FRESH INVESTMENT SOURCES REQUIRED FOR KEY RING ROAD

Ho Chi Minh City has proposed holding a land auction along Ring Road No.3 to acquire capital for the construction of the important infrastructure project.

The route passes through the city and Binh Duong, Dong Nai, and Long An provinces and has the total investment of $3.6 billion. After nearly ten years of construction, however, only 16.3km has been built due to financial difficulties.

According to Ho Chi Minh City Department of Transport, some possible options were proposed for mobilising further funds for the project.

Among those are issuing government bonds to localities involved in the project, auctioning land located along the route, and using the local budget.

However, to arrange capital from the local budget, the National Assembly would need to allow specific mechanisms and policies so that localities can mobilise capital.

Regarding bond issuances, localities proposed that the outstanding balance of the bond issuance should not be included in the overspending limit of the local budget.

Ho Chi Minh City is also considering the option of debt repayment by auctioning land located along the route and collecting fees after completing the project to gather the budget for debt repayment.

All four relevant localities are to calculate the cost of site clearance to ensure feasibility, considering local capital balance ability, investment allocation, and solutions to accelerate the project’s progress.

The common view of related localities is to invest in the form of a public-private partnership. However, using the local budget for reciprocal capital for site clearance is deemed difficult at this stage.

Moreover, the payback period for the project of 29 years is long and hence unattractive and infeasible for many investors.

As the cost for site clearance and construction is huge, Ho Chi Minh City, Binh Duong, Dong Nai, and Long An have not yet been able to balance the local budget to participate in the implementation, especially with the localities concentrating on the pandemic over the past two years.

They have also asked the central government to arrange budget support to invest in the arterial road. Of the initial investment capital, the project needs around $2 billion for land clearance and compensation.

Relevant localities have to submit plans to the government to complete the procedures, before sending everything to the National Assembly in April or May for final approval.

Ring Road No.3 was approved 10 years ago and aimed for completion by 2025 to help ease traffic congestion in Ho Chi Minh City and connect the southern key economic zone.

This is not the first time that Ho Chi Minh City has proposed auctions for key transport routes to finance roads. In 2020, the city applied this method to the first metro line from Ben Thanh to Suoi Tien. The proposal, however, has not yet been approved and remains under consideration.

Source: VIR