The information that the Ministry of Finance has decided to
stop acting as the guarantee for the Vietnam Express Corporation (VEC) to issue
bonds to raise funds for the development of its project on Cau Gie - Ninh Binh
highway, has raised big worries among contractors.

Ho Nghia Dung, Minister of Transport, confirmed the information at the meeting
discussing the measures to renovate and heighten the efficiency of state owned
enterprises held in late December 2010. The information shocked contractors.

The construction of the Cau Gie – Ninh Binh highway is expected to cost 8974
billion dong. Besides the one trillion dong worth of chartered capital allocated
to VEC by the Government, which has been poured directly to the project, the
remaining capital is expected to be mobilized through Government bond issue with
the guarantee by the Ministry of Finance.

Since the project was kicked off, VEC has twice issued bonds, mobilzing 1400
billion dong in capital. After that, as the interest rates have been increasing,
the project had to use the capital sourced from the state budget.

Prior to that, at the Document no. 17387 dated December 21, 2010, the Ministry
of Finance stated it has stopped acting as the guarantee for VEC to issue bonds
for the project, and requested VEC to “look for other legal capital sources”.
Meanwhile, there is a low possibility that the state budget would continue to
pour more money to the project, at least until the end of June 2011.

The Ministry of Finance has also refused the proposal by VEC to act as the
guarantee for the enterprise to borrow commercial loans from commercial banks or
international financial institutions at the average interest rates lower than
the interest rates of domestic bonds.

Minister Ho Nghia Dung has warned about the bad consequences of the decision.

“It is nearly impossible for VEC to seek capital from other sources at this
moment,” Dung affirmed in the urgent report sent by the Ministry of Transport to
the Prime Minister.

The Ministry of Finance has cited financial indexes of VEC to explain its
decision.

“Though this is considered sensitive news, the Ministry of Transport believes
that it is necessary to make it public, for the benefit of the enterprises which
are carrying out the construction,” Dung said.

“If the investor, VEC, cannot seek capital, we will surely suffer,” said a
contractor

Contractors have every reason to worry. The Cau Gie – Ninh Binh Highway project
has entered the final stage. If the payment is delayed, the total debts may
climb to tens of billions dong for every contractor.

VEC’s leaders said that the decision by the Ministry of Finance will certainly
lead to bad consequences.

First of all, the project implementation will be affected. Currently, most
contractors are living on the payment made by the investor, and once the payment
is broken, the project will slow down and eventually stop. If so, it will be
sure that the 56 kilometre 4-lane highway from Cau Gie to Ninh Binh will fail to
be open to traffic in June 2011 as planned.

Second, the decision would pose a dilemma to VEC. More dangerously, a lot of
financial institutions, who bought VEC’s bonds will also bear domino impacts
from the decision.

Source: Dau tu