New law will facilitate HCM City's efforts to streamline its infrastructure funding process, Lam Nguyen Khoi, deputy director of the municipal planning department, tells Kinh te Viet Nam & The gioi newspaper.
Why has HCM City decided to encourage non-public investment in infrastructure construction?
The city has a population of around 10 million at present. Its overloaded infrastructure is getting downgraded, becoming a barrier to growth as well as efforts to improve living conditions. We know that infrastructure plays a pivotal role in facilitating socio-economic growth, and it is especially so in a big city like HCM City.
However, to develop infrastructure, first and foremost, we need capital, lots of it, and this means considerable pressure on the city's budget. Therefore, city authorities are trying to diversify funding sources instead of relying on the city budget and ODA.
For example, developed countries like the UK, Japan, South Korea, Australia and Singapore, they have widely applied the private public partnership (PPP) model to develop infrastructure and public services.
HCM City authorities have been pro-active in seeking non-public funding sources for infrastructure development. In the 2004-2014 period, 32 projects have been initiated under the build-operate and transfer (BOT), build-operate and own (BOO), build and transfer (BT) or build-transfer and own (BTO) investment forms. These projects have a total investment of VND73,375 billion ($3.5 billion).
The city has also invited investments into 43 projects under the BT, BTO and BOT investment forms in goods and passenger transportation, environmental protection, flood prevention and healthcare. These projects have an estimated value of VND147,508 billion ($7 billion).
At present five project proposals worth VND13,036 billion ($620 million) under the PPP model are now on the Prime Minister's desk, awaiting approval.
My department is revising a proposal to build the Cho Lon Bus Terminal under the PPP model. Work on this project is expected to start in 2015.
What are some of the measures that the city has taken to attract private funding in infrastructure development?
Following the issuance of decrees on the PPP model and on investor selection, the city has stepped up communication campaigns to raise awareness among the people on benefits of the PPP model. At present, the Department of Planning and Investment is working closely with other agencies to review and identify public investment projects that have the potential of generating income quickly in order to transfer them to the PPP investment form.
Will the policy of encouraging private sector investment in infrastructure and the programme to restructure public investment help prevent fragmented and inefficient investments?
It is true that public investment has faced some challenges in the recent path, because of limited capital outlays from both the central and local governments. Our public investment has failed to keep up with socio-economic development needs, and quite a few projects have been implemented poorly and inefficiently.
However, I think the recently passed Law on Public Investment is a major breakthrough, especially in switching from a short-term or annual plan to a five-year plan, or the mid-term plan, as we call it. This decision confirms fully with the national five year socio-economic development plan.
I'm confident that the new law will help us prevent fragmented and inefficient investment.
Do you think the mid-term investment plan will do away with the "ask and give" mechanism?
The mid-term investment plan will help balance major projects nation-wide while enabling project owners to plan their budgets well, since they will know how money they will get over the next five years. This is a good way to achieve greater transparency, accountability and fairness in allocating State capital resources. So, yes, the "ask and give" mechanism of the past will have no place in the new system.
Can you tell us something about the city's investment plan for the 2016-2020 period?
State Budget allocation for public investment projects in the coming five years (2016-2020) will follow these principles: balancing allocations; prioritizing key socio-economic projects; identifying projects likely to generate quick returns; and projects using local budget.
Most importantly, from 2015 onwards, authorities will not earmark investments for any public projects that do not match the city's five year socio-economic development plan. They will also not consider funding any project that has not been included in the municipal list. — VNS