Economic management expert Hoàng Thị Thu Phương. Photo kinhtedothi.vn

Economic management expert Hoàng Thị Thu Phương speaks to Kinh Tế & Đô Thị (Economic and Urban Affairs) about mobilising resources for transportation infrastructure projects in Hà Nội.

What are the biggest challenges in investing in Hà Nội’s transportation infrastructure?

Compared to the past, the city has resolved many issues in the investment and development of transportation infrastructure. For example, mechanisms and policies have become much more favourable.

However, significant difficulties remain, particularly in capital mobilisation.

Between 2025 and 2030, the capital city needs about VNĐ400 trillion (US$16 billion) for transportation infrastructure, with nearly VNĐ130 trillion allocated to roads and VNĐ270 trillion to urban railways.

Currently, the city has met only about 20 per cent of its capital needs, with the remaining 80 per cent needing to be mobilised from other sources. This is a major challenge that Hà Nội must address to develop transportation and reduce traffic congestion.

Recently, many transportation projects in Hà Nội have been adjusted, switching to budget funding instead of loans or socialised resources. What does this indicate?

This should be seen as specific adjustments for each project rather than a systemic policy change. Social capital will still play a very important role in infrastructure development, particularly in transportation.

For projects where borrowing or mobilising external capital hasn’t been effective, changes are needed. In urgent cases, when social capital is unavailable, using the State budget to expedite progress is necessary.

The mechanisms and policies for transportation projects have been significantly adjusted and amended, and laws like the Capital Law and the Land Law have opened up pathways to mobilise social resources more easily.

In the future, when these policies are implemented in practice, further adjustments will be made to maximise their effectiveness, attracting more investors to transportation projects, making them more appealing than they are now.

Belt Road No 3 in Hà Nội. VNA/VNS Photo

From where and how should Hà Nội mobilise sources to meet its significant infrastructure investment goals?

There are various ways to mobilise capital for transportation projects, such as central government and municipal budgets, ODA loans, and importantly, social capital, involving private enterprises in infrastructure investment.

However, mobilising social capital is not easy. Historically, transportation projects have been seen as less attractive due to unstable outputs, difficulties in recovering investment and low profit margins.

For example, during a period when BOT (Build-Operate-Transfer) projects for roads were widely implemented, many companies invested heavily, but some are now asking to return or sell their projects due to losses.

To attract resources for transportation infrastructure development, the Government must have clear, stable policies that guarantee returns for each project.

How can you guarantee returns for each project?

To guarantee a return for a transportation project is to ensure a stable revenue stream for investors to recover costs and make a profit.

This includes the stability of the mechanism, policies and laws, meaning they should not change continuously. In case of changes, investors who have already committed capital should still be guaranteed stable revenue.

For example, to make urban rail projects linked to the transit-oriented development (TOD) model more attractive, Hà Nội must have clear policies. For instance, if a company invests in an urban rail project, it should be compensated with TOD development rights along the route for a specific period.

When these benefits are clarified, companies can better calculate their investment plans and make informed decisions.

The Capital Law allows Hà Nội to use Public-Private Partnerships (PPP) and Build-Transfer (BT) models to exchange land for infrastructure, which is a model favoured by many companies. This approach could be highly appealing for transportation projects if applied properly.

However, the process of exchanging land for infrastructure must be transparent and straightforward. The responsibilities of both parties—Hà Nội’s authorities and the businesses—must be clear.

For projects using budget capital and loans, what should be noted to avoid waste and achieve the highest efficiency?

From an economic perspective, projects funded by the State budget or international loans will find it difficult to generate profits.

To ensure they are effective and avoid waste, these projects must meet three criteria: urgency, rapid progress and serve as 'kickoff projects'.

Some projects are so urgent that the Government or the city’s authorities cannot wait for a long search for investors and must use public funds to implement them quickly to reduce traffic congestion. To avoid cost overruns and inefficiencies, these urgent projects must be executed swiftly.

In the actual implementation, there must be adjustments in capital allocation across projects to ensure funds are used wisely. Therefore, public investment disbursement is a key factor in evaluating the management performance of local authorities and ministries.

For projects using public funds, such as urban railway systems connected to TOD models, the Government and the city’s authorities should invest to demonstrate their effectiveness, creating a foundation for further investment and leveraging public funds to attract more social capital.

It’s clear that investing in one urban rail line that connects with multiple other lines will be more attractive than a standalone line. To ensure the efficiency of State-funded projects, it is essential to classify them properly and act quickly to maximise the value of every investment. VNS