VietNamNet Bridge - Capital arrangements for the construction of the Danang-Quang Ngai expressway are basically complete.

Later last week, a World Bank mission met with Vietnam’s Ministry of Transport (MoT), Ministry of Finance, Ministry of Planning and Investment, and the State Bank of Vietnam to make the final adjustments to the draft project on capital funding for the $1.47 billion Danang-Quang Ngai highway, which is expected to be inked within 2011.

Deputy general director of the Vietnam Expressway Corporation (VEC), the project developer, Nguyen Tat Son said the WB basically agreed to finance $580 million for the project, equal to 37.8 per cent of total investment capital.

Besides, the project would enjoy other $80 million sourced from the International Development Association (IDA) in a 35 year duration with 10 years grace, and $500 million from the International Bank for Reconstruction and Development (IBRD) with a 25 year term (10 years grace) with Libor interest rates plus 1.25 per cent.

The MoT also reached an agreement with the Japan International Cooperation Agency (JICA) over a $725 million-loan package equal to 48.3 per cent of total investments for the project.

The project’s largest financial problem was associated with the Vietnamese government’s counterpart capital issue.

Accordingly, with a low financial internal return rate (IRR) of 3.7 per cent it will take about 33 years for the highway project to recoup its investment. Besides, the project is reportedly to incur a loss of $323 million for the first 16 years after the highway is put into use. Therefore, it is almost impossible to raise investment from the private sector for the project.

To address the dilemma, the MoT proposed including the total loss ($323 million) into the Vietnamese government’s counterpart capital, which now stands at around $168 million.

Under the project’s feasibility study drawn up by the Japan-based Nippon Koei and Vietnam’s Transport Engineering Design Inc. (TEDI) consultant consortium, the highway runs from Hoa Vang district in central Danang city to Tu Nghia district in Quang Ngai province crossing Danang city, Quang Nam and Quang Ngai provinces.

The 139.5-kilometre long highway will consist of two parts: a 131.48km highway and an 8.02km long access road linking to a bypass in Quang Ngai province connected to National Highway 1.

With a total investment of $1.47 billion the highway is the largest section of the north-south expressway.

As planned, the highway will consist of six lanes with four lanes to be built in the near term and a 26-metre road bed. The highway will go across important economic zones and industrial parks such as Lien Chieu and Hoa Khanh industrial zones in Danang, Chu Lai Open Economic Zone in Quang Nam and Dung Quat Economic Zone in Quang Ngai.

In the near future, it may connect to National Highway 24 heading Central Highlands province of Kon Tum, crossing Laos and Thailand, creating an international transport axle between Thailand, Laos, Cambodia and Vietnam through the East West Economic Corridor.

Source: VIR