(VLR) Discussing on the North - South East Expressway Construction Project in the period of 2017-2020, Assoc. Proff. Ph.D. Tran Chung, Chairman of the Association of Investor in Vietnam Road Traffic (AVINA), expressed his concerns about the legal gaps when settling disputes (if any) between investors and state competent agencies. On the other hand, he provides with evidences that domestic enterprises are qualified to participate in implementation of national transportation projects.

Assoc. Prof. Ph.D. Tran Chung, Chairman of the Association of Investor in Vietnam Road Traffic (AVINA)

Legal gaps …

Sir, the details of North - South Expressway Construction Project had been announced by the Ministry of Transport (MOT), invited bidding, and proceeded to build. The addition of a new road, being an expressway, will bring obviously benefits to the country. However, what does this construction project still make you worried about?

Assoc. Prof. Ph.D. Tran Chung: Yes, I worry about some issues. The first issue is traffic division. This issue needs to be come up and solved prior to the starting construction of the North - South Expressway. We have known that, many expansion projects have been completed on National Highway 1A and under the process of collecting toll for payback. In particular, there are tunnel works through mountains which had been built at the huge investment costs, the payback process is required to be performed for many years. The implementation of a parallel expressway project will affect the financial plans of the National Highway 1A expansion projects. Who is responsible for damage of the project investors? I should think of this matter, the competent State agencies need to give an overview and consideration to solve it reasonably and thoroughly.

Deoca road tunnel, one of the typical projects performed by the domestic investors

The MOT has recently just held a meeting for invitation of investment and bidding documents for the North-South Expressway have been distributed, under a perspective of an expert, what do you give any comments on the bidding conditions for this expressway?

Assoc. Prof. Ph.D. Tran Chung: The leaders of the MOT affirmed that regardless of investors from any country, provided that they are sufficient experience, capability, and fair project implementation costs, they will be publicly selected through the international bidding. In my opinion, this argument sounds transparent and equal in investment. But, looking at the bidding conditions will see that the domestic private sector has many disadvantages in the competition at our home. With the barriers of very high requirements of the investor’s qualification and experience, issues such as access to the domestic funding source, interest rates and facility limits, etc, imperceptibly, domestic investors are eliminated, an element of “driving force of the national economy” is taken out of opportunity to participate in the national construction work. Only looking at the condition of experience capacity, it is clear that domestic investors fail from the prequalification round.

Could you explain why investors from France, Japan, and so on “are not interested” in this project, while many investors from China are very interested in it?

We need to question, if failure to facilitate the domestic enterprises to participate in big projects, how can they grown, how do they develop, and how can they take on the role of “the driving force of the national economy”?

Assoc. Prof. Ph.D. Tran Chung: As I known via information that more than 90 sets of applications for 8 BOT projects have been released. On average, more than 10 concerned investors take part in each project. That shows it’s an attractive project! But what foreign investors of the countries like France, Japan, etc expressing their top concern is the investing in Vietnam, how will the risks be handled and especially the legal problems, how are disputes handled? At the recent conference held by the MOT, the investors questioned the Government about those issues. This is their professionalism, because in reality we do not provide with any regulations or any clear guarantee regulations making them flinched.

So who is left? What are remaining investors? And contractors are from China only. They are willing to take the above risks from investment in the projects in Vietnam.

As an arbitrator of Vietnam International Arbitration Center (VIAC), could you point out any potential shortcomings when resolving contract disputes with foreign investors?

Assoc. Prof. Ph.D. Tran Chung: Through actual dispute resolution at VIAC, many causes for contract dispute. There are still many legal gaps that investors need to pay attention to avoid embarrassment when contract disputes occur.

Firstly, we often fail to consider the legal entity of foreign partners, which should be conducted on the basis of relevant foreign laws, we often consider on a basis of regulations on legal entity of Vietnamese business.

Secondly, foreign investors have the right to agree to apply laws to their relations. In fact, agreement on which applicable law in dispute settlement is an uneasy task. Contracts signed with Chinese investors on a number of projects in the past are the typical examples of the awkwardness in the dispute settlement.

