REVIEW
of
FINANCE -
November, 2018
49
majeure; Bidding is public: Conditions of
contractor (capacity of implementation, form
of company, capital proportion of contribution
of investors in the project) are stipulated by the
competent authority when constructing and
publicizing the master plan of the PPP project. For
projects proposed by the private sector, proposers
may be domestic or foreign enterprises or state-
owned joint-stock companies enjoying the same
incentives.
In the United States: The government has
allowed the private sector to participate in
planning, providing public services to the
transportation sector, and removing barriers
for more participation of the private sector. The
Government has also established a Transport
Development Fund to mobilize capital. This fund
will be spent primarily on projects implemented
independently by States. For specific projects, the
federal government is required to pay 80% of the
costs and states cover the rest.
Lessons for Vietnam
Firstly,
use the inflation index to limit risks
to financial asset investors. Often investing in
infrastructure is long-term investment, inflation
is inevitable, in order to limit this risk, make
investors “feel secure” in investment, according
to experience of Chile, Vietnam can use the
inflation index to adjust interest rate of the capital
mobilization tools in the financial market for
infrastructure investment, such as the “interest
rate floor” is defined by inflation plus margin.
Secondly,
increase the domestic demand for
financial assets by reforming the private pension
fund system. In the current context, Vietnam is
unable to develop a wide system of private pension
funds, as the majority of workers’ income is not
high. However, in the future, this is a good and
long-term capital mobilization channel suitable for
investment in infrastructure development, at the
same time, opening a direction for savings as well
as investment for participants in the private pension
fund system, this can initially be piloted in large
cities and employes with high per capita income.
Thirdly,
develop financial market. Financial
market is the fastest and most effective capital
mobilization channel for developed economies.
Therefore, it is necessary to develop the financial
market, especially to boose the corporate bond
market.
Fourthly,
take measures to curb short-term
speculative foreign capital flows which seek profits
in the domestic market; adopt policies to encourage
long-term foreign investors and domestic
reinvestment. According to Chile’s experience, 30%
of initial investment capital should be retained and
tax incentives should be given
Fifthly,
establish credit rating agency of bond
issuers. For infrastructure, it requires a long
period of capital use, which increases risks for
bond investors. Therefore, it is necessary to have
an independent credit rating agency for bond
issuers, which helps institutional investors to
choose the right one for their investment.
Sixthly,
attract capital in form of PPP: This is a
formof cooperation between a State representative
agency and a private party in the spirit of risk
sharing and rational distribution of profits for the
private party. Countries in the world generally
develops infrastructure through PPP.
Recommendations
From the foreign countries’ experience on
successful mobilization of financial resources,
the World Bank’s experts suggest: Vietnam needs
to implement a number of solutions, especially
attracting investment in the PPP model, especially
in the context of difficult budget and limited
resources from ODA. Accordingly, in order to
promote mobilization of resources from private
investors in infrastructure construction, the
following groups of policy solutions should be
implemented:
Firstly,
improve the legal framework for
SOCIAL CAPITAL NEEDED FOR INFRASTRUCTURE INVESTMENT
IN THE PERIOD OF 2016-2020 (BILLION VND)
No. Transport
Total
investment
State capital
contribution
Capital
mobilized by
investors
1 Land
279113
112687
166426
2 Marine
45494
1811
43683
3 Waterway
13990
3000
10990
4
Air
55976
1000
54976
5 Railway
58071
38304
19767
Total
452644
156802
295842
Source: Ministry of Transport
