Finalizing the bidding price for selecting investors for the North-South Expressway project.

Determining the price level and fee increase schedule is a prerequisite for proceeding with the bidding process to select investors for the 8 segments of the North-South expressway under the PPP model, to be implemented from now until 2020.

Specifics of service pricing

The pricing of road usage services is a mechanism and policy under the authority of the National Assembly that the Government wants the National Assembly deputies to approve in the Proposal on the investment policy for the construction of several sections of the North-South East Expressway, giai đoạn 2017 - 2020, which was presented by Minister of Transport Nguyen Van The, authorized by the Prime Minister, at the end of this week.

Specifically, in order to tender for the selection of investors for the 8 segments of the North-South expressway chosen for investment under the BOT (Build-Operate-Transfer) model, the price must be determined right from the approval of the feasibility study report and the preparation of the tender documents.

Finalizing the bidding price for selecting investors for the North-South expressway project.

The reason the government had to request this special mechanism for PPP projects with a payback period of approximately 24 years is because, according to legal regulations on pricing, the price of road usage services is managed by the State.

Specifically, the principle for determining prices is stipulated in Clause 1, Article 20 of the Law on Prices: "Ensuring the compensation of reasonable actual production and business costs, with profits consistent with market price levels; and in accordance with the State's socio-economic development policies and guidelines in each period."

According to Minister Nguyen Van The, based on the principle of "ensuring reasonable compensation for actual production and business costs, with profits in line with market prices," the necessary service price is approximately 2,500 VND/PCU/km, and will remain unchanged throughout the project's operation (PCU is a unit of measurement based on a 5-seater vehicle).

However, the initial price of 2,500 VND/PCU/km was quite high, exceeding the affordability of the people and failing to attract vehicles, thus not guaranteeing investment efficiency. Applying the current average price of 1,500 VND/PCU/km and maintaining it throughout the project's operation would be more affordable for the people, but the government's support for projects implemented between 2017 and 2020 would increase by approximately 25,380 billion VND.

A basis for forecasting is needed for bidding.

According to the head of the Ministry of Transport, based on the principle that service prices must "be in line with the State's socio-economic development policies in each period," the bidding price framework may have to be adjusted when State policies change. This cannot be foreseen, making it impossible to calculate the financial plan for bidding to select investors.

"In order to have a reasonable initial price, suitable for the affordability of the people and to increase the attractiveness of the route to attract vehicles, and at the same time to serve as a basis for calculating financial plans and organizing bidding to select investors, we propose that the National Assembly allow the determination of the service price framework from the outset and that the price not be adjusted according to the State's socio-economic development policies in each period," the Government's submission clearly states.

It should be added that, in reviewing the investment project for the construction of several sections of the North-South East Expressway, giai đoạn 2017 - 2020, the Economic Committee of the National Assembly proposed two options for consideration by National Assembly deputies.

Accordingly, Option 1 – agrees in principle to specifically determine the starting price and the price for each period as the basis for bidding to select investors in accordance with the law, consistent with the affordability of the people and the return on investment of the investor. Option 2 – determines the price according to market value based on the construction price index in each period.

According to the Chairman of the Economic Committee, Vu Hong Thanh, the general opinion within the Committee is to choose the option of approving in principle the specific determination of the starting price and the price for each period as the basis for bidding to select investors in accordance with the law on bidding, consistent with the affordability of the people and the ability of investors to recoup their investment.

"The government's proposal and the general opinion of the Economic Committee regarding the initial price are consistent with international practices and provide a basis for conducting a competitive bidding process to select an investor," commented Mr. Tong Tran Tung, Vice President of the Vietnam Association of Science and Technology for Roads and Bridges.

According to Investment Newspaper