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EXPRESSWAY CONCESSIONS IN DEADLOCK
Thursday, 17 January 2019 01:58

Despite recent positive signals, the road for foreign investors to acquire expressway concessions in Vietnam remains long due to the lack of legal framework, hindering interested investors. Tung Anh reports.

A few days ago, Japan’s Index Consulting and its partners – Deloitte, Nishimura & Asahi, and Padeco – worked with the Ministry of Transport (MoT) on the results of a one-year study about possibilities of transferring the operation right of the Ho Chi Minh City-Long Thanh-Dau Giay Expressway.

Developed by state-owned Vietnam Expressway Corporation (VEC), the country’s largest expressway developer, the route in question is the first studied expressway concession project in Vietnam.

With support from the Japan International Co-operation Agency (JICA), the study is expected to help potential Japanese funders learn about the investment opportunities of the life-line 55-kilometre highway located in the country’s south-eastern region.

FEASIBLE OR NOT?

Mai Tuan Anh, chairman of VEC, saw the results as a positive signal for the project as the study proves their capacity to return loans as scheduled, while having the funding to develop new projects.

Index Consulting proposes 30 years for the two concession schemes for the route, with the first to keep the four existing lanes, thus concession value is estimated at $796 million. In the second scheme, if the expressway is expanded to six lanes by 2020, the concession value will be over $1 billion.

The VEC representative said that Index Consulting favours the second scheme as with current transport growth, the expressway will likely be overloaded in the next five to seven years, thus enabling VEC to return its loans to JICA and the Asian Development Bank (ADB) as scheduled by 2032.

At present, the Ho Chi Minh City-Long Thanh-Dau Giay route is among the busiest highways built by VEC. With the total investment of VND20.63 trillion ($896.96 million) sourced from JICA and ADB loans for the first phase, the route has served over 45 million vehicles after over three years of operation.

While the study result is said to be a good signal for VEC and other interested overseas interested investors, some legal barriers in the process remain.

In September 2016, VEC signed a co-operation agreement with France’s Vinci Concessions, with transfer of the right to operate expressways developed by VEC being among the three main parts. The Ho Chi Minh City-Long Thanh-Dau Giay and the Cau Gie-Ninh Binh routes – among VEC’s most trafficked expressways – were their targets. However, the plan has so far hit a snag due to the lack of a legal framework, with expressway concession being new to Vietnam.

“VEC is developing and operating five expressways under a loan package. The group must collect tolls to pay its debts. Thus, the corporation cannot separate the roads to sell the operation rights of two to Vinci,” an MoT official told VIR.

“We need a detailed legal framework for expressway concessions. For example, in the scheme the investor wants to expand in the future, it is necessary to have a risk allocation mechanism, particular for site clearance, between the state and the investor. The other is price fixing among other things,” he said.

The other barrier is that VEC is waiting for the Politburo’s approval of the scheme on financial restructuring for its five expressways. Thus, concessions and the mechanism for them will be considered when approval is made.

Moreover, VEC is now in the process to transfer to the State Capital Management Committee. There are still some concerns about the overlap in management between the committee and the MoT which is now managing the corporation.

FURTHER INTEREST

- The Ho Chi Minh City-Long Thanh-Dau Day Expressway has an economic efficiency equivalent to over VND3 trillion ($130.4 million), higher than the average figure of the eastern component projects of the North-South Expressway at about VND1.4 trillion ($60.9 million).

- Established in 1994, Tokyo-based Index Consulting has a list of 100 clients, including GE Japan Corporation, Mitsubishi Motors Corporation, Mizuho Trust & Banking Co., Ltd., Morgan Stanley Group, Nippon Steel & Sumikin Engineering Co., Ltd., Tokyu Land Corporation, Tokyu Real Estate Investment Management Inc., and Unilever Japan K.K.

The Index Consulting study is expected to be a good foundation to take next steps. However, VEC and interested investors can do nothing but wait for improvements in the legal framework.

Currently, VEC is the investor of five expressway projects with a total investment capital of $6 billion, spanning over 500km in total. Of these, four are already open to traffic, including the Cau Gie-Ninh Binh, Ho Chi Minh City-Long Thanh-Dau Giay, the 245-kilometre Noi Bai-Lao Cai, and the Danang-Quang Ngai routes. The Ben Luc-Long Thanh route will be completed in 2020.

