Ministry of Transport: "Afraid" of appointing BOT contractors, afraid of "bare-handed thieves"
After the National Assembly passed a resolution on the investment policy for the project to build a number of expressway sections on the North-South Eastern route in the 2017-2020 period, the Ministry of Transport recently submitted a document to the Government on the implementation of the North-South expressway investment project. In which, the Ministry clearly expressed concerns about the bidding process.
Worry about the situation of an investor participating
After the National Assembly passed a resolution on the investment policy for the project to build a number of expressway sections on the Eastern North-South route in the 2017-2020 period, the Ministry of Transport recently submitted to the Government a document on the implementation of the North-South expressway construction investment project.
According to the report, phase 1 of the project (2017-2020) will invest in three sections: Cao Bo (Nam Dinh) - Bai Vot (Ha Tinh), Cam Lo (Quang Tri) - La Son (Thua Thien - Hue) and Nha Trang (Khanh Hoa) - Dau Giay (Dong Nai) with a length of 654 km, total investment of more than 118,700 billion VND. Of which, state capital is 55,000 billion VND and investor capital is more than 63,700 billion VND.
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| The North-South Expressway is being urgently deployed. Illustration photo: L.Bang |
Regarding capital contribution, the Ministry of Transport believes that in order to increase the feasibility of mobilizing capital as required by banks and at the same time select capable investors, the ministry recommends increasing the equity of investors participating in the project to 25% of the total investment capital (previously 10-15%).
Notably, the Ministry of Transport also considered the scenario where only one investor participated. In that case, according to the provisions of the law on bidding, this case could apply to designated bidding.
However, the Ministry of Transport is concerned that this "can hardly ensure the bidding goals of competition, fairness, transparency and economic efficiency".
This Ministry believes that: The appointment of investors will not ensure competition as directed by the Politburo and Resolution No. 52 of the National Assembly as well as the Prime Minister's conclusion that "selecting investors through competitive bidding".
Therefore, the Ministry of Transport recommends that the Government accept the case where only one investor passes the pre-selection, then it will report to the National Assembly Standing Committee for consideration and decision as in the case where no investor can be selected as required in Resolution No. 52 of the National Assembly.
For investors who cannot arrange credit capital, slowing down the project progress, the Ministry of Transport recommends that the Government approve the addition of the provision "The project contract will expire if after three months the investor has not signed a credit contract with a bank or credit institution with enough loan capital as prescribed to implement the project". In this case, the Ministry of Transport will report to the National Assembly Standing Committee for consideration and decision as in the case of not being able to select an investor.
Prevent investors from "catching thieves with bare hands"
According to Decree 15 on public-private partnership, investors need to have at least 15% of the total investment capital (with capital under VND 1,500 billion) and at least 10% (with capital over VND 1,500 billion). In the past, banks usually only lent investors to invest in BOT projects corresponding to 85% of the total investment capital. Recently, banks have required a minimum equity ratio of 20% of the total investment capital.
The draft Decree amending Decree 15 also stipulates an increase in the equity ratio by 5% (to 15-20%). Increasing the equity ratio will ensure that the project is more feasible in terms of credit capital mobilization. However, the Ministry of Transport is concerned that this will lead to an increase in investment capital costs because the rate of return on equity is often higher than bank loan interest.
Therefore, to increase the feasibility of mobilizing loans as required by banks and selecting capable investors, the Ministry of Transport recommends that the Prime Minister approve the calculation of the feasibility study report with an equity ratio of 20% of the total investment capital. Investors can propose to increase the equity ratio when bidding.
According to the Ministry of Transport, BOT road projects usually have a profit margin on the investor's equity ranging from 11.5-14%. On average, 67 BOT road projects have had a profit margin on the equity of 11.77%. During the negotiation process, investors proposed to increase this profit margin but the Ministry of Transport did not approve it.
In fact, the law has not yet specified the determination of the investor's profit level calculated in the financial plan for bidding to select investors. Therefore, the Ministry of Transport proposed that the Prime Minister approve the determination of the profit level of 11.77% when approving the feasibility study report and bidding documents. The official profit level of the investor is determined through bidding.
