Sustainable Financing Sources for Transport Development in Vietnam

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Main Objectives: Discuss the financing issue for transport infrastructure development and management in Vietnam; discuss mobilization of financing sources for transport development in Japan, in order to draw Useful Lessons for Vietnam.

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Nội dung Text: Sustainable Financing Sources for Transport Development in Vietnam

Main Objectives 9 Discuss the financing issue for transport infrastructure Sustainable Financing Sources for development and management in Vietnam. Transport Development in Vietnam 9 Discuss mobilization of financing sources for transport development in Japan, in order to draw Useful Lessons for Vietnam. Presented by Dinh Van Hiep Koji Tsunokawa Saitama University To establish a sustainable financing framework for transport infrastructure development and management The 8th Spring Study Meeting in 2007 1 2 Transport Expenditure Levels Government Budget Shares by Sectors, from 1994 16 % of Government Budget, from 1994 From 1994, the Vietnamese Government has paid more attention on the development 13.78 14 of transport infrastructure through many large-scale transport projects. 12 Country (period) Transport Total Public Investment 10 9.26 Investment in Infrastructure (% GDP) (% GDP) 8 6.22 Japan (1957 - 1973) 2.0 – 2.5 6.0 – 8.0 6 4 2.76 Korea (1983 - 1991) 2.1 – 3.0 8.1- 13.0 2.6 2 0.69 0.44 Vietnam (1994 – 2005) ~ 3.2 7.5 0 n ly n ty lth n ds io io io pp ci ea at oa at at tri su ic uc H ig R ec un Ir r Source: World Bank 1996, Ministry of Finance – Vietnam 2005 er Ed El m at m W co le 3 4 Te Source: CIEM Finance Sources of Transport Expenditure Major Spending on Roads 100 BOT G overnment Expenditures on Transport Modes (%) 90 88.3 Budget-other 5% 87.7 85.7 84.3 84.2 6% 80 76.9 State credit 3% 70 ODA 60 Road 42% Inland Water Way 50 9 ODA: 42 % Rail State bonds 40 30% 9 Budget – ODA counterpart: 14% Maritime Others 9 State bonds: 30% 30 9 State credit: 3% 20 Budget-ODA 9 Budget – other: 6% 10 Counterpart 14% 9 BOT: 5% 0 1994 1997 1998 1999 2002 2005 Source: World Bank, 2006 Year from 1994 - 2005 5 6 Source: World Bank 2006 1
ODA Capital in VN- Commitment &Disbursement ODA inflows in Vietnam 7 8 Total ODA Disbursement & Projects TOP 10 Donors by Disbursement in 2003 Number of projects USD million 9 10 Distribution of ODA within Sectors ODA inflows in Vietnam in the Future? Transportation 11 12 2
ODA Disbursements: Continually declined ODA Inflows to China from Japan Afghanistan 2500 600 Cambodia Laos Myanmar 2000 500 Nepal JPY 100 milion Vanuatu 400 1500 US$ million 300 1000 200 500 100 0 0 79 81 83 85 87 89 91 93 95 97 99 01 03 19 19 19 19 19 19 19 19 19 19 19 20 20 1995 1996 1997 1998 1999 Year 13 Year 14 Source: World Bank 1999 Source: JBIC, 2005 And STOP now. ODA inflows in Vietnam in the Future? 9 The global trend of ODA inflows has continuously declined How is Future Expenditure in 9 Donors could not provide more ODA to Vietnam in the future, because the country will archive a higher GDP per capita (at US $ Transport Development? 1000 as estimated for 2010), so it would not be seen as the underdeveloped country in order to receive preferential treatment from donors ODA inflows in Vietnam might decline in the future! 15 16 Future Expenditure Requirements in Transport Transport Expenditure Levels in East Asian Countries Development in US$ million Country (period) Transport Investment Total Public Invst as % of GDP in Infrastructure 2002 2010 – Total Annual % of (% GDP) -2010 2020 average GDP Japan (1957 - 1973) 2.0 – 2.5 6.0 – 8.0 MOT 1) 50,125 84,352 134,477 7.471 12.0 Korea (1983 - 1991) 2.1 – 3.0 8.1- 13.0 Taipei China (1970 - 1992)* 2.1 – 4.0* 7.3 VITRANSS 2) 12,600 25,000 37,600 2.089 3.4 Malaysia (1973 - 1983)* 6.0* 6.9 Recent estimation (WB, 2006) Æ give a 2.097 - 3.5-4.0 Thailand (1973 - 1983)* 6.0 – 7.0* 7.5 more reasonable and sustainable level of 2.669 transport expenditures Vietnam (1994 – 2005) 3.2 7.5 1) The Vietnam Transport Development Plan up to 2020 (MOT, 2002) 2) The Vietnam Transport Strategy Studies 2000-2020 (JICA, 2000) *) In both Transportation and Telecommunication Investments 3) Strategic Review of Transport Donors’ Support to Vietnam’s 2006-2010 SEDP, Almec (2005) Source: World Bank 1996, Ministry of Finance – Vietnam 2005 17 18 3
