infrastructure financing in viet nam: challenges · infrastructure financing in viet nam:...
TRANSCRIPT
Infrastructure Financing in Viet Nam: Challenges
Hung Tran
CEO – Monitor Consulting
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National Workshop on Infrastructure Financing Strategies in Viet Nam
Hanoi, 3rd October 2017
Viet Nam has successfully sustained a high level of infrastructure investment in recent years
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4.4 4.6 4.7
4.7
5.0 4.2 4.75.6
5.8 6.0 6.5 6.5 6.77.0
8.89.8
10.3% 10.1% 9.7%
8.2%7.5%
6.5%7.3%
8.0%
0%
2%
4%
6%
8%
10%
12%
0
2
4
6
8
10
12
14
16
2008 2009 2010 2011 2012 2013 2014 2015 Infr
astr
uct
ure
Inve
stm
ent
to G
DP
(%
)
Infr
astr
uct
ure
Inve
stm
ent
($b
illio
n)
Electricity, gas & water supply Transport & Telecommunications
Infrastructure Investment to GDP (%)
Source: Vietnam General Statistics Office, World Bank, Bloomberg and Author’s Research and Analysis
However, its infrastructure competitiveness needs to be improved
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0
20
40
60
80
100
120
140
Cambodia Indonesia Lao PDR Malaysia Phillipines Singapore Thailand Viet Nam
Ran
kin
g (o
ut
of
13
8 e
con
om
ies)
Roads Railroad infrastructure Port infrastructure
Air transport infrastructure Electricity supply Mobile telephone subscriptions
Fixed- telephone lines Overall
Source: World Economic Forum, Global Competitiveness Index Report 2016-2017
Projections of infrastructure investment demand in Viet Nam
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Source of
Estimation
Time horizon Infrastructure
investment needs
($ billion)
Annual average
($ billion)
ADB 2015-2025 167 16.7
WB Annual average 25 25
HSBC 2016-2030 259 17.2
KPMG 2013-2020 170 24.2
Author 2016-2020 116.9 23.4
Financing gaps in infrastructure investment in Viet Nam
• Annual infrastructure investment in 2011-2015 is $12.6 billion
• Infrastructure investment demand in 2016-2020 is projected about $24 billion- almost twice the previous 5 years
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Key Challenges:
1. Fiscal constraints and less room to finance large transport projects by state funding
2. Inefficient investment planning and public finance allocating
3. Undeveloped capital markets
4. Lack of necessary in-country capacity
5. Lack of enabling environment for private investment
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Challenge #1: Fiscal constraints and less room to finance infrastructure by state funding
• High budget deficits and less budget allocated for infrastructure investment
• High level of government debt and pressure to reduce
• Less concessional ODA access as a middle income –status
• Decline tendency of capital expenditure in State budget
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Challenge #2: Inefficient investment planning and public finance allocating
• Shortcomings in its planning and budgeting processes
• ADB(*) noted: “Within the development budget, investment projects are not well aligned with the government’s Socio-Economic Development Plan, 2016–2020”.
• As decentralization emerges, provinces are incapable of enabling efficient planning of infrastructure development
(*) ADB, Sector Assessment (Summary): Public sector management (Public expenditure and Fiscal management)
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Challenge #3: Underdeveloped capital markets
• Limited capacity of domestic banks to provide long-term loans in local currency
• Small bond markets mainly with short-term maturities
• Inactivity of institutional investors in infrastructure-related assets
• Securitization schemes are not prevailing
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Challenge #4: Lack of necessary in-country capacity
• Weak project preparation and appraisal
• Lack of bankable infrastructure projects
• Poor coordination among government agencies
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Challenge #5: Lack of enabling environment for private investment
• Complexities and incomplete legal system including PPP legal framework
• Governance in policy making and project procurement : SOE treatment and vested companies
• Competitive bidding is not prevailing in the procurement of infrastructure projects
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Hung Tran – CEO
Email: [email protected]
Mobile: (84) 903443690
Monitor Consulting
16th Floor, Icon4 Tower, 243A De La Thanh Street,
Dong Da District, Hanoi, Vietnam
www.monitor.com.vn
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