How to "untie" transport infrastructure bonds?

As one of the leading enterprises investing in transport infrastructure construction in Vietnam today, Deo Ca Group proposes many solutions to attract investors to issue bonds, creating resources to invest in transport infrastructure under the PPP method.

Long term, bonds difficult to attract investors

Regarding the issue of capital for infrastructure development, Mr. Nguyen Huu Hung, Vice Chairman of the Board of Directors of Deo Ca Group, has just sent his opinion to the Ministry of Finance on solutions to mobilize investment capital for transport infrastructure projects under the public-private partnership (PPP) method.

According to assessments, currently, investors are still not "interested" in mobilizing resources through bond issuance to mobilize resources for developing transport infrastructure (Illustration photo).

According to Mr. Hung, transport infrastructure plays a key role in the country's socio-economic development and is one of three strategic breakthroughs that need to be prioritized for investment.

In the context of limited State budget resources, the PPP Law issued in 2021 is expected to help supplement the capital gap between infrastructure investment needs and the budget's funding capacity.

However, the implementation of PPP in Vietnam has encountered many obstacles due to the lack of synchronous policies, leading to a low number of successful projects and the private sector remaining hesitant. Many bottlenecks make PPP projects unattractive, not really opening the door for investors to mobilize resources for PPP investment projects.

Specifically, the provisions of Clause 1, Article 78 of the PPP Law clearly state: "PPP project enterprises are allowed to issue and repurchase individual bonds that they have issued in accordance with the provisions of this Law, the law on enterprises and securities to mobilize capital to implement PPP projects; they are not allowed to issue individual convertible bonds and bonds with individual warrants".

However, in reality, no project enterprise has successfully issued bonds to invest in PPP projects.

"The reason why bonds do not attract investors is because the bond term is long (20-30 years according to the payback cycle).

In addition, the project construction period usually lasts 24 - 36 months, while the issuance of bonds will have to pay interest at the time of issuance, thus leading to mobilized loan capital but not being put into the project immediately, causing an increase in interest costs and reducing the investment efficiency of the project.

In addition, the only collateral is the project's toll collection rights and is not guaranteed by the Government," said a representative of Deo Ca Group.

Proposing solutions to attract investors to invest in bonds issued by PPP project enterprises, Deo Ca Group proposed that the Government issue credit guarantees and risk insurance for transport infrastructure investment projects under the public-private partnership method.

Specifically, transport infrastructure investment projects under the public-private partnership method need to be added to the subjects of application according to the provisions of Article 2 of the Law/Decree on Public Debt Management No. 20/2017/QH14; Enterprises with investment projects under the provisions of the Law on Investment under the public-private partnership method need to be added to the list of subjects eligible for Government guarantees according to Article 41 of the Law/Decree on Public Debt Management No. 20/2017/QH14.

"The current PPP Law also does not allow PPP project enterprises to issue bonds to the public, narrowing the target audience and capital market that PPP project enterprises can access.

Competent authorities need to study and amend the content of Article 78 of the PPP Law and regulations in the Decree on financial management of PPP projects to allow project enterprises to issue bonds to the public, reducing pressure on budget capital and bank credit capital," Deo Ca Group proposed.

Research more specific policies

Also according to the leader of Deo Ca Group, currently, corporate income tax/personal income tax on corporate bond investments issued for the purpose of investing in transport infrastructure investment projects under the PPP method is calculated at 5% (calculated on bond interest) for foreign contractors.

Investors must pay 0.1% tax on the total transaction value when transferring/selling bonds, centralized depository fees as prescribed and transaction fees as prescribed by each securities company.

"A tax exemption/reduction policy will contribute to increasing the attractiveness of long-term bonds due to the characteristics of the transport infrastructure investment industry, contributing to promoting infrastructure investment, improving the country's economy in general and the stock market in particular.

In addition, the Securities Law 2021 (Article 91 on Securities Investment Funds) allows FIIs to participate in establishing investment funds but there is no specific infrastructure fund.

Decree 174/2020/ND-CP sets out regulations to support ETF development but has not yet been applied to the transport infrastructure sector or has a specialized ETF for the transport infrastructure sector," Deo Ca Group raised the issue.

"PPP project enterprises have different characteristics compared to normal production and business enterprises. Therefore, the authorities also need to study specific policies to open up capital sources such as: Accounting mechanisms to ensure the reflection of the characteristics and investment efficiency of transport infrastructure projects under the PPP form, clarifying regulations guiding value-added tax refund dossiers for projects...", Deo Ca Group further proposed.

Source: https://www.baogiaothong.vn/cach-nao-coi-troi-cho-trai-phieu-ha-tang-giao-thong-192250329170748039.htm