Thirdly, the laws of Vietnam are formulated mainly governing relations without foreign factors. When entering into a contract, the parties fail to choose the applicable law, disputes are usually arising. At that time, it is necessary to apply international practices to settle disputes.

So, what needs to be paid attention for the domestic investors, sir?

Assoc. Prof. Ph.D. Tran Chung: Normally, construction investment projects have to be performed for many years. In case any changes in policies by the State (such as salary policies) directly affect the contract performance, the investors need to know about the circumstances in which the contract can be adjusted without any advance agreement. The rapid development of society together with integration and opening, Vietnamese legislations change very quickly leading to conflicts.

Then, the rights of the parties in case of overlapping documents, what documents are higher legality? Are conditions applied to handling of contract breaches included in contractual commitments?

Create opportunities for domestic businesses

Back to bidding conditions for these expressway construction projects, what are the difficult conditions for domestic investors, sir?

Assoc. Prof. Ph.D. Tran Chung: In terms of capacity, investors are required to have performed the similar projects and have equity that has been contributed equivalent to the investment costs of the current projects. Be aware that these are projects at a very great total investment cost. Previously, very few transport infrastructure projects in Vietnam at a great amount of total investment cost, the domestic enterprises participated and the law also stated that equity contribution was only at a low level.

Financially, the current domestic investors wishing to implement the projects shall have to mobilize domestic credit capital. However, mobilization of domestic credit capital is very uneasy because the commercial banks consider BOT investment as potential risks. Along with that, the State Bank is tightening the rate of short-term capital mobilization for medium and long-term loans.

In fact, recently, the international construction works were successfully built in the first time in Vietnam such as: Landmark 81, Road tunnels passing through Ca pass, etc, by the domestic investors and construction contractors, this is a clear demonstration of the potential of Vietnamese when they know how to accumulate experiences, organize and exploit manpower resources well.

In addition, the Bids for prequalification are currently applied at interest rates less than 5% - 6% of the bank’s interest rates. This is the difference that is impossible for any domestic investors who are able to be born.

So, according to your analysis as mentioned above, is the opportunity for domestic enterprises to participate in the North- South Expressway Project almost impossible?

Assoc. Prof. Ph.D. Tran Chung: I think that in order that domestic enterprises participate in this project, modification of bidding criteria must be made to allow the domestic investors to enter into joint ventures, so that they can supplement their advantages and mitigate disadvantages each other. We need to question, if failure to facilitate the domestic enterprises to participate in great projects, how can be they grown, how do they develop, and how can they undertake their roles of the “driving force of the national economy?”

From the conditions of participating in the bidding, I think that the MOT is evaluating the project based on the total investment cost, based on equity, etc, means that based on money without technical decentralization of works.

At the requirements of an expressway with 4 to 8 lanes and 60km in length, from a technological and technical view, I think that many domestic enterprises are sufficiently capacity to do well the expressway projects at the grade of such project. In fact, some works done by Vietnamese have proved this.

Has the application of modern technology, professionalism in the construction organization method of the domestic enterprises caught up with other countries, sir?

Assoc. Prof. Ph.D. Tran Chung: We should look at the reality in the recent time, with the international works that it’s the first time to successfully built in Vietnam such as Landmark 81, Road tunnels passing through Ca Pass, etc by the domestic investors, construction contractors, that is a clear demonstration of the potential of Vietnamese when they know how to accumulate experience, organize and exploit manpower resources well.

Vietnamese investors built road tunnels with advanced technologies with high accuracy in drilling through mountain. The system of modern tunnel operating equipment with tens of details of light, ventilation, toxic gas content, traffic safety assurance criteria and so on are automatically updated and stored in the Traffic Management Center (TMC) 24/24. Use Drones in the route selection surveys, site clearance, construction inspection on site. Application of the principles of sustainable development in the field of construction of transport works is based on the principle: “Passing through mountains, digging tunnel is required; Crossing valley, bridge construction is needed” and create an ecological path for all transport works that need to be concerned and performed.

Thank you, Sir

By Quang Thanh/VLR

http://vlr.vn/giao-thong/cao-toc-bac-nam-co-hoi-nao-cho-nha-dau-tu-trong-nuoc-4791.vlr