BT projects create loopholes for investors to attain enormous benefit

According to the report just submitted by the State Audit of Vietnam to the National Assembly, build-transfer projects (BT projects, which exchange land for infrastructure) are showing numerous shortcomings and loopholes that cause considerable losses of State budget.

The State Audit also said that most BT projects used the method of direct contracting, which lacks competitiveness and transparency.

Previously, the Government Inspectorate also concluded that in Hanoi then, among 15 BT projects, only one of which bid while the rest used direct contracting. Even in some BT projects, Hanoi’s authorities assessed and approved for the projects too eagerly, which increased the total investment of the projects. 

For example, at the Le Duc Tho - Xuan Phuong road project, due to incorrect calculation, the contract value increased by about $856,000.

Given the current situation of BT and BOT (build-operate-transfer) projects, economist Pham Chi Lan said that by nature, BT or BOT were perfect solutions to the lack of State capital for infrastructure development. However, when implemented in Vietnam, this method has been “distorted" too much.

"In many projects, investors did little but enjoy enormous benefits. They only added a layer of tar on a quite good road; then they could charge fees for a long time. This can happen due to either poor management or secret agreement for corruption,” Lan said.

Regarding exchanging land for infrastructure in BT projects, Lan said that this method caused even more significant losses to the State if the process is not transparent.

So, who benefits the most from BT projects? These projects mainly borrow from the State budget to get about 85% of the capital. Hence, BT projects do not reduce the burden on the State.

Meanwhile, when a new road is built under a BT contract, investors get land exchanged for their investment right next to the road. Thus, it is evident that when the road is completed, the value of properties on that site will increase by several times. 

"The new road then benefits the investor again and a few resident groups there. The people in the neighbourhood and the city, of course, could benefit from the road, too, but the biggest part still belonged to the investors," Lan emphasized.

Sharing the same view, Assoc. Prof. Dr. Dang Van Thanh, Chairman of the Vietnam Association of Accountants and Auditors, also said that if there were not enough close supervision, the State would suffer from losses while investors enjoy too many benefits.

According to Thanh, it was necessary to complete the legal basis to solve the consequences of BT projects as soon as possible. 

However, it was crucial to guarantee transparency in the investment process, so that the State could buy the projects at the most reasonable price and transfer the land with the highest possible price. To do this, we should calculate land values when the BT projects had been completed.

On the other hand, direct contracting should be minimised as much as possible as it might cause the enormous losses for the State, Thanh emphasised.