Financing disagreements are holding back the development of a crucial port for northern Vietnam.

According to the Ministry of Transport (MoT), the construction of Lach Huyen’s first two berths have not begun because of a change in investors.

Vice Minister of Transport Ngo Thinh Duc said the Japanese embassy in Vietnam had introduced Molnykit Company to join hands with Vinalines to build the two berths under the public-private partnership (PPP) investment form, replacing Mitsui O.S.K Lines, Nippon Yussen Kaisha and Itochu.

Although Molnykit Company is a joint venture between the three mentioned-above corporations, which four months ago got approval from Prime Minister Nguyen Tan Dung to be involved in the project, there are concerns that the newly-proposed investor Molnykit’s legal capital was too low to implement the project.

“This case is out of the MoT’s control. We proposed the prime minister accept the new investor based on the guarantee of the Japanese embassy,” said Duc.

Located in northern Haiphong City, the port would handle most import and export cargo for the key northern economic zone.

While waiting for Dung’s approval, the MoT said the port project was also delayed due to a disagreement in finding $18 million to dredge an access channel.

The Ministry of Finance proposed investors should cover this cost by borrowing funds from Japan’s official development assistance (ODA) to Vietnam. However, Vinalines general director Nguyen Canh Viet said the investor would not be able to develop this project if the state did not cover the cost.

Transport Engineering Design Inc and Portcoast Consultant Corporation estimated the return on investment ratio of the port project at around 12.6-13 per cent without the government’s financial support. If the government gives financial help, the ratio would be 15.6-16.2 per cent.

Duc said Molnykit could not get a Japan Bank for International Corporation loan if the ratio was below 15 per cent. “The MoT has proposed the government to give financial support to investors, aiming to enhance the financial feasibility of this project.”

A source from the Ministry of Planning and Investment’s Foreign Economic Relations Department said the Japanese government this year would sign an agreement with the Vietnamese government to provide ODA for Lach Huyen port.

Nikkei Daily last week reported that the Japanese government would provide about $1.4 billion of ODA to the project. Lach Huyen port is the second PPP project proposed in Vietnam. The first one is Dau Giay-Phan Thiet expressway.

The government agreed to Bitexco Group and International Financial Corporation (IFC) be the first and the second investors of this pilot PPP expressway project.

The government plans to organise bidding for choosing the third investor for this project in May.

Source: VIR