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Transport contractors lack capital, administrators seem helpless   2011-05-31 - LD

Due to the serious capital shortage, the Ministry of Transport has to delay 75 transport projects totaling 1422 billion dong so far this year.

 

Only very important and urgent projects can get capital from the state budget. However, the “very important and urgent” projects are now facing the slow disbursement, which has caused big difficulties to contractors. The Ministry of Transport has said it is trying to help settle the problem, but it seems that “the spirit is willing, but the flesh is weak”

 

Projects thirsty for capital

 

Lacking capital is the common problem of nearly all transport infrastructure projects. The decision by the Ministry of Transport on delaying the implementation of 75 projects capitalized at 1422 billion dong has caused big worries to contractors.

 

In general, contractors carry out works first and get payment later. Once projects have delays, contractors will not get paid. Though contractors have brought machines and workforce to the construction sites already, they have to stop working for indefinite time. They fear that the half-finished items of the projects will downgrade. While they have to stop working, they still have to pay interests for bank loans, though they do not have income. As such, the possibility of incurring loss is foreseeable for contractors.

 

Can Hong Lai, General Director of Cienco 1, a big transport construction company, said 50 projects of the company with the total capital of 1200 billion dong have been postponed and delayed, or the projects do not have capital to be executed, which has put big difficulties for Cienco 1.

 

Also according to Lai, a subsidiary of Cienco is now a big creditor, because a partner has not paid the big debt of 70 billion dong. As a result, the subsidiary does not have money to pay wages to workers, who have to stay off work or take other jobs.

 

Some projects prove to be “luckier” because they are not listed among the projects to be postponed. However, the disbursement for the projects has been coming in dribs and drabs.

 

Contractors have been moving heaven and earth to arrange capital to implement the projects to avoid the investment interruption. However, it is very difficult to seek capital at this moment. The lending interest rate has climbed to 22 percent on average, while it is not easy to access bank loans. In general, transport construction companies cannot make fat profits; they just wish to get enough jobs for workers to survive.

 

Where to seek capital?

 

Leaders of the Ministry of Transport these days have been making every effort to help its transport construction companies seek capital. However, the result remains modest.

 

In April 2011, Deputy Minister of Transport, Ngo Thinh Duc flew to South Korea in an investment promotion program, got the initial agreement with the partner on financing transport projects.

 

According to Duc, it is time to change the way of calling capital for transport projects. It would be better to call for investment by offering different projects suitable to different groups of investors, instead of offering projects with the same model to all investors.

 

Deputy Minister of Transport, Truong Tan Vien said that Vietnam needs a huge sum of capital for the transport projects in the next five years, from 2011 to 2015. Meanwhile, the state budget, including the ODA (official development assistance) will only meet 38 percent of the demand, while the government bond will provide 18 percent of capital needed. Besides, Vietnam will have to seek non-state budget capital for the projects. Especially, the PPP model (private public partnership) is believed to be a good solution.



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