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CAC MOI LIEN HE GIA LAM PHAT, LAI SUAT VA TY GIA HOI OAI

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Pollution Minimization Fund of Ho Chi Minh City (USD 1 million) ... Successful municipal bond issuances in Ho Chi Minh City opened up a new fund raising ... – PowerPoint PPT presentation

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Title: CAC MOI LIEN HE GIA LAM PHAT, LAI SUAT VA TY GIA HOI OAI


1
Financing Urban Infrastructure Development
HIFUs Practical Experiences
Speech by Dr. Vuong Duc Hoang Quan Director of
Investment Department Ho Chi Minh Investment Fund
for Urban Development (HIFU)
2
Hochiminh City Investment Fund for Urban
Development - HIFU
  • HIFU is the 1st Local Development Investment Fund
    in Vietnam established by the decision of
    Vietnams Prime Minister in June 1996 and under
    the direct control of the Ho Chi Minh Citys
    People Committee
  • Mission Increase the effectiveness in mobilizing
    and utilizing funds from various sources,
    including private funding, for the ultimate
    purpose of promoting the development of the
    socio- and physical infrastructure of the City.

3
HIFU Main activities
  • Direct Investment
  • Lending
  • Entrusted Capital Management
  • Securities Market Participation
  • Municipal Bond Issuance Agency

4
Fund-mobilization methods used by HIFU
  • Trusted management of state fund
  • Loan syndication with banks
  • Municipal bond issuance
  • Foundation of joint stock companies investing
    in infrastructure

5
1. Trusted management of state fund
  • Before1990s, pay-back free mechanism to finance
    investment projects
  • Upon HIFUs establishment, loans already made by
    the Ho Chi Minh City Department of Finance were
    transferred
  • HIFU is responsible for disbursing loans made out
    of budget funds, monitoring the use of capital
    deployed as well as collecting on these loans.

6
Trusted management of state fund (cont)
  • This mechanism has been mostly applied in
    financing projects relating to land clearance,
    and environmental improvement.
  • The application of this approach was found to
    improve the efficiency in using the
    national-budget originated funds through
    enhancing the project owners accountability when
    getting financed.

7
Trusted management of state fund (cont)
  • HIFU has been trusted and assigned to manage some
    other funds
  • Pollution Minimization Fund of Ho Chi Minh City
    (USD 1 million)
  • Revolving Fund (USD 2.5 million) for cleaner
    production program
  • ADBs loan of USD 43.3 million for environmental
    improvement of Ho Chi Minh City.

8
Trusted management of state fund (cont)
  • Trust Fund loans of HIFU have grown more than
    double over the last six year from VND 532.6
    billion to VND 1,332.85 billion (equivalent to
    USD 83.30 million). The majority of the
    outstanding balance of Trust Fund loans at HIFU
    paid no interest and, on these, there were
    management fees payable.

9
2. Loan syndication with banks
  • Loan syndication is not a newly-invented approach
    to rise funding
  • Advantages
  • Ability of pooling many financial institutions
    capital to get access to large amount of fund for
    long term projects, whose size could not be
    funded by any single bank
  • Risks can be shared among banks and the
    controlling of project implementation will be
    increased owing to many participating lenders

10
Loan syndication with banks (cont)
  • HIFU has applied this approach successfully to
    finance big infrastructure development projects
    in the City
  • Water treatment plants (about USD 101.59 million)
  • Thu Thiem New Town project (USD 50.79 million)
  • Transportation development (USD 31.75 million)
  • Projects of repair, upgrading and equipping
    facilities for hospitals, infirmaries, schools
    with total investment of over USD 45.70 million

11
Loan syndication with banks (cont)
  • In implemented projects, with the role as a
    syndication leader, capital proportion HIFU has
    participated accounts for about 20
  • Through the role HIFU has played, local
    government has been successful in mobilizing
    remaining 80 from other sources of different
    economic sectors for investment

12
3. Municipal bond issuance
  • First municipal bond issues ever in Viet Nam were
    done by the Citys government and by HIFU in 2003
    to raise fund for Ho Chi Minh Citys government
    with total amount issued of USD 127 million
  • Bonds issues by Ho Chi Minh City
  • Plain vanilla general obligations by the City
  • Semi-annual debt service
  • Principle and interest payment are made out of
    the Citys budget resources.
  • Proceedings from municipal bond issues have
    contributed to balancing capital resources needed
    for the Citys urban infrastructure projects.

13
Municipal bond issuance (cont)
  • Successful municipal bond issuances in Ho Chi
    Minh City opened up a new fund raising channel
    with advantages of longer term and stable
    financing, reasonable cost of financing suitable
    to infrastructure projects, not only for Ho Chi
    Minh City but for other provinces in Viet Nam as
    well.
  • This financing has contributed to capital
    mobilization for infrastructure development and
    overcome drawbacks of commercial lending from
    banks.
  • From 2003 to, HIFU has issued 2000 VND
    (equivalent to approximately USD 120 million) of
    municipal bond each year for the City.

14
4. Foundation of joint stock companies
investing in infrastructure
  • Direct fund mobilization from the public through
    capital contribution in setting up joint stock
    companies operating in project investment.
  • Typical model of public private partnership.
  • Investment responsibility and risks previously on
    the states side can be partly transferred to
    private sector.
  • Better management due to private participation
    with average but stable profitability is a
    noteworthy feature of this model, attracting
    public to invest.

15
Foundation of joint stock companies investing
in infrastructure
  • When establishing these joint stock companies,
    HIFU clearly identifies the types as well as the
    objectives of these Public-Private Partnership
    projects.
  • The projects should be those in accordance with
    the Master Development Plan of the City. They are
    urgently essential for the development of the
    City, and revenue-backed.
  • By establishing joint stock companies, HIFU has
    actually not only succeeded in raising funds
    needed to make the projects feasible but also
    bring over investment opportunities to investors,
    either state-owned or private, to directly
    involve in the development of City infrastructures

16
HCMC Infrastructure Investment Co. (CII)
  • Founded in 2001, USD 20 million capital (HIFU
    15)
  • Listed May 2006
  • Current Market Cap USD 175 million
  • Functions
  • Concession contracts of operating transportation
    projects
  • Investing in revenue backed infrastructure
    projects under various forms of BT, BOT, etc.
  • Projects
  • Hung Vuong and Dien Bien Phu roads
  • Phu My Bridge BOT Joint - Stock Company - USD
    101.60 million (Cofounder)
  • Thu Duc Water Treatment Plant Project - USD
    101.60 million (Cofounder)

17
Hochiminh City Investment Fund for Urban
Development - HIFU
  • Thank you!

18
HO CHI MINH CITY INVESTMENT FUND FOR URBAN
DEVELOPMENT 1997 - 2007
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