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SEMINAR/ CONFERENCE SPEECH SCRIPT

Topic: “Situation, tendency, development direction and


policy mechanism of mobilizing investment for
development of Vietnam rural road infrastructure.”

Good morning/ afternoon/ evening, Ladies and Gentlemen:

On behalf of the Vietnam Road Administration (VRA), it's my great pleasure, and also
my honor, to be able to welcome all delegates and distinguished guests to this conference.
So thank you all for attending this conference, thanks to conference holders and I believe
that this conference will achieve great success.

Today this conference will focus on the current situation, tendency, development
direction and policy mechanism of mobilizing investment for development of Vietnam
rural road infrastructure in the coming years.

Ladies and Gentlemen:

I am glad to introduce to you the report containing 3 mains parts:

Firstly, I would begin with a review of the past and the present of investment on
road traffic infrastructure.

As you know, rural road infrastructure plays a great important role in


transportation infrastructure, socio-economic and cultural development, poverty and
alleviation movement, reduction of economic and cultural gaps between different areas:
cities and rural areas and assurance security and safety of society.

Road network is distributed quite widely and fairly regional. Up to date, the road network
is 223.059km length, including 17,020km highway making up 7.63%; 23,137km
provincial roads making up 10.37%; and 78.19% of rural roads equals 174,410km.

The density per national area is 0.68km/km 2, per capital is 2.65km/ 1000 people; these
statistics are higher than other countries in region.

The road quality has gradually improved, total highway and provincial roads’ surface are
spread by BTXN, BTN or asphalt is 31,033,5km as 13.91%; urban traffic has also
improved significantly. There are many establishments of axis roads, corridors; city-inner
roads are enlarged and surface spread; new bridges are built, upgraded and maintained.
Rural traffic has developed practically fast; traffic now is more convenient; kilometer of
asphalted road is increased to 29,662km making up 17.1%. Only in 2006, 1001km road
were upgraded, maintained and constructed; 14,340md bridges were built; some
important routes were restored and maintained such as national highway number 1, 2, 3,
4, 5, 6, 8, 9, 10, 13, 18, 22, 51, 53, 55, 56… Ho Chi Minh route phase 1 has basically
cleared; many new bridges were built such as Thanh Trì, Bãi Cháy, Mỹ Thuận, Kiền,
Bính, Đà Rằng, Câu Lâu, Trà Khúc, Diêu Trì, Yên Lệnh…. Some big bridges are starting
to build like Rach Mieu, Can Tho; were built and cleared the Hai Van tunel in national
highway 1 that enhance convenience for North-South traffic.

In recent years, Government interest has encouraged large amount of investment on land
traffic. Total investment capital on highway network from 2001 to 2006 was 66,526.76
billions VND; average is about 11,089.79 billions VND per year, taking account of
92.34% of total investment on transportation sector. The investment is mobilized mainly
from national budget, government credit, state-owned enterprises and ODA, Government
bonds, capital and non-state owned enterprises. However, the primary investment is from
national budget or has source from national budget. With huge investment, road traffic
network has expanded and developed in not only quantity but also quality. The primary
traffic route such as Northern-Southern route, traffic in main economical zones have
gather invested so that road infrastructure has been improved noticeably. In 2006, road
traffic loaded 67.7% traffic quantity, 86% passengers, ensure for necessary traffic
quantity for economical development, society. Especially, road traffic has spread to
almost difficulty zones, mountain spine areas in Vietnam and communication lines to
neighbor countries.

However, our transport network has not been completed and not able to keep up to the
economic grow, especially when we join the WTO. The main issues are:

+ There is no highway road infrastructure which brings a breakthrough in


economic. High standard road level 1, level 2 has a small percentage. For example
highway with 4 lanes is only 4%, 2 lanes is 35% where the rest are low standard.

+ There are many route has no technical standard guarantee or has not been
classified. At difficult zones, especially mountainous region or Cuu Long river’s plain
country, there are routes have not been clear or with temporary, not reliable bridge (more
than 30% bridge need to be replaced)

+ Many bridge, drain have old standard therefore they are not suitable for current
standard, firming etc.... With the change in hydrograph system and severe weather
conditions, in the flood season, there are part is collapsed, fall in apart and traffic is tie-up
after flood.

+ Secure corridor is not guarantee and still being transgressed.


+ North - South axis still concentrate on the highway 1 even with 2 routes. Ho Chi
Minh route is trough some difficult zone and collapsed after flood.

