UPPSALA UNIVERSITÉT & : VNU UNIVERSITY OF ECONOMICS & BUSINESS UPPSALA m4. wu UNIVERSITET MASTER THESIS OF MPPM EFFECT ASSESSMENT OF THE “NATIONAL ROAD MAINTENANCE FUND” ON VIETNAM ROAD NETWORK MAINTENANCE SUB-SECTOR Author. Hao, Khuc Thi Nguyct Supervisor: Dr. Sven-Erik Svard Local supervisor: Assoc.
Nguyet, Hoang Thi Thuy Class: MPPM - INTAKE 7 Hanoi, January - 2015 ACKNOWLEDGEMENT My first thank is for Uppsala University, Sweden and Economic College - Vietnam National University who have collaborated to develop programs and organize a training course of “Public Management - Master Degree) which is very exciting, useful and practical, especially to the governmental officers, including me, who are working for the Vietnamese governmental offices. The lectures delivered by Professors and Doctors who have full experience in theory and practice which brought learning interest to the leaners. I, once again got chance to go to university where I had graduated as B.A Economist with university degree. Therefore, | decided to choose this training course to improve my knowledge.
I would like to express my sincere thanks to Professor Sven-Erick Svard who owns valuable experience via many years of lecturing in one of the most reputed European universities. He has reserved wholehearted and thoughtful instructions towards us, the learners. Individually, I got my study and implement study stages correctly onented. ] also would like to reserve these sincere thanks to Associate Professor, Dr.
Hoang Thi Thuy Nguyet who has scientific style of lecturing to transfer learning and studying motive and excitement to us right on the first days. I got very impressive in the way the Professor put forward macro-matters but they were so close to daily life of her; and made extremely abstract matters simple and easily understandable ones. I express my sincere thanks to all officials of Ministry of Transport, Directorate for Road of Vietnam and particularly National Road Maintenance Fund Office who have considerately provided me important and necessary data and information to be integrated into and made my thesis clarified and lively. Finally, this thesis writer permanently and highly appreciate the assistances with enthusiasm from the CITE Center as well as great emotion from all the 7" course attendants which greatly contribute into my completion of this thesis.
Yours Faithfull, Ha Noi, January 2015 ABSTRACT Name of the Study: Effect assessment of the “National Road Maintenance Fund” on Vietnam Road Maintenance sub-sector. Thesis Degree: Master Date of Presentation: 6” December 2014 Presented by : Khuc Thi Nguyet Hao Supervisors - Dr. Sven-Erick Svard - Assoc. Dr Hoang Thi Thuy Nguyet Objectives Years ago, all of Vietnam road maintenance activities had been paid by the state budget, which was very limited.
The financed state subsidies was equivalent of about 20% to 29% with the actual needs what are required by proposal of Directorate for Roads of Vietnam in order to preserve exiting road system in a good condition and to ensure smoothly of transportation, in comparison. Due to the above issues, Vietnam “National Road Maintenance Fund” was established in December 2012 and officially activated on January 2013 by the Decision of Government with the goals that the fund could meet a main part of existing demand by providing capital collected by annual fee of transportation vehicles. This study is to assess the considerable changes in road network maintenance in Vietnam, compared to road conditions before the road network was funded for maintenance by the said Fund; Besides, this study considers other impacts of the “National Road Maintenance Fund” such as changes on management method of government agencies, application of science and technology on road maintenance as well as raise in awareness of residents. Research Method The study applied 03 researched methods to clarify the impact of NRMF on Vietnam road system, as bellows: Firstly, the study analyzed statistical data over a period of 5 years from 2010 to the end of December 2014 and divided into two specific periods.
- Phase 1, from 2010 to the end of 2012 (03 years) is the period of road maintenance activities in Vietnam operating under 100% of the annual state budget. - Phase 2, from January 1“, 2013 until the end of 2014. which means 02 years since the NRMF was established and has put into operation to manage all revenues, which are collected of transportation vehicle, associating with the annually additional state budget, in order to provide funding for activities related to the road maintenance sub-sector. All using data are collected from reliable sources such as Ministry of Transportation.
Directorate for Roads of Vietnam and National Road Maintenance Fund including: (i) annually actual funds using for road maintenance operations, particularly for the highway system; and also the supported funding to the local before/after NRMF establishing: (ii) The number of road and bridge has been maintenance by funding through NRMF: expenditure of applied science and technologies on road maintenance sub-sector which has been paid by the NRMF; and changing of management method what is executed by state agencies in road maintenance sub-sector through newly applied policy documents for project bidding and approval. Based on the actual data collected above, comparison between the phase | with the phase 2 was implemented in order to assess the NRMF’s impacts on road maintenance sub-sector before and after its formation and operation. Secondly, the author also conducts interviews 03 groups directly related to road maintenance operation. They are: (i) Government Officials represent those who implement state policy and capital management under the Fund mechanism:(ii) constructors and consultant companies represent companies which directly carry out road maintenance contraction as bid contract as well as consulting firms who are supervisors in construction site; (iii) transportation firms and local residents who benefited from the quality of roads change rapidly due to NRMF investment.