The expressway developer said that in the first nine months of 2018, the number of vehicles served by its expressways grew by 11 per cent on-year to 30.5 million. Of the five, the Cau Gie-Ninh Binh Expressway reported the highest growth with 17 per cent and 11.4 million vehicles. The runner-up was Ho Chi Minh City-Long Thanh-Dau Giay Expressway with 11 million vehicles, while 7.4 million were served by Noi Bai-Lao Cai Expressway, up more than 12 per cent.

VEC aims to continue investing a total of VND80 trillion ($3.87 billion) in building 500km of expressways in the 2016-2020 period, thus creating opportunities for funders to join.

Expressway concession is one among the most interested business segments in the transport sector. Over recent years, besides Vinci, many international groups, including KEC, NEXCO, POSCO, and Doosan, and others from the likes of Spain and the US have expressed interest in co-operating with VEC on expressway operations.

Mori Masafumi, deputy head of the Japanese Ministry of Land, Infrastructure, Transport and Tourism, said that many infrastructure investors in Japan are strongly interested in the transfer of operation rights.

He noted that the Japanese government and his ministry will continue providing support to make the concession of Ho Chi Minh City-Long Thanh-Dau Giay Expresway successful.

With no new concession deals signed yet, the international consortium led by Indian infrastructure company IL&FS remains the first foreign investor to ink such a deal after it successfully signed an agreement in 2014 with Vietnam Infrastructure Development and Finance Investment Company to acquire the right to collect tolls on Hanoi-Haiphong Expressway.

 
DANANG APPROVES MAJOR LOGISTICS INFRASTRUCTURE DEVELOPMENT PLAN
Tuesday, 15 January 2019 09:34

With the total investment capital of VND13.695 trillion ($595.4 million), Danang aims to become a key logistics centre in the central region, and an important traffic hub of the whole country.

 

The Danang People's Committee has just approved the city’s logistics infrastructure development planning to 2030 with a vision towards 2045.

 

The plan will bring into play local resources and advantages, striving to build Danang city into a key logistics service centre of the pivotal central economic region and an important traffic hub of the whole country.

 

Danang aims to become the main sea entrance of the East-West Economic Corridor.

The city is also the main sea entrance of the East-West Economic Corridor.

 

Accordingly, Danang city’s logistics centres are set to meet about 25 per cent of cargo traffic through seaports by 2020, increasing to 30 per cent by 2025, 35 per cent by 2030, and reaching 55 per cent by 2045.

 

The processed cargo traffic rate through airports is expected to be 10, 15, 20, and 40 per cent, respectively. The rate of processed freight traffic through railways is expected to be 20 per cent by 2030, increasing to 40 per cent by 2045.

 

Besides, total demand for investment capital in the development of logistics services in Danang will be about VND13.695 trillion ($595 million), raised by the municipal People's Committee.

 

The investment capital for road traffic improvement will come from the local budget and be managed by the Danang People's Committee.

 

The investment capital for building Lien Chieu Port and new Kim Lien Cargo Terminal will come from the central budget. Total demand for land to implement the city’s logistics infrastructure development plan to 2030, with vision towards 2045 is estimated at about 312 hectares.

 
DHL survey finds companies in Asia Pacific place more importance on green transport than other regions
Monday, 31 December 2018 04:15

 

75% of survey respondents in Asia Pacific believe electric vehicles will have a significant impact on transport in the next two years

The latest research report on ground transportation logistics by DHL, the world’s leading logistics company, has revealed that companies in Asia Pacific place more importance on green transport than other regions do.

The global survey found that a whopping 75% of respondents from the region believe electric vehicles will have a significant impact on transport in the next two years, compared to the global average of 53%. This is further backed up by 82% of respondents from Asia Pacific stating that they need help navigating legislation around mandatory carbon reporting, second only to North America.

 

“The Logistics Transport Evolution: The Road ahead” is a report by DHL Supply Chain, using data from research by Lieberman Research Worldwide, LLC (LRW) that was commissioned by DHL to identify the factors that are impacting ground transportation logistics and how industry is adapting to the new frontier of solutions available.

 

Green Freight Asia (GFA) is a network of Asian freight companies working together to improve fuel efficiency, reduce CO2 emissions, and lower logistics costs across the entire supply chain. It rewards companies that demonstrate a commitment to the adoption of green freight practices through its voluntary green certification program, the GFA Label program. DHL is a founding member of GFA.

Last Updated on Monday, 31 December 2018 04:17
 
GLOBAL INTEGRATION KEY TO LOGISTICS DEVELOPMENT
Thursday, 27 December 2018 01:51

The Vietnamese logistics sector must take advantage of global integration to reach its full potential, deputy minister of industry and trade Cao Quốc Hưng said at a meeting on Friday.

