Diversification of investment capital for road construction in Vietnam

1. The necessity of the thesis The acceleration of industrialization, modernization and international integration requires a strong development of road construction system. Over the past years, the Party and State have paid great attention to the development of road construction system. Initially, the diversification of capital and investment was undertaken, but the results were not as expected. By the end of 2015, the country has nearly 20,000 km of national highways, but only 47% of km are roads with high and medium technical standards, the rest of 53% are low-level roads. Many projects were implemented slow in progress, poor in quality, high in cost, causing barriers for development. Although State has promulgated mechanisms and policies to encourage social investment in development, it has not yet generated strong support and shared responsibility between businesses and the whole society. Many issues of concern have not been addressed. The lack of capital investment for developing road construction has become a concern. The author has chosen the topic "Diversification of investment capital for road construction in Vietnam" as a topic of his PHD thesis, majoring in political economics to address the practical concerns of road construction management

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HO CHI MINH NATIONAL ACADEMY OF POLITICS NGUYEN XUAN CUONG DIVERSIFICATION OF INVESTMENT CAPITAL FOR ROAD CONSTRUCTION IN VIETNAM SUMMARY OF THE PHD THESIS FIELD OF STUDY: POLITICAL ECONOMICS CODE: 62 31 01 02 HA NOI - 2017 The thesis is completed at the HO CHI MINH NATIONAL ACADEMY OF POLITICS Supervisor: Assoc. Prof. Dr. An Nhu Hai Reviewer 1:.................................. Reviewer 2: ............................. Reviewer 3: ................................ The thesis will be defended in front of the Thesis Committee at Academy level, at the Ho Chi Minh National Academy of Politics At hour date month year The thesis can be found at the National Library and the Library of Ho Chi Minh National Academy of Politics 1 INTRODUCTION 1. The necessity of the thesis The acceleration of industrialization, modernization and international integration requires a strong development of road construction system. Over the past years, the Party and State have paid great attention to the development of road construction system. Initially, the diversification of capital and investment was undertaken, but the results were not as expected. By the end of 2015, the country has nearly 20,000 km of national highways, but only 47% of km are roads with high and medium technical standards, the rest of 53% are low-level roads. Many projects were implemented slow in progress, poor in quality, high in cost, causing barriers for development. Although State has promulgated mechanisms and policies to encourage social investment in development, it has not yet generated strong support and shared responsibility between businesses and the whole society. Many issues of concern have not been addressed. The lack of capital investment for developing road construction has become a concern. The author has chosen the topic "Diversification of investment capital for road construction in Vietnam" as a topic of his PHD thesis, majoring in political economics to address the practical concerns of road construction management. 2. The purposes and tasks of the thesis 2.1. Research purposes On the basis of reviewing theories and practical experiences on diversification of capital investment for road construction, this thesis analyses and evaluates the situation of the investment capital for the settlement of investment capital in Vietnam from 2011 to present, proposes viewpoints and solutions to promote the development of this investment capital and to contribute to capacity building and modernization of the Vietnam's road construction by 2025. 2.2. Research tasks - To collect documents to systematize, supplement and develop theories on the diversification of in capital investment for road constrution Vietnam. - To learn the experience of implementing the diversification of capital investment for road construction and draw lesson learnt for Vietnam 2 - To propose viewpoints and solution for promoting diversification of foreign investment in road construction in Vietnam by 2035. - To learn the experiences of implementing the diversification of capital investment for road construction in some countries, draw lessons for Vietnam to refer. - To review, analyse and evaluate the situation of the capital capital investment for road construction in Vietnam in the 2011-2015 period. - To propose ideas and solutions for promoting capital capital investment for road construction in Vietnam till 2025. 3. Subject and scope of research of the topic 3.1. Research subjects Viewpoints, mechanisms, policies and forms of implementing diversification of road construction in Vietnam. Entities involved in the diversification belong to all all economic sectors in a socialist-oriented market economy, including investors in public and non-state sector (private owners, Domestic and foreign joint-stock corporations) operating in Vietnam. 3.2. Research scope - Content: Studying the regularity, necessity, forms, principles and conditions for implementation diversification of road construction investment in Vietnam in connection with the requirements of development of a market socialist oriented economy. - Space: Road-related infrastructure projects managed directly by the central government via Ministry of Transport. It is responsible for management of including national ways and highways (the study of diversification of road construction investment by the provincial District, commune level is only a complementary). - Duration: This thesis analyses and evaluates the current status of diversification of capital investment for road construction from 2011 to 2016. Time range for proposing viewpoints and solutions is expected by 2025. 4. Rationale and Methodologies of the research 4.1. Rationale The thesis employs the rationale and methodology of dialectical materialism and historical materialism in the Marxist-Leninist doctrine to examine the theoretical background of the diversification of investment of road construction in 3 Vietnam. Policy studies and practical assessments are also based on Ho Chi Minh ideology, reform viewpoints and policies of the Communist Party of Vietnam and policies and laws of the State. 