According to Nguyen Quang Huan, a member of the 15th National Assembly, for BOT projects that incur bad debts, if the government chooses to use the state budget to buy them back, the process must be subject to strict oversight, screening, and careful classification.
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REPORTER: – Sir, non-performing loans from BOT projects have become a major concern for many banks. We understand that you also raised this issue during a recent session of the National Assembly. Could you elaborate further on the matter?
NGUYEN QUANG HUAN: – Actually, in my speech at the National Assembly, I did not focus much on the issue of non-performing loans, but rather on the shortcomings and inadequacies in BOT projects. Specifically, the terms agreed upon during the contract negotiations were different from those applied after the projects were implemented, as they were subsequently adjusted and changed. These policy changes have adversely affected businesses investing in BOT projects.
A case in point is the Bac Thang Long–Noi Bai project, which was also developed under the BOT model. Before signing the contract with the company, the State committed that if the company invested in and built the expressway, it would be allowed to collect tolls at Bac Thang Long. However, the company is now being required to remove the toll station, which is inconsistent with the original contract. In such a case, the State must compensate the company.
This is a difficult problem because the negotiations at the outset did not adequately take into account other factors, such as social and public welfare considerations. As a result, once the project was completed and the toll station was put into operation, it faced strong opposition from local residents. If the toll station was not removed, public protests would continue, putting the authorities in a difficult position between public pressure and policy requirements.
– If that is the case, has the bad debt arising from BOT projects now become a “burden” for banks?
– I believe it is not appropriate to lump all BOT projects together as generating non-performing loans; they need to be assessed and classified separately. Even when a BOT project does incur bad debt, it is necessary to determine why it became a non-performing loan in the first place. For example, companies investing in transport BOT projects enter into contracts with representatives of state agencies, such as the Ministry of Transport (MOT) or other relevant authorities. However, after the company has implemented the project, the MOT may go on to build a parallel road alongside the BOT road, while the company is expected to operate a toll station on its road. This creates significant difficulties for the company.
When a company has no source of revenue, it will naturally struggle to generate enough cash to repay its bank loans. Banks are, by nature, businesses that lend capital, while companies invest money with the expectation of generating revenue and profits in the future. When those profits fall short of expectations, both the company and the bank are inevitably affected.
– In principle, for BOT projects implemented under the PPP model, state funding serves as “seed capital,” while the remainder comes from the companies’ own capital and mobilized private investment. However, in this case, companies have relied too heavily on bank credit. Does this mean that banks also bear responsibility for failing to anticipate and adequately assess the risks before extending loans?
– In principle, banks are required to conduct due diligence on companies’ BOT projects. For example, transport BOT projects may have a lifespan of 20 to 40 years, so banks must carry out a very thorough assessment before extending loans.
Personally, I believe that a 20-year loan term is not unusual. What matters is a thorough assessment of the specific project. As for BOT projects where banks have provided loans in violation of regulations, for improper purposes, or in breach of relevant banking laws, these cases also need to be clarified. If any violations are found, the relevant investigative authorities will review, investigate, and take appropriate action.
– There has also been a proposal to use the state budget to buy back, ahead of schedule, BOT projects that have incurred non-performing loans, allowing the companies to repay their bank debts. However, would this put additional pressure on the state budget?
– I believe the budget allocated to the transport sector should be used to restructure and support projects that are forced to cease operations prematurely. However, this should be implemented through a phased approach over several years and in multiple rounds. At the same time, there must be strict oversight, screening, and careful classification to prevent companies from exploiting the policy for personal gain and to guard against the emergence of “group interests.” The process must be transparent and clearly defined for all parties involved.
For BOT projects where companies have fully complied with the commitments and terms originally agreed upon, but the State subsequently makes adjustments or changes, the State should provide support to the companies. We may use the more polished term “support,” but in essence, this is compensation for the companies. However, if non-performing loans arise from BOT projects because the companies miscalculated or made incorrect business decisions, the companies and banks must bear responsibility themselves. The burden cannot simply be shifted to the State. If the State fails to comply with the original contract, it must provide compensation. But if the State has not breached the contract, the companies and banks must accept responsibility for the consequences.
Therefore, each case must be clearly assessed and classified. Matters that fall under the State’s responsibility should be borne by the State, while those attributable to the companies should be borne by the companies themselves. Otherwise, there is a risk of exploiting loopholes in the law to channel state budget funds to private businesses, which would be inappropriate, unlawful, and could give rise to vested interests.
This issue must be closely monitored and thoroughly clarified. The principle here is clear: the state budget cannot be used to shoulder the non-performing loans of companies and banks.
– Thank you very much for your time, Mr. Huan.