highway is put into operation, it will lose about $232 million in the first 16 years, experts have said.

“If the State budget doesn’t support the investors with this loss, the project cannot be developed,” a representative of VEC Corporation said.

Except for the automobile-only road Tan Vu – Lach Huyen Project, the other three projects require a great deal of land and much site clearance work at many localities, posing many hardships to the investors.—VNS