Vietnam has experienced incredible economic growth since its reforms in 1986. Over three decades, these new economic policies have resulted in an explosion of economic activity and a slash in the rate of poverty. However, Vietnam’s transportation infrastructure is woefully behind many other developed economies. The government responded to this need by creating a nationwide connectivity project, the North-South Expressway.

The Infrastructure Issue

Vietnam has inadequate transportation networks and requires development and investment. Empirically, Vietnam’s 2020 target goal of $27 billion for public investment, mainly dedicated to transportation infrastructure, shows this. The country’s transportation needs have steadily risen since the economic reforms. Road usage in Vietnam has been on an incline with congested streets and car accidents constituting Vietnam’s hidden epidemic. However, transportation investments have lagged behind. An increase in funding is necessary for the country to reap the benefits of efficient transportation.

The North-South Expressway

The North-South Expressway is the solution to this transportation problem. The $17.9 billion project looks to connect all of Vietnam from Lang Son to Ca Mau. The road system will be an expanse of 1,811 kilometers with a toll collection system and a smart traffic system. Travel to important tourism sites, economic zones and other transportation areas will now be feasible with the new expressway. This high-speed travel throughout diverse geographical regions will revitalize the country’s transportation infrastructure. For the first time in Vietnam’s history, the country will be well connected.

Unfortunately, the central government has run into issues with financing the project. Originally, the government split the project into 11 sub-projects, with five being a public-private partnership (PPP). However, only three of the five received financial backing; the remaining two had no investor bids. The government then changed the two unfunded projects to public projects. However, the government’s ability to finance the project on its own is uncertain. The much-needed outside investments have proven hard to obtain. The project itself is attractive but legal ambiguity within the country causes caution and concern in investors. As such, Vietnam’s government has been spurred into implementing new legislation.

Public-Private Partnership Law

The Public-Private Partnership Law (PPPL) aims to fix the legal barriers preventing the execution of The North-South Expressway. The PPPL will be in effect as of January 2021. The law will clarify the process of investing in Vietnam by creating standard form contracts and government guarantees of project fulfillment. The law will also enforce proper foreign currency payment from foreign investors and the use of a risk-sharing mechanism. Essentially, the PPPL elevates and integrates the previously passed laws, decrees and circulars that regulated PPPs into one authoritative law. It will make private and foreign investment in government-sponsored infrastructure projects simpler, less risky and more appealing.

The Light at the End of the Road

Improving transportation networks will have a profound impact on Vietnam. It will increase economic activity through improved connections between consumers and producers and decrease transportation costs. The World Economic Forum estimates a 5% to 25% economic return on every dollar that goes toward infrastructure, such as transportation. More succinctly, developed roads lubricate the flow of goods and people across regions, which increases economic activity.

Additionally, developing transportation networks directly affects society’s most impoverished members. Areas with little economic opportunity would become connected to vital economic centers. As a result, connectivity to social services, such as health care and education, would increase along with economic and social mobility. The economic rewards are well worth the financial investment into transportation infrastructure. The North-South Expressway — with the help of the PPPL — indicates significant poverty reduction for Vietnam in the near future.

– Vincenzo Caporale
Photo: Flickr