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Ho Chi Minh City falls short of $2bn for infrastructure plans in 2016-20

Saturday, December 26, 2015, 09:49 GMT+7
Ho Chi Minh City falls short of $2bn for infrastructure plans in 2016-20
Vehicles are seen stuck in a traffic jam during rush hour in Ho Chi Minh City.

Ho Chi Minh City will fall short of capital for its infrastructure development in the 2016-20 period, and is therefore in need of a special mechanism to solve the money issue, a finance and investment firm said Friday.

The southern metropolis needs VND203.11 trillion (US$9.07 billion) for infrastructure development in the next five years, mostly to fund traffic congestion reduction and flood prevention projects, according to the Ho Chi Minh City Finance and Investment State-Owned Co. (HFIC).

“But the city will only be able to arrange around VND123.21 trillion [$5.5 billion], plus an additional VND37 trillion [$1.65 billion] from a private placement agent,” general director Pham Phu Quoc said at a meeting to recap the company’s 2015 operations.

Quoc therefore suggested that the city’s administration call on the Prime Minister to allow HFIC to retain all of its post-tax profit to make up for the VND42 trillion (($1.88 billion) capital shortage.

The HFIC was founded following a directive by the city’s administration in 2010, and is tasked with mobilizing capital and developing urban infrastructure.

The company also functions as the representative of the state holdings, possessed by the municipal administration, in businesses, similar to the State Capital Investment Corporation (SCIC).

However, while the SCIC is allowed to earmark all of its post-tax profit to its infrastructure development fund, the HFIC has to contribute 70 percent of the earning to the state budget and can only keep 30 percent for its fund.

Quoc, the company director, has therefore urged the Ho Chi Minh City administration to seek government approval for it to be treated the same as the SCIC when it comes to the post-tax profit, so that it will have more money for the infrastructure development fund.

Tran Du Lich, deputy head of the delegation of Ho Chi Minh City lawmakers, also said the city needs a “local financial institution" to be able to mobilize investment from the private sector.

“So the city’s infrastructure development will be both funded by public and private capital,” he said.

In 2015 HFIC and its member firms are expected to post VND1.56 trillion ($69.64 million) earnings, surpassing target by 19.5 percent.

The company is expected to contribute VND2.91 trillion ($129.91 million) to the state budget.

As of the end of last month, the HFIC has earmarked VND1.9 trillion ($84.82 million) for multiple projects, 42.7 percent of which went to the infrastructure sector.

Investment for the finance, and healthcare and education accounted for 49.5 percent, and 4.3 percent, respectively.

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