Investors are not ready to invest in 5 BOT projects in Ho Chi Minh City

Although Ho Chi Minh City has introduced a series of special mechanisms to attract investors to 5 BOT projects, when consulting, investors assessed that these mechanisms are not attractive enough for businesses to invest in the projects.

Although Ho Chi Minh City has introduced a series of special mechanisms to attract investors to 5 BOT projects, when consulting, investors assessed that these mechanisms are not attractive enough for businesses to invest in the projects.

Land clearance bottleneck

There were many questions and suggestions raised by investors at the investor consultation conference on the Pre-Feasibility Study Report of 5 BOT projects invested under the special mechanism of Resolution 98/2023/QH15, which took place recently in Ho Chi Minh City. Unlike previous projects, in order for the project to be feasible and attract investors, this time the Ho Chi Minh City Department of Transport sought investors' opinions right from the stage of preparing the Pre-Feasibility Study Report.

When organizing the consultation, many large infrastructure investment enterprises such as Deo Ca Group, Son Hai Group, Ho Chi Minh City Technical Infrastructure Investment Company, Dinh An Group, etc. were interested in participating. However, the participating enterprises all shared the same concern when investing in BOT projects that the site clearance is not guaranteed, leading to investors being stuck, causing the project to be prolonged, increasing capital, and increasing toll collection time.

“The government must ensure that 90% of the site clearance work is completed before investors can start construction. If investors are required to start construction when the site is limited, the risk will be very high. Just one month without the site can cause businesses to bury their capital, causing serious damage,” said Mr. Le Quoc Binh, General Director of Ho Chi Minh City Infrastructure Investment Company (CII).

From practical experience in investing in infrastructure projects in Ho Chi Minh City, Mr. Binh proposed that if the project is to be feasible, it must be separated into a separate site clearance project carried out by a state agency. According to Mr. Binh, in the 5 BOT projects, site clearance must be 90% completed before investors can invest in construction.

Also concerned about the issue of site clearance, Mr. Cao Dang Hoat, Chairman of Dinh An Group, said that although many projects have been separated into separate projects, the site clearance process of the projects is still prolonged. In case the State clears 90% of the "clean" site, investors will also lose many opportunities to mobilize capital because the time is too long. Therefore, the most important factor that Ho Chi Minh City must ensure for investors in the 5 BOT projects is to hand over the site on time.

Responding to investors’ concerns, Mr. Tran Quang Lam, Director of the Ho Chi Minh City Department of Transport, said that all 5 BOT projects implemented under the mechanism of Resolution 98 have had the site clearance part separated into a separate project by the City. This item is implemented by the City and paid for by the state budget, and investors will invest capital to carry out the construction and installation part.

Profit margin is not attractive

According to the financial plan developed by the consulting unit, for the 5 BOT projects implemented under the mechanism of Resolution 98, the average state capital participation is about 60%, the enterprise participation is 40%. The payback period is about 20 - 24 years, the interest rate is about 10.3% and the profit rate is over 11%.

With the above financial plan, Mr. Le Quoc Binh said that the profit margin is only 11%, while the toll collection period lasts for 20-24 years, it will be very difficult to attract investors to participate. Enterprises will bring investment capital to projects with higher profit margins and faster toll collection time.

Similarly, according to Mr. Le Quynh Mai, Vice President of Deo Ca Transport Infrastructure Investment Joint Stock Company, BOT projects need to have the participation of state budget capital from 50% to 70% to shorten the toll collection time and ensure capital recovery for investors. Mr. Mai calculated that the capital recovery plan for 5 BOT projects in Ho Chi Minh City is about 20 years is reasonable, the capital recovery time should not be longer because it is not feasible with the financial plan.

Regarding the criteria for selecting investors, Mr. Le Quoc Binh proposed that investors using the least amount of state budget capital should be selected, instead of choosing investors with the shortest toll collection period and not applying a risk-sharing mechanism.

“Enterprises participating in the game must accept profits and losses, and not expect the State to cover losses. Thus, when deciding to participate in a project, investors will consider very carefully, then the project's efficiency will be best guaranteed,” Mr. Binh frankly said.

Some investors suggested that it is necessary to update the new unit price to ensure the financial plan. Mr. Cao Dang Hoat commented that all the unit price coefficients given by design consultants in BOT projects are not updated with the actual price. Because, during the construction process, the unit price in the project and the actual unit price often differ by 10 - 30%, even up to 50% in some projects.

Mr. Hoat cited an example when Dinh An Group participated in the North-South Expressway projects and suffered huge losses due to price fluctuations. “If design consultants do not update unit prices according to reality, investors will be very worried,” Mr. Hoat expressed.

Regarding sanctions, some investors proposed that the bidding documents should clearly state sanctions in case the investor has already started construction but there is still a few percent of the land that has not been cleared, causing the project to be unable to be completed and put into use, then the State must be responsible for compensating the enterprise for damages. Conversely, the enterprise will also be sanctioned if the construction is delayed and not on schedule.

Source: https://baodautu.vn/nha-dau-tu-chua-san-sang-rot-von-vao-5-du-an-bot-tai-tphcm-d230603.html