Addressing shortcomings in BOT projects.

Information regarding the Ministry of Transport's submission to the Prime Minister of solutions to address difficulties and obstacles in several infrastructure investment projects under the build-operate-transfer (BOT) model is attracting significant attention not only from investors, credit institutions, and local authorities, but also from transport associations and road users.

This is the second time in the past year that the Ministry of Transport has submitted to the Government solutions to address difficulties and obstacles in a number of BOT (Build-Operate-Transfer) infrastructure investment projects, after incorporating and refining them according to the directives of the National Assembly Standing Committee, Government leaders, opinions of ministries, sectors, and localities, and updating the results of preliminary work and negotiations with banks and investors in projects facing financial issues.

While there are no complete statistics, if we consider the period from 2018 to the present, the number of proposals put forward by state management agencies in the transport sector to resolve obstacles related to some BOT transport projects is certainly greater than two, with each subsequent proposal being more urgent than the previous one.

It should be added that, in its latest proposal to the competent authorities, the Ministry of Transport has for the first time outlined the principles, procedures, and scope of application. This is a very important step to ensure transparency, fairness, and prevent the exploitation and abuse of policies when dealing with difficult BOT projects.

Specifically, state budget funds may only be used to address difficulties and obstacles in BOT projects caused by objective reasons or violations of the contract by state agencies, and where the parties have applied solutions as stipulated in the contract but these are still not feasible. Under no circumstances should state budget funds be used to address difficulties and obstacles caused by the subjective fault of the investor/project enterprise. Furthermore, the resolution process must ensure the principle of "harmonious benefits and shared risks." In the case of contract amendments or additional state funding, the investor should consider reducing the profit margin by 50% compared to the profit margin stipulated in the project contract.

The scope of application has also been specifically defined for BOT (Build-Operate-Transfer) infrastructure investment projects signed before the PPP Law came into effect.

From both a rational and ethical standpoint, these important principles, if approved by the competent authorities, would certainly receive the understanding and support of investors, credit institutions, and taxpayers alike.

If we compare the above principles, the number of BOT projects managed by the Ministry of Transport that require state budget funding is not large, only about 8 projects out of a total of 140 BOT transport projects implemented before the Law on Investment in the Public-Private Partnership (PPP) method came into effect.

In fact, to implement the requirements of the National Assembly Standing Committee, since 2018, the Ministry of Transport has coordinated with the investor, relevant ministries, sectors, and localities, striving to apply solutions as stipulated in the contract to improve financial efficiency. However, the financial plan still failed due to extremely low toll revenue, insufficient to cover costs.

The project companies in the eight struggling BOT projects have made efforts to mobilize their own capital to cover costs, but due to the volatile economy, especially the impact of the Covid-19 pandemic, they no longer have the capital to cover expenses. Credit loans have been reclassified as bad debts; the project companies are at risk of bankruptcy. The investors in the eight projects are all in a financially desperate situation, facing imminent bankruptcy, while all eight projects are about to enter the overhaul phase, requiring significant capital.

The above situation demands that the resolution of obstacles in BOT projects be carried out more quickly and decisively. The longer the delay, the greater the consequences and the higher the resolution costs, especially for other production and business sectors of enterprises (outside the BOT project investment sector). More importantly, failure to resolve these issues definitively will affect the level of trust, the investment environment, and the achievement of the strategic breakthrough goal of infrastructure development in the context of a very limited state budget.

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