4.2. Research Methods The author employs common research methods applied for theoretical studies including: scientific abstraction, systematic method, logical method combined with history, analysis and synthesis. This thesis collects reports of Vietnam Road Administration and official information on the research subject; It applies method of summarizing the practice from the data and statistics of state agencies to assess the current situation of diversification of road construction investment in Vietnam. The thesis also clarifies the achievements, limitations and causes. The author also applies at limited level the forecasting method with reference to some other scientific research outcomes 5. New contributions of the thesis - To systematize theories and practice of capital investment for road investment associated with the characteristics and practical conditions of Vietnam in order to improve the capacity and modernization of the system of goods and services to facilitate the industrialization and modernization. Internationalization and international integration in the new period. - To review and assess the current status of road construction investment in Vietnam from 2011 to 2016, achievements, imitations and the causes of these limitations. - To propose viewpoints and solutions to promote the diversification of capital investment s for road construction in Vietnam by 2025. 6. Structure of the thesis In addition to the introduction, conclusion, list of publications related to the thesis by the author, list of references and appendix, the content of this thesis is divided into 4 chapters, 11 sections. 4 Chapter 1 OVERVIEW OF RELEVANT STUDIES RELATED TO DIVERSIFICATION OF INVESTMENT CAPITAL FOR ROAD CONSTRUCTION 1.1. RELEVANT STUDIES IN FOREIGN COUNTRIES RELATED TO DIVERSIFICATION OF INVESTMENT CAPITAL FOR ROAD CONSTRUCTION 1.1.1. Studies on the necessity and forms of diversification of capital investment for road construction This section focuses on the following contents: - Relevant studies on the need for diversification of investment capital for road infrastructure. - Relevant studies of road forms of diversification of investment capital for infrastructure. 1.1.2. Relevant studies on the mechanism of operation and solutions to diversify capital investment for road development This section focuses on the following contents: - Overview of the studies on the promulgation of the law on diversification of investment for road infrastructure. - studies on the combination between the law on regulations, policy and the support of the state. - Studies on improving professional qualifications of the investment project managers. - Studies on solutions of diversification of investment in transport infrastructure. 1.2. RELEVANT DOMESTIC STUDIES The author focuses his research on studies in the following areas: - Firstly, to study foreign experiences in diversifying capital investment for road construction in Vietnam - Secondly, to study research related to theories, practices and solutions to diversify investment in road construction (national regional, and provincial levels). 1.3. CONCLUDING REMARKS FROM RELEVANT STUDIES RELATED TO THE THESIS AND ISSUES FOR FURTHER RESEARCH - Foreign studies have discussed about the need for diversification of road construction investment. These studies look at the topic from the marginal theory 5 in development economics; A number of studies provide an approach from the areas of monetary finance, transport economics. These studies have drawn attention to the theoretical and practical aspects of project contract forms in PPPs' investment for road infrastructure. Domestic studies have focused topics of the learning experiences from leading countries, provided a practical analysis and proposed measures to promote the socialization of investment for road construction. In addition, there are some studies on the restructuring of capital investment for road construction in Vietnam. - The issue of concern and research direction of the thesis will focus on new points in theoretical understanding of the capital investment for road construction in Vietnam; The advantages and disadvantages of diversification of investment for road construction from 2011 to 2016 and measures to promote the diversification of capital in the coming time. Chapter 2 RATIONALES AND PRACTICES ON DIVERSIFICATION OF INVESTMENT CAPITAL FOR ROAD CONSTRUCTION 2.1. INVESTMENT CAPITAL, REGULARITY AND THE NECESSARY FOR DIVERSIFICATION OF INVESTMENT CAPITAL FOR ROAD CONSTRUCTION IN VIETNAM 2.1.1. Some basic concepts - Investment capital: by reviewing perceptions from relevant publications, the author understands that capital, is a category used to refer to capital goods in general. It is a type of production that distinguishes from the factors such as natural resources and labour. Investment capital, in nature, is values reflected in the amount of money or assets invested in production and business in order to seek profits and generate income; In terms of quantity, it is expressed in the amount of money and assets in money for production and business. Investment in road construction is a part of the social resources expressed in the money accumulated after a certain period of time to invest in construction, maintenance, upgrading and development of the road construction 6 system to meeting the country's economic and social development requirements. Investment in road construction is also considered in terms of both quality and quantity. It has the following characteristics: + The demand of capital for investment in road construction is secondary. + Capital for road construction is a very large and long-term investment. + The product of road construction investment is a public good. It is both exclusionary and can not be excluded from the user. This feature provides the basis for the diversification of investment in road infrastructure. Investment in road construction can be divided into different categories depending on the source, purpose of use, product features or management decentralization. If it is divided by the nature of the capital in the investment, there is a basic capital investment and capital investment to operate road transportation. - Diversification of investment in road construction is the process of forming and putting into use of the capital, which involves the participation and coordination of investment by the state and other economic sectors according to a defined mechanism to broaden and improve the quality of the diversification of road construction system to meet the requirements of socio-economic development of the country. Diversification of investment in road construction is considered in all three aspects: ownership relations, organization, management and distribution relationships. Diversification of investment in road construction is a condition for the survival of diversification of income distribution, establishing the diversity of economic interests in a multi-sectoral economic economy. In nature, diversification of investment in road construction is the process of concentrating social capital to solve a large investment while the State can not take better care of it. 2.1.2. Diversification of investment capital for road construction - a trend of regularity Diversification