Maybank Kim Eng Securities Company has urged Vietnam to call for more foreign direct investment (FDI) into infrastructure projects to address the country’s rapid urbanization amid falling official development assistance (ODA) loans.
In its ASEAN Infrastructure: The New Old Thing report released at the Invest ASEAN 2016 conference last week, the brokerage said Vietnam has relied heavily on the State budget to develop infrastructure. The nation still faces a serious lack of infrastructure for the transport, energy, power, water and telecom sectors.
In 2016-2020, the country will need over US$200 billion for infrastructure development, and at least the same amount in the following five-year period. This is more than double the annual investment in the last decade.
Vietnam’s fiscal deficit has widened to over 5% again in the last five years as spending increased faster than revenue. The country has had to borrow more to offset the deficit, leading public debt to nearly touch the ceiling of 65% of gross domestic product (GDP) approved by the National Assembly.
ODA loans used to account for 30% of its infrastructure financing but a majority of this cheap financing will be lifted by 2018.
The Government said the State budget and other forms of development assistance can meet 40-50% of its infrastructure funding needs in the next 10 years. The shortfall may be met partly by private investors, including foreign ones.
The securities company stressed that public-private partnership (PPP) is now a must. Though Vietnam has issued decrees and laws backing PPP since 2010, the nation should help investors in terms of land clearance, pricing mechanism, budget support and stability of regulations so that foreign investors can be confident to join big-ticket projects that need a long time to recover capital.
This is necessary as other ASEAN nations like Myanmar, Bangladesh and Pakistan are also seeking foreign investment for their infrastructure projects.
Maybank Kim Eng said in the report that funds for the transport sector should be used to build roads as Vietnamese still rely heavily on roads, predominantly local roads, and not so much on urban roads or highways. The country’s railway system is outdated and air transport has improved in recent times but they cannot meet demand for socioeconomic development.
Therefore, road development via the PPP format will be essential in the coming time. Power should be prioritized after transport. Vietnam has imported electricity to meet rising local demand and deal with a shortfall in the domestic market.
The shortage could worsen in the next 2-3 years and more incentives would have to be rolled out to accelerate investments in new plants.
Maybank Kim Eng said slow land clearance has long been the main impediment to most infrastructure projects in Vietnam.
Therefore, the company suggested the Government further assist businesses in site clearance to boost the implementation process of infrastructure projects.
Maybank Kim Eng is an investment bank under Malaysia-headquartered Maybank, and operates in 11 nations in sectors like stock brokerage and debt and capital markets. In Vietnam, Maybank Kim Eng is the first 100% foreign-owned securities company and provides stock brokerage and consulting services.
Source: www.thesaigontimes.vn
Keyowrds: Maybank, Attract, more FDI, into infrastructure
