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Hot incentives in line for cold infrastructure and energy sectors
Foreign investors will soon enjoy better incentives when exploring investment projects in Vietnam’s cash-strapped infrastructure and energy sectors.
An official from the Ministry of Planning and Investment’s (MPI) Infrastructure and Urban Development Department told Vietnam Investment Review that his department was drafting a set of measures for Vietnam’s wish-lists calling for foreign direct investment in the two sectors.
“We now have to revise legal policies to allow private participation in infrastructure and energy sectors to identify what obstacles have actually deterred foreign- invested projects in the sectors from becoming a reality,” said the official.
“The situation is in contrast to the fact that the foreign community is really interested in building new toll roads, ports and power facilities in Vietnam, where the underdeveloped infrastructure network needs billions of dollars in funds every year.”
The MPI official said that the proposed solutions to raise private participation in targeted sectors would be delivered for prime ministerial approval in the final quarter of this year.
“We do not want to see our wish-lists remain idle,” he said.
Last year, the government unveiled a list of 17 strategic infrastructure projects to build roads, seaports, rail routes and airports until 2020 for foreign private participation. Preliminary estimates put the combined required funding of those projects at $67.57 billion.
The MPI official admitted the list had grabbed the foreign community’s attention. But, to date no foreign investors have won approval for a project. Similarly, three years ago, the Ministry of Industry and Trade (MoIT) published a list of 15 power projects open to foreign investment, with a combined capacity of about 11,500 megawatts, but few foreign companies responded to the announcement.
“Reasons for this are understood to include legal and regulatory issues, low electricity purchase prices by Electricity of Vietnam, a lack of a transparent and competitive market, and poor coordination among government agencies,” said a UNCTAD study.
The study estimated that the country’s electricity demand would rise by 17 per cent annually until 2010, and require additional funding of approximately $3.2 billion in 2010, assuming a typical cost of $1,000 per kilowatt of electricity.
Now, Vietnam has only two major foreign invested power projects that have been completed. They are Phu My 2.2, which is a joint venture between Electricite de France (56.3 per cent), Sumitomo Corporation (28.1 per cent) and the Tokyo Electric Power Company (15.6 per cent), and Phy My 3 – an equal share joint venture between British Petroleum, Nissho Iwai Corporation and SemboCorp Industries of Japan.
There is a long list of private investors wanting to establish wholly foreign-owned thermal power plants in Vietnam, including those from the US, Japan, China, Singapore and Taiwan. “Foreign investors will participate in the Vietnamese power sector only if their financial aspirations are met and if they are able to make a return on investment commensurate with their perception of the risk they are taking,” the study said.
VNN
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