Investment & Finance

What led to fall of ETC project?


It has come as a surprise to many that the Vietnam Electronic Toll Collection Co., Ltd (VETC) has suddenly requested turning over the current implementation of Phase-1 of the Electronic Toll Collection Project (ETC) to the Ministry of Transport (MOT). Why is such an important project, which is contributing to resolving urgent issues in BOT transportation, and a major concern of the Government, all of a sudden at risk of collapsing in just five years of deployment?

Cars crossing the automatic toll lane on Highway 51. Photo: THANH TRI

Cars crossing the automatic toll lane on Highway 51. Photo: THANH TRI

Talking to Saigon Investment, Associate Prof., Dr. Tran Chung, Chairman of Association of Investors in Vietnam Road Traffic, said that there were many shortcomings in the implementation of the project which now are cause for concern for VETC.

JOURNALIST: - Sir, there is an opinion that the Ministry of Transport was wrong from the very onset in giving VETC the exclusive rights in providing ETC services. What is your opinion on this matter?

Dr. TRAN CHUNG: - The ETC project provides road toll collection services based on modern technology. It was implemented under the contract form of public-private partnership BOO (build-own-operate). Previously, many investors wanted to participate in providing this service, including strong potential investors both in finance and technology. However, the Ministry of Transport chose VETC as the exclusive supplier.

This system needs a unified technology for the server and all station systems to  operate across the territory, and that is why I think it is a satisfactory reason for the above monopoly.

If each investor offers a different technology it will be very complicated to operate. We call it a monopoly, but the investor cannot do whatever they want. They must comply with the provisions of the contract. If well managed, we do not worry about monopoly. The problem is that there have been too many shortcomings during the implementation of this project. Besides, the Ministry of Transport and VETC did not anticipate all these problems that would arise during the project implementation process.

- Please, can you analyze more clearly the reason why the ETC project was delayed?

- The most important thing is that the project must be implemented under the law, according to the operating rules of market economy. In order to implement the ETC project, BOT road project investors, who had signed a contract with the Ministry of Transport, were required to sign additional annexes to the BOT contract, due to the additional cost of using the ETC service.

In fact, the investors, who provide ETC were required to sign service provision contracts with BOT investors. However, it seems that the Ministry of Transport and VETC disregarded this step. Instead, they focused too much on the procurement and installation of equipment for the system, before signing the appendix contracts and service provision contracts. Meanwhile, through the General Department of Roads, the Ministry of Transport forced the investor to speed the progress using administrative orders.

In reality, VETC did not really care about the problems the public would directly face when using this service. Many conflicts were not resolved in time such as problems in attaching Etag cards; opening an account; adding money to an account; and worry on preparing large amounts of money to preload the account.

- In your opinion, how should the ETC project be resolved? Is it acceptable to turn over the project to the Ministry of Transport because of prolonged losses?

- We have to remove the bottlenecks, which are causing conflict of interests between the parties, arising from negotiating appendexes and service contracts. The state management agencies were slow at this point. For example, if VETC wanted a revenue deduction rate of 7%, the BOT investors wanted revenue deduction of only 5%, hence the Ministry of Transport must clarify on what basis they should decide that rate. If the two parties cannot agree, the Ministry, as a state management agency, must make a calculation in accordance with market rules to ensure the interests of both parties.

When investing, VETC should not have invested only for profitability, and later ask to turn the project over or share risks when faced with difficulties. The investors themself must make efforts to resolve the issues in order to make the project highly feasible. Without creating the most favorable conditions for people and businesses to use Etag cards, open accounts, link bank accounts, and circulate through the stations smoothly, the project will remain hindered.

-  Sir, in the case of project failure, how will responsibility be assigned for each party, and how should VETC claim the turning over of the project be handled?

- Regarding assigning responsibilities, I think that all rights and obligations of the parties are clearly stated in the contract. The Ministry of Transport and VETC have to look into the BOO contract to decide the main responsibility in this project. They cannot put blame on each other. If the Ministry of Transport does not fulfill its obligations in the contract, it must be held responsible. If the business fails to comply, the business suffers.

The Ministry of Transport and VETC did not anticipate the problems that would arise during the implementation of the project and did not resolve these issues in time.
VETC asking to return the project due to losses is not new. Previously, a number of BOT project investors also requested turning over the project because of new problems that could not be resolved and the revenue did not meet with the financial plan. I think the market economy is very complicated, and contracts are the most important legal basis to resolve disputes between parties. The negotiation before signing the contract is very important. The parties have to decide carefully if they need to hire a lawyer and support consultants to identify all possible difficulties and risks. Ignorance and inexperience are the cause of complaints and losses. Once the contract is signed, the parties must abide by it, and even if it is not beneficial, they cannot withdraw.

Recently, there have been a number of BOT projects having many difficulties, and many problems which are difficult to resolve. They tend to transfer these problems to the Prime Minister for decision. This is very unprofessional. As a matter of fact, every dispute must be resolved according to the contract. Of course, our country is in the process of developing, so many new issues still lack in legalities. The Government and National Assembly are continually improving the legal framework to create favorable conditions for regulatory agencies and for businesses to operate.

- So, what is the lesson learnt from this incident?

- Many recent successful projects are the result of good management and better way of organizing and operating. Thanks to good management, some projects reached the finish line early showing high quality standards and reaping high economic benefits.

It is time for businesses to be more aware of the importance of efficient management and operating skills, and state agencies also need to gradually remove heavy administrative tasks, and work together with enterprises to find feasible solutions for the projects.

- Thank you very much!

Translated by Francis

Minh Duy (Interviewer)

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