The 25th WORKSHOP
26 August 2006 (Sat), GRIPS Campus in Tokyo 14:00-17:00

Subject:
"Diversification of Financing Sources
for Transport Development in Vietnam"

Summary

In this workshop, Mr. Luu Hoai Son presented his research on the diversification of financing sources for the development of transportation system in Vietnam. The presentation was based on his final report for the GRIPS Young Leader Program in 2006.

Mr. Son began the presentation by providing an overview of financing scheme for the transport infrastructure in Vietnam, in which funds from the Official Development Assistance (ODA) and state budget have played important roles. It was also shown that, among a variety of major infrastructure projects by ODA fund such as energy, communications, and urban development, transport projects accounted for about 45 percent of the largest ones in the period 1993-2003. More importantly, figure showing expenditure in transport infrastructure indicated that outstanding commitment, which was measured by the gap between approved and actual disbursement, always existed. In addition to the information on Vietnam, Mr. Son also provided an international comparison of transport expenditure in other regional countries such as Japan, Korea, and Thailand at the time that they had the same levels of development as current Vietnam. Before reaching his projections of financing transport infrastructure projects in Vietnam in the coming periods, Mr. Son reviewed Japan’s experiences with numerous financing schemes, and also pointed out current issues for Vietnam in developing transport sector such as ambitious plans of Ministry of Transportation (MoT), limited state budget sources, and expected decline of ODA fund.

The financial projections with different scenarios of low and high economic growth showed that future expenditure in transport sector would account for 2-4 percent of GDP in the period 2006-2010. To achieve funds for such projections, a variety of sources were discussed such as gasoline tax, fees and charges, and license tax. Moreover, Mr. Son proposed to set up a special account for transport development, in which mobilization of sources from private sector and ODA and institutional reform were the primary tasks. Efficiency of utilizing budget for transport development was also in focus of attention.

Mr. Pham Truong Hoang (YNU & VDF-Tokyo) started Q&A session by a question of how financial costs of transportation projects could be estimated. In addition, he also wondered the reason why the gasoline tax was not effective in Vietnam. In his response, Mr. Son said that he made estimates for all transport projects in term of percentage of GDP. He admitted that different projects would have different requirements and characteristics, but such estimates could provide overall scenario of required costs for developing the transport sector. For the second question, Mr. Son elucidated that if different ministries could introduce different kinds of such specific policies as gasoline tax, then they would be overlapped and it would be difficult for the government to manage at macro level. Therefore, diversifying and looking for other financial sources would need to be done immediately.

Regarding management of transport projects, Prof. Izumi Ohno (GRIPS) raised a question of the consistent functions between SOEs, PMUs and related administrative units that Mr. Son talked about in his presentation. Further, she would like to know his proposal on institutional reform, in which PMUs must be reorganized. Mr. Son responded that those organizations were playing different but complementary roles in the transport sector. However, there were still many management issues between them that the government and MoT needed to deal with. About PMUs, Mr. Son said that there were numerous ideas and debates about PMUs, in which reorganizing them as public corporations was one way because it might be more transparent in terms of functions and responsibilities.

Discussing more about projections, Prof. Izumi recommended that Mr. Son distinguish medium and long-term projections as they must be consistent with the Socio-Economic Development Plan (SEDP) 2006-2010, and such concrete projections would help to know how much we could mobilize funds/capitals from different sources. Moreover, she also said that Vietnam could not invest at once in overall transport projects so that detailed financing sources would be identified if we could classify prioritized projects. Prof. Izumi also provided Malaysia as a good case in making consistent social and economic plans in different time range that Vietnam could learn. In his feedback, Mr. Son thanked for her comments, and said that financial projections for a transport project would require a variety of information including those that Prof. Izumi mentioned, and he again said that his current research just aimed to provide an overview of financial needs and possible sources for transport sector in Vietnam. For the next step of study, he would like to work in more detail on financial projections of specific projects of the transport sector.

After listening to all comments and questions, Prof. Kenichi Ohno also gave some comments on the presentation contents. He said that, though projections were simple, the presentation was still interesting in the sense that it could provide an overview or background of current and future issues for the development of transport sector in Vietnam, and he asked Mr. Son to prepare for detailed projections of different transport projects as he mentioned. Additionally, Prof. Ohno talked about differences of gasoline tax in Japan and Vietnam, in which Japan used tax on gasoline consumption, while Vietnam was still subsidizing such consumption, and therefore Vietnam must look for other sources to finance the future transport projects. More broadly, Prof. Ohno was interested in such issues as how master plans and strategies had been implemented in Vietnam, and how they were related to the micro projects. Agreeing with Prof. Izumi, he said that diversification of financing sources needed to be considered in detail with specific projections.       

The workshop ended with a 45-minute exchange information section, in which we announced our coming monthly workshops, current studies of the participants, and VDF networking. 

(By Giang Thanh Long)