Opening the door to international investors at the Ring Road 4 Project in the Capital Region

The Hanoi People's Committee needs to soon research, organize investment promotion, and survey the level of interest of potential domestic and international investors in the PPP Project Component 3, Ring Road 4 - Hanoi Capital Region.

Perspective of an intersection on the Ho Chi Minh City - Moc Bai highway.

Perspective of an intersection on Ring Road 4 - Capital region.

The Ministry of Planning and Investment has just issued Official Dispatch No. 4492/BKHĐT-QLĐT to Deputy Prime Minister Tran Hong Ha to report on the proposal of the Hanoi People's Committee on removing difficulties and obstacles in implementing the Investment Project to build Ring Road 4 - Hanoi Capital Region and Component Project 3 invested under the PPP method.

The most notable information in Official Dispatch No. 4492 is the form of selecting investors to implement Component Project 3 of Ring Road 4 - Hanoi Capital Region with a total investment of up to 56,293 billion VND.

According to the Ministry of Planning and Investment, in the Decision on investment policy for the Project to build Ring Road 4 - Hanoi Capital Region, Component Project 3 under the PPP method is applied to widely bid domestically to select investors.

However, the Hanoi People's Committee believes that not many domestic investors will participate in the bidding because after surveying the interest, only 1 domestic investor registered to implement the project.

In addition, the scale of Component Project 3 is too large, leading to high requirements on financial capacity and experience for investors, making it difficult to find investors who can meet the requirements; at the same time, it is difficult to mobilize loans from credit institutions and banks due to the long payback period and the large demand for loans.

Therefore, the Hanoi People's Committee proposes to apply the form of selecting domestic investors according to the provisions of Clause 5, Article 34 of Decree No. 35/2021/ND-CP.

Specifically, in case the project applies the selection of domestic investors but needs to promote the use of advanced technology, techniques, and good international management experience, the negotiation invitation and bidding documents are stipulated that domestic investors form a joint venture with investors established under foreign law or use a foreign contractor as a partner to participate in the bidding; in this case, the domestic investor must be the head of the joint venture; the language used in the selection of investors is Vietnamese.

In Official Dispatch No. 4492, the Ministry of Planning and Investment agreed with the proposal of the Hanoi People's Committee on applying the provisions of Clause 5, Article 34 of Decree 35/2021/ND-CP to attract international investors on the condition that the Hanoi People's Committee can explain the necessity of promoting the use of advanced technology, techniques, and good international management experience for a large-scale project with a long construction and operation investment period such as Component Project 3.

In case the Hanoi People's Committee finds that the plan to apply the provisions in Clause 5, Article 34 of Decree 35/2021/ND-CP to attract international investors is not feasible, it is proposed to study and report to the National Assembly for consideration and permission to apply international open bidding to select investors.

“For both cases mentioned above, it is recommended that the Hanoi People's Committee study, organize investment promotion, and survey the level of interest of potential domestic and international investors in Component Project 3 to ensure the selection of investors with full capacity and experience, meeting capital requirements, and the ability to effectively and feasibly implement the Project,” said the leader of the Ministry of Planning and Investment.

According to Mr. Tran Sy Thanh, Chairman of the Hanoi People's Committee, the biggest difficulty in the Ring Road 4 - Capital Region Investment Project is to implement the construction of the central expressway - the backbone of the Project to ensure progress and synchronization with the parallel road construction component projects that are being invested in.

With this progress, it is expected that investors will complete the entire parallel route of Ring Road 4 - Capital region in 2025. This poses a risk of "phase difference" in progress between Ring Road 3 itself and the accompanying parallel road system, reducing investment efficiency.

Previously, the Hanoi People's Committee conducted a survey of investors' interest in Component Project 3 on the national bidding network on October 28, 2022 in accordance with the provisions of the PPP Law on the national bidding network.

At the deadline for submitting expressions of interest at 9:00 a.m. on December 11, 2022, the survey results showed that only 1 investor was interested, which was T&T Group Joint Stock Company. According to the provisions of Decree No. 35/2021/ND-CP dated March 29, 2021 detailing and guiding the implementation of the Law on Investment under the PPP method, the form of investor selection for Component Project 3 - construction of Ring Road 4 Expressway is open domestic bidding without pre-qualification.

According to the leader of the Hanoi People's Committee, the selection of domestic investors is expected to be difficult because investors must meet the minimum criteria prescribed for a very large transport project of complex nature and scale, which is the first time the Hanoi People's Committee has implemented it under the Investment Law under the PPP method.

Specifically, the selected investor must have equity capital of at least 15% of the total project investment excluding State capital (about more than 4,400 billion VND); have been the main contractor to complete a bid package with a minimum value of 30% of the corresponding work value (about more than 13,600 billion VND); in the role of an investor - the candidates must have completed a project with a total investment of at least 50% of the total project investment (about more than 28,100 billion VND)....

This leads to the need to combine many investors and contractors to form a new consortium that can meet the financial capacity and experience criteria of Component Project 3.

However, even when consortiums of investors have been established, according to the provisions of Point d, Clause 3, Article 38 of Decree No. 35/2021/ND-CP dated March 29, 2021 of the Government, the equity contribution ratio of the leading investor in the consortium is at least 30%, and that of each member in the consortium is at least 15%).

This is not easy to meet even for large domestic infrastructure investors because currently the vast majority of equity capital has been invested in expressway PPP projects implemented from 2020 to present.

On the other hand, because Component Project 3 uses investor capital of about VND 29,525 billion, of which, the need to borrow from credit institutions accounts for about 85% of the capital source, the payback period is long, the ability to concentrate such a large amount of capital for long-term lending is in fact extremely difficult for credit institutions and banks, affecting the ability to mobilize capital of investors.

With the above reasons, the Hanoi People's Committee predicts that there will not be many domestic investors participating in forming a consortium of investors that meet the requirements and will have to handle the situation according to the provisions of Clause 3, Article 83 of Decree No. 35/2021/ND-CP (in case there are less than 3 investors submitting bidding documents).

“It is necessary to expand the number of international investors participating in the investor consortiums bidding for Component Project 3 to both meet the experience requirements to ensure competitiveness and mobilize more foreign capital to invest in transport infrastructure,” the Chairman of the Hanoi People's Committee proposed.

Source: https://baodautu.vn/noi-rong-cua-don-nha-dau-tu-quoc-te-tai-du-an-vanh-dai-4-vung-thu-do-d217697.html