Monday, May 1 2017

VietNamNews

Special law needed to plug BOT loopholes

Update: March, 03/2017 - 09:00

Nguyễn Danh Huy, general director of the Private Public Partnership Investment Project Management Department, under the Ministry of Transport, speaks to Lao Động (Labour) newspaper about the need to revise legal documents on Build-Operate-Transfer (BOT) projects.

Can you explain why there is a discrepancy in the total investment fund and the long term investment return for BOT projects and who is accountable for this problem?

First of all, we need to understand the concept of a total project fund.

According to Government Decree 112, the project’s estimated expenditures will serve as a background for the project owner to develop their project and how to manage the project capital, not the total value of the final financial settlement.

During the period of drawing up the project, the project’s owner cannot calculate a precise total cost of the project’s expenditures.

Under Circular No 4 of the Ministry of Construction, issued in 2010, the project’s total investment is based on the project’s factual total construction cost. That’s why the total investment fund does not reflect the real value of the project. That’s why when the discrepancies occur, it is not a surprise.

However, at the beginning a BOT project, the Ministry of Transport (MOT) invites the Ministry of Planning and Investment (MPI), the Ministry of Finance (MOF) and the project’s related localities to attend a meeting to negotiate a contract and discuss the timing for the project’s investment returns. That means the project’s total investment fund and the investment returns are only projected. That’s why, following the financial audit and financial settlement, all concerned parties have to work together to adjust their financial schemes as well as the toll collection period and toll cost.

An audit report pointed to a discrepancy of VNĐ465 billion ($20.4 million) upon a total investment sum of VNĐ65 trillion ($2.8 billion). That means the discrepancy was only 0.71 per cent while the reserved spending fund, which is allowed under the law due to inflation, is 10 per cent, the projects’ reserved work volume and the inflation rate is 16 per cent.

I don’t argue that during projects’ implementation negative things occur. But the discrepancy rate of 0.71 per cent is a very small figure. Furthermore, auditing work is done by the Việt Nam State Audit Office at the request of the MOT.

That means following the audit, the projects’ return on investment will be adjusted. However, do you think the MOT will lower the road tolls for road users instead of cutting down the time of toll collection?

Shortening the toll collection time should be attributed to several factors, including the shortening of the construction time, cutting down the reserved work volume as well as the construction price index and the loan interest rate between 2012-2015 compared with that in from 2009-2011.

Of course, following financial settlement, the remaining toll collection time may be adjusted if there will be a major change in the interest rate as well as the volume of vehicles going through the toll stations.

That means there will be no change in the toll rate. But do you think that there will be an adjustment in the toll booths with a distance less than 70 km as the law says?

In my opinion, there is a misunderstanding here.

Under the law, the toll for a distance of over 70 km between the two toll booths is decided by the MOT. This decision is based on the MOF’s Circular which was issued in 2013. But for a distance of less than 70 km it is decided by the local administration but with consultation from the MOT.

At present, the MOT has asked the government to sop levelling road tolls depending on distance, but on the quality of the road. That means on the new roads, all vehicles have to pay tolls. But om the old roads, depending on their quality, the tolls will be considered. But the benefits people using the roads enjoy must be bigger than the money they have to pay for going on the road.

What’s about the issue of appointed constructors?

Under our current law, there are two ways of having a public contract. One is going through an open bid and the other, with some special projects, the Government will select the contractors

Under our law, only the Prime Minister can decide to appoint the contractors.

For example, in the projects on national roads No 1 and 14 the contractors were appointed due to the urgent need of the two roads. Meanwhile the other roads were subjected to bidding.

I can say that the construction of the 27 BOT projects totally conformed to Vietnamese law.

What do you think of inadequate BOT projects?

I have to concede that our current policies have made many projects’ financial settlement very difficult, including BOT projects.

Administrative procedures of projects are related to many ministries and sectors. As a result, the MOT has submitted to the Government a proposal on developing a special law for BOT projects. We hope when that law is approved by the National Assembly, it will help complete our legal system.­ — VNS

 

 

 

 

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