Brian Jeffrey
| The upcoming metro line, extending 19.7 km from Bến Thành Market in District 1 to Suối Tiên Theme Park in Thủ Đức City, is scheduled to commence operation later this year. — VNA/VNS Photo |
Ho Chi Minh City is planning to raise funds through bond issuance to finance its long-anticipated metro projects, reducing its dependency on Official Development Assistance (ODA).
The city envisions constructing 183 km of metro lines by 2035, with a projected cost of around $36 billion.
Funding sources will include local budgets, support from the central government, ODA loans, and other funding avenues.
To minimize reliance on ODA, the city aims to issue bonds between 2025 and 2035, with annual amounts expected to range from VNĐ10 trillion to VNĐ30 trillion, while maintaining a 120% debt-to-budget revenue ceiling.
During a recent meeting, Phan Văn Mãi, the chairman of the municipal People’s Committee, urged residents to invest in metro bonds to enhance infrastructure development, even if it means accepting lower interest rates than those offered by banks.
The city has put forward a request for 14 different financing mechanisms to the central government, aimed at funding a total of 200 km of metro lines, including both local government and project-specific bonds.
As it stands, only two out of the eight planned lines and three monorails are currently under construction.
The first line, set to cover 19.7 km from Bến Thành Market to Suối Tiên Theme Park, is expected to begin operations later this year, with trial testing already in progress.
The larger metro initiative aspires to expand to over 350 km by 2045 and reach 510 km by 2060, requiring a comprehensive funding of approximately $66.8 billion.
Concerns about Public Debt
Dr. Dương Như Hùng from HCM City University of Technology stressed the importance of assessing public debt risks associated with bond issuance to decrease ODA dependency.
With a debt cap of 120% of the city’s budget revenue, it is noted that ticket sales will largely dictate metro revenue, which will take time to build up.
Dr. Đinh Thế Hiển noted that urban and project bonds are essential for positioning the city as a financial hub in the region, supported by its financial capabilities and stable revenue streams.
According to Dr. Lê Duy Bình of Economica Vietnam, issuing bonds for critical projects is crucial, as reliance on ODA has led to delays and budget overruns.
To engage investors, Bình emphasized the need for competitive interest rates and sufficient liquidity in the secondary market.
He suggested offering rates that are in line with the long-term averages of established banks.
Collaboration among financial bodies has been recommended to foster a liquid bond market, while cautioning against low-interest-rate strategies that might repel investors.
Nguyễn Thị Tuyết Hồng from Dragon Capital pointed out the significant potential of local government bonds.
She emphasized the necessity for attractive interest rates and reliable repayment capabilities to draw in investors, given that these bonds are often seen as less secure when compared to central government bonds.
She underlined the importance of transparency in financial reporting to reassure investors, particularly due to previous issues with timely payments.
In a related initiative, the government has recently proposed using bond issuances to help fund the $67.3 billion North-South high-speed rail project, alongside other financing sources. — VNS
