Submitting investment plan for Quy Nhon - Pleiku expressway worth 36,594 billion VND
The 123 km long Quy Nhon – Pleiku expressway through Gia Lai and Binh Dinh will open up opportunities to exploit the potential and inherent advantages of the Central Highlands and the South Central Coast.
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The Ministry of Transport (MOT) has just issued Official Dispatch No. 14038/BGTVT – KHĐT to the Government leaders regarding the investment plan to build the Quy Nhon – Pleiku expressway through the two provinces of Gia Lai and Binh Dinh.
In this dispatch, the Ministry of Transport proposed that the Government leaders consider approving the transfer of the investment study of the Quy Nhon - Pleiku Expressway Project under the PPP method to the investment study under the public investment form; at the same time, assigning this Ministry as the governing body, coordinating with the People's Committees of Gia Lai and Binh Dinh provinces to organize the preparation of the Project's Pre-Feasibility Study Report, and submit it to competent authorities for approval according to regulations.
It is expected that the Quy Nhon - Pleiku Expressway Project will be prepared for investment from 2025, implemented, completed and put into operation in the period 2026-2030.
According to the proposal of the Ministry of Transport, the Quy Nhon – Pleiku Expressway Project has its starting point in An Nhon town, Binh Dinh province; its end point is at the intersection of Ho Chi Minh road, in Pleiku city, Gia Lai province; the total length of the route is about 123 km, of which the section through Binh Dinh province is about 37.4 km long, the section through Gia Lai province is about 85.6 km long.
The route within the scope of the Project is fully invested according to the approved planning with a scale of 4 lanes, a roadbed width of 24.75 m, and a design speed of 100 km/h. Particularly, the sections through the An Khe tunnel and Mang Yang tunnel with difficult terrain are being studied with a scale of 4 lanes and a design speed of 80 km/h.
According to the review and update results of the People's Committees of the two provinces: Binh Dinh and Gia Lai, the preliminary total investment of the Project is about 36,594 billion VND, of which the cost of site clearance is about 3,733 billion VND; construction and equipment costs are about 26,833 billion VND; investment consulting costs, project management, other costs are about 2,012 billion VND; contingency costs are about 4,015 billion VND.
With a route length of about 123 km, a scale of 4 lanes completed according to the plan, the investment capital of the Project (excluding site clearance costs) is about 267 billion VND/km.
Compared to the investment rate announced by the Ministry of Construction (4-lane highway about 187.24 billion VND/km), the investment rate of the Project is about 80 billion VND/km higher because the Project has a large proportion of bridge and tunnel works, especially the two tunnel works An Khe and Mang Yang with a total length of about 5 km (investment cost of about 4,800 billion VND) and the bridge work before An Khe and Mang Yang tunnels with a total length of about 8 km, expected to have a pillar height of more than 50m (investment cost of about 6,200 billion VND).
Regarding the investment plan of the Project under the PPP method, the Ministry of Transport said that implementing the Prime Minister's direction, the People's Committee of Gia Lai province coordinated with the People's Committee of Binh Dinh province, the State Capital Investment Corporation (SCIC) and a number of partners to conduct surveys and research on the investment plan of the Project.
According to the report of the People's Committees of Gia Lai and Binh Dinh provinces in May 2024, the results of research and preliminary calculations of the Project's financial plan show that, with the scenario of the maximum state support capital level of 50% of the total investment according to the provisions of the PPP Law, the Project does not ensure financial efficiency according to regulations.
In order for the Project to be financially efficient and have a payback period of approximately 25 years, 18 years and 10 years, the level of state support needed to support the Project would be between 76% and 88% of the total investment. Therefore, investing in the PPP method is ineffective and difficult to implement.
In response to practical requirements, investment necessity and legal regulations, based on the results of the review of the scope, scale and preliminary total investment of the Project, the Ministry of Transport has coordinated with the People's Committees of Gia Lai and Binh Dinh provinces to carefully and thoroughly study the form of investment in the Project under the PPP method.
With the scenario of site clearance being separated into an independent component project using public investment capital (about VND 3,733 billion) and a PPP component project (about VND 32,861 billion) applying a state capital ratio of no more than 70% of the preliminary total investment according to the revised PPP Law, the state capital needed to participate in support to ensure the feasibility of the financial plan of the PPP component project is about VND 23,673 billion; the time for collecting fees to recover the project's capital is about 25.1 years; the total state support capital participating in the project (including site clearance costs) is about VND 27,406 billion, accounting for about 75% of the preliminary total investment of the project.
In order for the PPP component project to be financially efficient and have a payback period of about 21 years, 18 years and 16 years, the state capital needed to support the PPP project is about VND 24,929 - 27,565 billion (accounting for 74 - 82.5% of the total preliminary PPP project cost); the total state support capital participating in the Project (including site clearance costs) is about VND 28,662 - 31,298 billion (accounting for about 78.3 - 85.5% of the total preliminary investment cost of the Project).
According to the results of the research on the investment plan of the Project under the PPP method mentioned above, in case of applying the provisions amending and supplementing a number of articles of the PPP Law recently passed by the National Assembly at the 8th Session, the Project has low financial efficiency, the toll collection period is longer than 25 years, it will be difficult to attract investors and credit capital for implementation.
In case the Project is financially efficient and the expected payback period is less than 21 years (capable of meeting the lending conditions of financial and credit institutions), the total state capital needed to support the Project accounts for about 78.3 - 85.3% (about 28,662 - 31,298 billion VND) of the preliminary total investment.
This level of support capital is very large, not effective when investing under the PPP method and the policy of state capital plays the role of "seed capital" to attract socialized capital sources to participate in infrastructure investment.
“Therefore, similar to the Khanh Hoa – Buon Ma Thuot Expressway Project, the proposal by the People's Committees of Gia Lai and Binh Dinh provinces to stop researching investment under the PPP method and switch to public investment is well-founded,” the Ministry of Transport assessed.
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