HANOI: As Vietnam enters the largest infrastructure development phase and needs hundreds of billions of US dollars for infrastructure investment, state budget and bank credit are limited.
Analysts believe that infrastructure bonds will become a new pillar of long-term capital for national projects.
Analysts of VIS Rating, an affiliate of Moody’s, estimated that by 2030, Vietnam will need about US$245bil for highways, railways, renewable energy projects and transmission infrastructure.
However, public investment capital can only meet about 70% of the demand, while the banking system – the main funding channel – is facing clear limitations.
Maturity pressure makes it difficult for banks to pursue long-term loans of 15 and 20 years.
Besides, Basel III international banking standards require banks to maintain higher equity capital to reduce risks, causing costs for bank credit for long-term projects and construction risks being always high in the early stages.
Director and senior expert of VIS Rating, Duong Duc Hieu, said that bank credit used to be the key source of funding for infrastructure projects.
However, in the past three years, outstanding loans for transport have decreased by an average of 10% per year.
This trend reflects the tightening compliance with capital safety indicators, especially limiting the use of short-term capital for medium and long-term loans, said Hieu.
When the funding room is narrowed, banks cannot continue to shoulder the majority of capital resources for projects with payback periods lasting decades, he added.
The state budget still plays a pivotal role but is no longer able to aid all investment needs.
The official development assistance capital from developed countries or international organisations for developing or under-developed countries, which once played an important role in the early stages of reform, has also significantly decreased.
Meanwhile, the target of high gross domestic product growth and the need to develop modern infrastructure require a more diverse and stable long-term capital structure. — Viet Nam News/ANN