+ Many highway routes in mountainous region are not clear, having difficulty in
transport. Cuu Long river’s N1 N2 routes are not completely clear.

+ City’s traffic has jam parts, corridors are not completed. There is difficulty in
extend the traffic in the city. Deprived of land for traffic and there are serious traffic jam
in Ha Noi and Ho Chi Minh City.

+ There are still 250 communes without car – enable road leading to the city. Most
of them are in Northern mountainous areas and Cuu Long basin.
+ The weak points of Viet Nam road system are: variousness of transportation
means flowing in the same road with different speeds, houses are too closed to the road,
all conjunctions are in the same level and unsystematic, road margins are occupied by
private purposes

2. Direction for road development in coming years


Ladies and Gentlemen,
Road system plays crucial role in infrastructural base of the social economy generally and
in transportation facilities particularly. It need one-step headed investment to make
foundation and motivation for socio-economic development and contribution to
industrialization and modernization course, to match with requirements of regional and
international integration and to ensure the national security.

In the coming years, investment for development of roads will focus on the following
directions:
- To maintain, enhance and upgrade for maximizing usages of existing roads and soon
start up building of high-ways system, especially it is from the North to the South;
upgrade routes in important economic areas, urban areas, linkages between economic and
new urban areas, roads of external linkage.
- Invest for development of inter-link urban areas in big cities, especially Ha Noi and Ho
Chi Minh cities; roads in rural areas, focus on it in mountainous, remote and isolated
areas, Cuu Long basin to support hunger elimination and poor alleviation program and to
help socio-economic development in these areas.
- The real objectives shall be achieves to 2020 are as follows:
(i) For national roads: complete restoration and upgrading of existing road system with
technical standard minimum of IV level; complete of building all necessary bridges in
national road system in 2015.
+ Invest to quickly development of highways system, as the end of 2010 could
complete 8 routes with 700km long, including: Cau Gie-Ninh Binh; Ho Chi Minh city –
Trung Luong; Trung Luong – My Thuan-Can Tho; Ha Noi-Hai Phong; Ha Noi-Lao Cai;
Ha Noi-Thai Nguyen; Lang – Hoa Lac; Ho Chi Minh city-Long Thanh-Dau Giay;
+ As the end of 2020, complete further 13 routes with 1709km long. The highway
roads as 2020 will be 2409km, account for about 1,08% total roads over the country.

(ii) For urban roads: Complete ring roads, centre-directed roads and main city roads;
complete of building all big bridges over Hong and Sai Gon Rivers.

(iii)For provincial roads: as 2015, 100% provincial road are bitumen or concrete surfaced
with technical standard minimum of IV level (at difficult mountainous areas.
(iv) For rural roads: as 2010, 100% commune and group of communes have automobile
roads to its centers; 95% are covered by hard material, of which, 30% by concrete;
eliminate 90% of “monkey bridges” in Cuu Long basin.

With above mentioned direction, investment capital demand for development of Viet
Nam roads is very large.

As said by consultants, at the current price, total investment for development of road over
the country to 2020 will be VND 1,002,402 billions, equivalent to VND66,826 billions
annually, of which: investment for existing national roads of VND10,045 bill. per year;
provincial roads of VND 6,666.67 bill. per year and urban roads (calculation of Ha Noi
and Ho Chi Minh cities only) of VND 17,765 bill. per year; rural roads of VND 6,941
bill. per year; Ho Chi Minh Road of VND 2,734.67 bill. per year; and highway roads of
VND 22,673.67 bill. per year.

It is seen that, investment capital demanding for targeted development to 2020 is quite
high, may be six time in comparison with current investments. It is clear that with the
current investment level, Viet Nam could not achieve its planned objectives and could not
make a significant improvement in infrastructural facilities. Viet Nam’s government
should have good policies in mobilization of all capital sources to invest in roads. It may
include publication of list of projects calling for investment, diversification of capital
mobilization and other appropriate incentives.

3. Comments on mechanism, policies in mobilizing investment capital for road


development in the coming years

3.1. Fostering state budges for roads

- Investment capital from state budges and state-sourced budges (including ODA) are
considered as a crucial source in road development. Therefore, looking for a good
mechanism and policy to increase state budges is strategic, vital issue in order to increase
investment for road facilities. As proposed in the strategy to 2020 for transportation
development, state budges invests for transportation facilities should be at least of 3.5%
GDP.

