Investors shy away from Vietnam's transport public-private partnerships

Investors have shown little interest in entering public private partnerships (PPP) for transport infrastructure projects in Vietnam over concerns of high risks and low profitability, Minister of Transport Nguyen Van Thang has stated.

In response to inquiries at a parliament Q&A session on Monday, Minister Thang pointed out that the Law on PPP had proven ineffective in attracting private engagement in infrastructure projects since its enforcement in 2021.

He attributed the lackluster sentiment to economic hardships in Vietnam as well as globally, low profitability of transport projects in comparison with other fields, and particularly financial viability risks.

Vietnam is home to around 5.2 million autos, but they are not evenly distributed, with Hanoi, Ho Chi Minh City and some other provinces accounting for the majority. “This is a disadvantage to investors,” the minister noted.

In addition to setbacks in mechanisms and policies for investment, the ratio of state funding of up to 50% remains unattractive. In many cases, site clearance costs are elevated, leaving meager financial support by the state for investors, he said.

Worryingly, PPP projects have failed to attract foreign participation because overseas investors require government guarantees for revenues, foreign currency convertibility, and site clearance, the minister said.

Unlike in Vietnam, the site clearance phase in other countries is separated and executed first, thus helping investors focus their efforts on deploying the project.

The Ministry of Transport will work with the Ministry of Planning and Investment and other agencies to submit to the government more attractive policies to attract participants in transport projects, Thang said.

In addition, the government has asked parliament to endorse some solutions, including a higher ratio of state funding, to make these projects more appealing.