of investment in road construction is a normative trend. It has a history of about two thousand years since the ancient times of the Roman Empire. It has increasingly attracted more and more participating countries. In 7 recent decades, due to the urgent need of road while the state budget can not be sufficiently and efficiently fulfilled, the attraction of social capital through diversification of investment capital in road construction is an indispensable solution. In fact, the diversification of investment capital in road construction is not only the result of economic and social changes and developments in the market economy, but also the result of awareness on economic responsibility of state in its relationship with private sector. The economic role in the modern market economy have been developed and shaped in economic theories. So far, the diversification of investment in road construction has become very common in many countries including both developed or developing countries. Diversification of investment capital in road construction is considered in three aspects: ownership relations, organization, management and distribution relationships. Diversification of investment capital for road construction is a condition for the survival of diversification of income distribution, establishing the diversity of economic interests in the multi-sectoral economy of this economic field. 2.1.3. The need to diversify investment capital for road construction in Vietnam The diversification of investment capital for road construction in Vietnam is not out of the above-mentioned regularity trend, but also a necessary solution, rooted in the importance of road construction for the promotion of the country’s modernization and industrialization as well as the need to accelerate the development of a market economy that integrates deeply and widely into the world economy. Diversification of investment capital in road construction in Vietnam is not only necessary for people to share the burden of State budget investment in public products but also to expand the investment sector to exploit potential resource in society for development purposes. It is a solution to create opportunities, to seek for a management mechanism for investment infrastructure faster and more effective. 8 2.2. FORMS, PRINCIPLES AND CONDITIONS FOR IMPLEMENTATION THE DIVERSIFICATION OF INVESTMENT CAPITAL FOR ROAD CONSTRUCTION 2.2.1. Forms of diversification of investment capital for road construction - State-owned investment capital: In addition to the state budget, in the market economy, t state can generate investment capital in road construction through the operation of state-owned enterprises, the issuance of government bonds, local government bonds, credit loans, receiving official development assistance (ODA) and revenues from economic activities of the state. - Investment capital of the non-state economic sector: including capital from private economic entities, joint-stock companies and foreign investment (referred to as private sector capital). Private investment in this sector is often aimed at the road product which can exclude users for profit purposes. In the market economy, in addition to ownership capital, investors can also access capital through financial intermediaries such as banks and credit institutions to supplement, compensate for deficits to ensure the progress of construction to soon put the project into exploitation and operation. - Mixed state-private investment: This is a common form of universal application in every country of the world. It is called public-private partnership (PPP). PPP is an economic cooperation agreement between the state and private sector investors to implement public investment projects, including road construction. In this form, road ownership remains under the State. PPP should not be confused with privatization, as it differs in terms of ownership, responsibility, operating mode, risk and benefits. PPP is shown in project contracts such as: BOT, BTO, BOO, BT, BTL, BLT, O & M. In road construction, many countries apply BOT, BTO and BT contracts. - Forms of voluntary contributions of organizations and individuals at home and abroad: Due to motivation for the common interests of the community, the interests of enterprises and other motivations people and 9 organizations can voluntary contribute money and efforts to road construction to meet their transportation and travel needs in the area. 2.2.2. Principles for diversification of investment capital for road construction Due to the objective of diversification of investment in road construction to create public goods, which contributes to increase the efficiency of the economy and improve the quality of social life while promoting the efficiency of the capital, ensuring practical benefits for investors, the implementation, must adhere to the following principles: Firstly, the principle of complying with the country's socio-economic development strategy and plan. Secondly, the principle of publicity and transparency to ensure the strong and effective attraction of social capital in this investment field. Thirdly, the principle of efficiency. When a project is completed and put into operation, it must contribute to the cost savings and time of transportation and means of participating in traffic, increasing the socio-economic efficiency compared to previous time when the road is not yet constructed Fourthly, the principle of sustainability. Diversification of investment capital in road construction must achieve sustainable development in all three aspects: demand responsiveness, capacity building and institutional sustainability. 2.2.3. Conditions for diversifying investment capital for road construction In addition to the natural conditions that must be taken into account in road construction, there are conditions that directly relate to the environment and the economic benefits of the investors and users of the service. More specifically, these conditions are: - Consistency and effectiveness of economic institutions - Ability to choose form and investment partner - The level of risk allocation of the project - Level of funding for the project 10 2.3. EXPERIENCES OF SOME COUNTRIES ON THE IMPLEMENTATION OF DIVERSIFICATION INVESTMENT CAPITAL FOR ROAD CONSTRUCTION 2.3.1. Experience on development of state capital for road construction investment of Japan The Japanese government created a special account for large infrastructure projects, national bonds, local bonds, taxes, road tolls, highway bonds ... 2.3.2. Experience on diversification of investment capital for road construction in China In addition to capital, the State, the Chinese government also borrows foreign capital, mobilizes capital from enterprises and individuals through taxation stations, road maintenance fees ... to build high
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