Taxes are main sources and contributed a nominated potion to the state budges. In order
to have more taxes in the state budges, it is necessary to add more or adjust taxes and fees
relating to usages of road facilities such as, fees for using of motor vehicles, heavy tracks,
etc., and stabilize policies of petroleum fees. When making decisions on transportation
toll fees, it is necessary to take into account budges to reinvest in transportation system.

The Vietnam Road Administration proposed to have adjustment of and addition to some
fees as follows:
- New supplementary fees imposes to using of motor vehicles (automobiles, monocycles
with more than 150cc capacity). This kind of fee is new for Viet Nam but popular in
regional countries and in the world. The collection of fees for using motor vehicles is
suitable when VietNam is full member of WTO and many taxes have been cut off. It will
be a good source for state budget and also be a measure for mitigation of the using of
private automobiles.
The collection should be applied in registration for a new automobile or during
periodically technical inspections for automobile in using.

- Impose higher transportation fee through petroleum price. Current fees of VND 500/lit
of petrol and VND 300/lit of diesel are not efficient. In many countries, transportation
fee through petroleum price shall be extracted of 25 – 30% to reinvest in transportation
facilities. In Viet Nam, this collection is most feasible.

- The collection from assignment of road facilities, stations, from indirect beneficial
objectives resulting from road facilities, especially for buildings having commercial
advantages by new road should be adjusted in order to increase state budget.

Investment from state budget shall focus on main and important roads, routes with
refundable difficulties, support for rural roads and routes of strategic national security.
Other routes with high condenced flows and having quick refundable capability will be
invested by other sources (private participation) under the form of BOT, BT, BOO...

Management of state budget investment for infrastructural facilities should be improved


by more open for biding, further measures to avoid losses, corruption and misspend. The
strengening and stabilizing structure, enhancing management capability of state
management and capital construction for investors and project consultants are also
measures to ensure efficiency of investment.
3.2 In order to have a sustainable and long term financial source for management and
maintenance of roads, there is a need for establishment of “Road Maintenance Fund” like
some other countries.

The Fund may build up from some main resources are as follows:
+ Collection of fees for using motor vehicles through petroleum price.
+ Collection of toll fees for new roads and bridges which have just built or
improved with high technical standards.
+ Annually transportation fees per motor vehicles
+ Annually collection of transportation fees through automobile and motorcycle
tires.
+ Collection from issuing of driving licenses, after extract legally spends, send it to
the Fund.
+ Collection from fees for technical inspection of motor vehicles, after extract
legally spends, send it to the Fund
+ Other sources: supports from domestic and foreign organizations, enterprises,
individuals and residential communities...

3.3. Policies to attract private domestic and foreign investment in road constructions

Private domestic and foreign investment is a promising potential source which may
provide a part of financial requirement for the program of road development. Private
investment, however, is focused in routes with high beneficial capability, highways under
BOT, BTO, BOO... forms. In order to promote these sources, there is a need for
establishment of a appropriate and sustainable legal framework, publishment of master
development plan, improvement of administrative system ... to facilitate investors.

3.4. Mobilization investment in road construction through issuance of securities

Securities issuance may takes place in 3 levels: governmental, provincial/city and


enterprise.

During the past time, some constructions have been efficiently invested by these financial
sources, so need to promote for dissemination. Securities market is potential for
development, but its reality requires a deep constitutional reform, of which including
management and transparent are the most important.

3.5 Mobilization financial funding from commercial banks and financial institutions

During the past time, commercial banks and financial institutions, by taking part of
investment group, have been financed for road constructions with promising beneficial
capability. With the aim to attract this financial source, Viet Nam should have a
organization on credit appraisal to provide information which help banks in process of
verifying credit proposals made by enterprises.

3.6 Contribution obligatory and voluntarily from residential communities to development


of road facilities, especially in rural roads.

In order to mobilize this source, we need to have good propaganda to get public
awareness on benefits of road infrastructure and also need financial supports from the
state as “motivated capital”. The state pay for major construction materials such as
cement, rocks.. and residential communities contribute man power. It may encourage
resident positively and voluntarily taking part in the constructions. In addition, it is
necessary to have management power of community’s representatives to ensure credit of
residents and efficiency of the constructions.

3.7. Enhancement efficiency of management and using invested capital. This is crucial
measures to maximize investment capital in road constructions. Investment must be in
accordance with master plan for development, upgrading management system, improving
standards and economic-technical norms, consolidated costs and strengening inspection
and quality control.

In the future, development of roads facilities continuously play important role