Though private investment has been touted as an effective solution to Vietnam's increasing need to develop the country's roads and bridges, the country has attracted precious little of it in recent years.
Experts say the country's limited financial capacity and lack of experience in implementing massive projects has turned off foreign investors.
During the past decade, Vietnam has repeatedly sought foreign funds to rebuild National Highway 1, but has found few takers according to Chairman Pham Quang Dung, of the TASCO construction company.
A financial paradox
According to Dung, the state has committed itself to keeping road usage fees, so much so that it would require private investors 20 years to recoup their capital and turn a profit. Most commercial banks, however, only consider projects that turn a profit in 15 years or less, he said.
Commercial banks are now wary of long-term investments due to a general aversion to risk.
The chasm between need and the scarcity of capital widens, the larger the project gets.
Dung said that Vietnam's VND2-3 trillion ($95.2-142.9 million) projects won't generate enough in the first 7-10 years to even cover interest payments.
The government needs to create policies that encourage commercial banks to invest in these longer-term projects, or raise usage fees so that investors can recoup their capital faster, Dung said.
Pham Dung, chairman of the management board of the Civil Engineering Construction Corporation No. 1. said private investors have grown wary of transportation projects.
For example, his firms estimated it would take 20-25 years to begin turning a profit on the Viet Tri bridge which crosses Lo river in Phu Tho Province.
That estimate was made before, the state announced plans to build another bridge nearby.
The news meant that the number of vehicles traveling on the Viet Tri bridge will fall well below the numbers used to draft the project's feasibility study, dealing a blow to investors.
New framework required
Sindy Wong, Vice President of the Indian IL&FS Transportation Network Limited said that Vietnam lacks the legal framework to develop effective public–private partnerships. The country could more easily attract investment in its transportation infrastructure projects once it creates stable and transparent policies that offer benefits to the government and investors alike.
The transparency, oversight, and efficiency that joint-ventures bring will help Vietnam draw in more investment.
The private sector invested nearly VND43 trillion in transportation projects this year, far less than the money required to develop the country's infrastructure.
Vietnam's annual capital demands for road development were estimated to reach VND202 trillion by 2020, according to a report of the Minsitry of Transport.