The growth of the Vietnamese economy is expected to help the logistics sector maintain annual growth of 12-14 per cent, Hưng said.

Opportunities for the logistics sector to continue growing include Việt Nam’s participation in the Trade Facilitation Agreement (TFA) of the World Trade Organisation (WTO) that took effect on February 2, 2017.

According to WTO economists, the TFA could help cut total trade costs of WTO members by 14.3 per cent, which would benefit developing economies the most.

In April, Prime Minister Nguyễn Xuân Phúc set out some important targets for the logistics sector.

The sector is expected to contribute 8-10 per cent of the country’s total gross domestic product (GDP) by 2025 and its growth is forecast to reach 15-20 per cent.

The percentage of outsourced logistic activities is predicted at 50-60 per cent, logistic costs are forecast to fall 16-20 per cent and Viet Nam’s ranking in the global logistics sector is hoped to climb above 50.

Currently, ministries and agencies are working to boost the sector’s performance by cutting administrative procedures and business requirements for logistic firms, developing an e-government system and online public services and publishing testing standards for local firms.

On November 9, the PM launched a programme on cost reduction for businesses and assigned ministries and agencies to improve Viet Nam’s logistics efficiency and trade facilitation, as assessed by the World Bank and Organisation of Economic Co-operation and Development (OECD).

“All of those solutions aim to create smooth trade activities and reduce logistic expenses for local companies,” Hưng stressed.

There are about 3,000 logistic firms in Việt Nam but most are small-sized, he said. Nine out of 10 Vietnamese logistic firms have charter capital of below VNĐ10 billion, 5 per cent have charter capital of between VNĐ10-20 billion and 5 per cent have charter capital of more than VNĐ20 billion.

Of the 3,000 logistic firms, only 360 have signed up to become members of the Vietnam Logistics Business Association (VLA).

"Those facts prove Vietnamese logistic companies are not well connected and most of them do business as individuals, not as a community," the deputy minister said.

According to Deputy Prime Minister Vương Đình Huệ, the earnings of Vietnamese logistic companies account for 3-4 per cent of the country’s total gross domestic product (GDP), proving their performance is still modest.

"One of the major problems for Vietnamese logistic firms is the underdevelopment of infrastructure and facilities in some provinces that can become trade hubs, however, those areas are not aware of the benefits brought about by logistic services," Hưng said.

Slow infrastructure development would make it more difficult for local firms to expand their networks and work with each other and foreign logistic firms, Hưng added.

In addition, Vietnamese logistic companies have found it hard to enter new markets and business segments, according to the industry and trade deputy minister.

"The Government needs to help Vietnamese logistic firms develop and catch up with foreign companies," he added.

“Logistic firms often have opportunities to work with and learn from foreign businesses, so they are able to develop better strategies and offer products and services with better quality at cheaper price levels.”

"Other tasks include the Government’s efforts to improve its management, simplify and clarify administrative procedures and make the business environment more transparent and convenient," Hưng added.

In addition, it is important to help local businesses expand their networks to other markets so the sector is able to keep up its current growth rate, according to VLA vice chairman Đào Trọng Khoa.

 

 
INDUSTRIAL SCRAPS FOUND HIDDEN IN 20 CONTAINERS
Tuesday, 25 December 2018 03:48

 

After examining 20 shipping containers at Cat Lai Port, customs officers on December 6 found most of them contained industrial waste, Nguoi Lao Dong newspaper reported.

The Saigon Port Border Customs Sub-department Region I, on December 6, collaborated with the Customs Supervision Team under the HCMC Department of Customs, the border defense force at Nha Rong Harbor and representatives of shipping lines to conduct an examination of 20 out of the total 25 containers of goods imported by Tri Quang Transportation Services Trading Co., Ltd, in District 2, following the previous confiscation of five of its cargo containers due to their storage of waste.

The investigation turned up all manner of scrap, including second-hand water pumps and water meters, electric wires, plastic bags and junk iron, which are barred from import into the country due to their high risk of causing pollution.

Earlier, at the end of October, the company had issued a customs declaration for five goods containers out of a total batch of 25, imported from Japan. The sub-department acted on its suspicions by unsealing five of the containers, which turned out to contain industrial waste.

The company had declared in its statement that the goods included machinery imported from Japan.

After the customs agency confiscated the five containers of goods, Tri Quang Company withheld further import declarations for the remaining 20 goods containers. The competent agencies investigated its listed headquarters and found it was only a car wash.

Last Updated on Tuesday, 25 December 2018 07:03
 
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