The Current Issues 9 The future expenditure for transport development is still high Mobilization of the Financing Sources 9ODA inflows in Vietnam might decline in the future for Transport Development in JAPAN If financing source depends heavily on the State and ODA, budget constraint clearly occurs and it is not sustainable! 19 20 Financing Policies for the Transport Sector in Japan Financing Sources in Japan General account Special account (user fees and earmarked taxes, transfer from several National accounts) Generating Revenues Government National bonds Collecting from government taxes, earmarked taxes (gasoline tax), user fees, Fiscal Investment and Loan Program (FILP) Selling land surrounding transport projects Other (Public stocks sales) Local Gov. and National government Æ Gov. introduced several special accounts private Local bonds through Fiscal Investment and Loan Program (FILP) financial Financing Infrastructure Institutions Local taxes (general account and earmarked taxes) by central or local governments by private sector (BOT), General account Combine public and private resources, for especially Corporate bonds Public expensive projects (private participation in infrastructure-PPI) corporation Fiscal Investment and Loan Program (FILP) Æ Gov. established public corporations Bonds and loans from private financial institutions 21 22 Source: SIDJ, 1999 Between Japan & Vietnam Entity Sources Japan Vietnam Financing Sources in Japan General account Yes Special account (user fees and earmarked No! Special Accounts: collect money from user fees taxes, transfer from several accounts) National Government National bonds Yes, but it was not appreciated by private sector and earmarked taxes Fiscal Investment and Loan Program No! Public Corporations: issue their own bonds and Other (Public stocks sales) No! borrow from private sector to finance infrastructure Local Gov. National government No! projects. and private financial Local bonds through Fiscal Investment and Loan Program (FILP) It was promoted as a pilot project for urban transport development in Ho Chi Minh City and Fiscal Investment & Loan Program: takes funds Institutions Hanoi City. from postal saving and social security pensions, Local taxes (general account and No, usually funded through state budget. earmarked taxes) then issues bonds to public corporation and private General account Yes. The Vietnam Expressways Corporation (VEC) established in 2004, but it still heavily depends sector investment as interest-bearing loans. This Public on the MOT. program has been recently reformed to introduce Corporate bonds No! corporation market discipline. Fiscal Investment and Loan Program No! Bonds and loans from private No! 23 24 financial institutions 4
Financing Scheme for Roads in Japan - For initial investment cost 9 National treasury loan 9 Subsidy from central government Lessons for the Financing Sources for 9 Government Equity Investment in public Transport Development in Vietnam corporation 9 Private loan 9 Cross-subsidy from other route - For pay-back of loan and maintenance cost 9 Toll revenues 9 Special road account - Fuel tax - Car ownership tax 25 26 Introduce Special Accounts for Transport Dev. Diversification of Financing Sources 9 General revenue (state budget) should subsidy for the non-profitable projects 9 The initial financing sources of the special account should be provided from gasoline tax and user fees 9 Government bond should mobilize for the special purposes 9 The special account will be financed for profitable transport projects as a loan (expressway, toll roads, …) 9 Encourage Private Participation in Infrastructure (PPI) which is preferable to the profitable projects 9 Pay-back is required with specific interest rate 9 Special account subjects to profitable project and provides cross-subsidy 9 The revenue should be collected from user fees 9 And, for ODA sources, it need to be enhanced for utilizing 27 28 Institutional Reform Conclusions The investment needs will be required a huge amount in the future, while 9 Enhancement of the efficiency of financing sources by ODA might decline; Therefore, it needs to examine the financing source for transport development, and several following points are worth noting introducing the incentives to encourage the public corporations, such as highway public corporation in Japan 9 Encourage private participation in transport or Korea. development 9 The public corporations could attain loans and repay 9 Introduce special account for transport development with the specific interests, therefore they are forced to carry 9 Privatization of State-Owned Enterprises (SOEs) and out investments profitability. establish of public corporation 9 Current organization of the MOT needs to be improved through: transparency of administration, enhancement of accountability, contractual management, To establish a Sustainable Financing Framework for and competitive market. the transport infrastructure development and management 29 30 5
Further Studies 9 Study the applicability to introduce the Japanese Thank you! experiences into Vietnam due to differences of economic and social conditions. 9 Analysis project failures in Japan to draw more useful and applicable lessons when introducing the Japanese system into Vietnam 9 Carry out a simulation to mobilize various financing sources for transport development and management according to Vietnamese conditions 31 32 6