Interviewing results of group (i) to clarify the impact of theNRMF changing the mode of operation management and also policy applies of state agencies on the road maintenance sub-sector. After interviewing group (ii), it is discovered the fact that, apart from the traditional state-owned company before. but now the company carried out construction bid has included many different economic sectors such as the private equity company, the limited liability companies and joint stock companies with state capital associated private participate. Thank to sufficient and timely funding what is more attractive to companies on roads maintenance sub-sector, leading various competitive environment and managers also has benefited when having the better road with lower costs.
The quality of construction is also increased when to seek cost reduced measurements as applying science and technology and newly management practices. Targets of interviewing group (iii) are finding out profits what automobile transportation companies benefited after reducing cost of fuel and depreciation of vehicle as well as saving labor due to the smoothly operated road system. In addition, residents who use road system everyday, particularly in poor locals have been excited of the upgrading quality of the roads that were maintained by NRMF funding. At last, SWOT analysis method was applied to recognize NRMF'’s chances as well as its obstacles in order to build a rational master plan in which management agencies could be enforced for NRMF development in the future.
Result and Conclusion After analyzing the actual data collected from the government agencies on road maintenance operation and information interviewed by questionnaire, it is found that NRMF foundation is the rational decision of Vietnam Government, adapting to the socio-economic circumstances of Vietnam today. In addition, through positive results of the NRMFs activities brought back, one of the goals of Vietnam Government, which is oriented strategy on development of maintenance sub-sector toward the step by step of full privatization, is clearly supported proofs. With two years only, Vietnam’s road and bridge network has been well preserved with longer life, also provided road users smooth traffic services, especially in the remote and isolated areas where annual state revenue is low. Therefore, with positive effects, it can be seen that in general, the National Road Maintenance Fund plays a vital role for the development of transport sector in Vietnam Due to the extremely limited state budget, which is not insufficient to sponsor the social welfare system such as maintaining the road network in good operation, the NRMF capital, which contributed by resident is the first step in the privatization process of road maintenance works.
With the funding of the NRMF, shorted capital situation are overcome in part. Road and bridge systems, after many years of lacking fund for fragmented repair, with fund of much higher from the Fund than from state budget before. have their quality improved to ensure smooth movement on the roads for the people. This is significant to remote and isolated area where the local state budget is low, have created belief to the people, brought into full play direct contribution by the people (according to audit report prepared by the Vietnam State Audit Office in September 2014).
Enhancing accountability because management mode by a state administrative agency that is responsible for road maintenance is therefore changed as the timely provided fund meeting progress. As a result of this. interest in participation in this field is attracted by several economic sectors. Road maintenance becomes more competitive, so bidding method to select contractor with high quality and low cost has been applied.
Application of science and new technology, which has been the first time to be supported by the Fund, changed previously subsidized construction process. Companies are obligatory to be interested in studying and finding out how to reduce cost of materials and laboring, increasing lifecycle for their constructed structures. Awareness of preserving public assets has been raised up because of recognition of practical and quick efficiency from annual contribution that they did. The study also shows that, for the Vietnam's social economy, in which majority (70%) population live on agriculture and individual business is mainly, therefore, tax collection to meet social welfare is very difficult and impossible.
As state budget relies mainly on export, which is very constrained and public debt is increasing, privatizing road network maintenance is an objective that Vietnam Government set up is fully reasonable. Forming the Fund to directly manage revenue and allocate investment right in the fiscal year with transparent results shall generate belief of the public in efficiency of their direct contribution. Recommendations This studies show that, NRFM play a vital role in the transport sector in Vietnam, particularly in road maintenance sub-sector. In the future, with the goal of sustainable development NRMF, I have some recommendations as follows: - The biggest constraint is seeking a developing financial source for NRMF to satisfy road maintenance works.
The Government should consider on other income sources such as collecting electricity infrastructure user fee, optical cable fee etc. As reality shows that, Vietnam transport infrastructure are invaded by power lines, water pipes. and fiber optic cable a lot, especially in big cities. Therefore, said rented fees could be abundant revenues for further needs of the NRMF.
Taking advantage of study assistance of the WB. MOT needs to assign consultant that build up a 5 year road toll collection plan with the aim of making use of revenue from leasing infrastructure transport into communication and electricity. - Government also early encourages various business modes, promote privatization process on road maintenance sub-sector in order to eliminate state abundant. - Based on the positive support from the road users on the impressed results brought back by NRMF, to built up legal corridor for NRMF following direction of increasing revenue from road toll imposed on road vehicles in compliance with GDP growth and to look for other sources as well.
- For further construction projects, maintenance should be subjected to an item in the contract, guaranteed by the contractor for at least 5 years after construction completion and handing over. - Government should quickly develop other transportation modes such as: (i) railway transportation (this is under a study conducted by MOT) and (ii) continuing to build and develop sea favorable transportation routes, which run along the country.