Investors threaten to boycott BOT transport projects

Investors threaten to boycott BOT transport projects

The State Bank has told commercial banks to remain cautious about disbursing money for transport projects developed under the mode of BOT (build, operation, transfer). Meanwhile, investors say that BOT projects have an unreasonable mechanism.

Pham Quang Dung, president of Tasco JSC, which has implemented five projects, noted that the Ministry of Transport has successfully called for huge investments in BOT transport projects over the last three years.

However, he noted that investors poured capital into transport projects because they did not know where to invest at that moment.

“We are under the state’s control in many things, from investment rate, labor costs to cost price,” he said.

Under current laws, investors must have at least 15 percent of capital needed to develop projects, while they can borrow the remaining 85 percent from different sources.

Regarding the bank loan interest rates, Dung said the lending interest rate is equal to 1.3 times of the 3-5-year government bond interest rates. However, in fact, investors have to pay 1.5-2.5 percent more to banks to be able to access loans.

The biggest problem in BOT projects, according to Dung, is that investors are required to take back the investment capital within 20 years, but the fee collected in the first 7-10 years of the project's operation is not high enough to pay bank loan interest.

Tran Chung, senior advisor of Deo Ca BOT Company, complained that when implementing the project on expanding Highway No 1A, the investor had to advance money for site clearance, but it has not got money back from the State because the local authorities could not arrange the money.

As a result, the company’s VND500 billion worth of capital cannot be used, while it has to pay bank loan interest.

Dung of Tasco related the story of CII, an infrastructure development company in HCM City, to prove that investors are at a disadvantage when implementing BOT transport projects.

He said with the current financial plan, CII will take a loss if it cannot make profits from investments in other business fields.

“The expected profit of 11.5 percent on stockholder equity is unsatisfactory,” he said.

“If the State does not amend the current unreasonable mechanism, I will give up BOT projects,” he warned.

Chung, a former senior official of the Ministry of Construction, noted that in principle, the state is on the same par with investors when negotiating BOT projects. However, in reality, state agencies think they are at a ‘higher level’.

According to the Ministry of Transport, in 2016-2020, Vietnam will need VND1,000 trillion worth of capital for transport project development.

vietnamnet