The Prices To Pay
By Tan Duc
The collection of tolls imposed on personal vehicles as proposed by the Ministry of Transport, if ever applied, will require the sacrifice of many targets of the country
The Prime Minister has authorized the Ministry of Transport to study and define the goals, contents, scientific facts and practical values, feasibility as well as impacts of collecting personal vehicle tolls in order to design a scheme which will be submitted to the Government for consideration. One of the impacts worth mentioning is the future of the automotive industry and the ability to attract investment from the private sector into the road transport infrastructure.
At an online dialog on January 12, 2012, Minister of Transport Dinh La Thang said the objectives of collecting tolls are to reduce traffic congestion as well as create a fund for re-investment in the transport infrastructure.
There have been no facts to support the agrument that if the collection of personal vehicle tolls can limit the number of personal vehicles and reduce traffic jams. However, it is not difficult to foresee its impacts on many other targets Vietnam keeps track of.
From the future of automobile industry…
Vietnam still has its plan for developing the automotive industry. The old plan was approved by the Government in 2004, and the new plan with growth targets set until 2020 and vision to 2030 will be submitted to the Government by the Ministry of Transport. This is an industry Vietnam has expected to develop and has pursued over the past 20 years.
In 2008, the world’s economic crisis pushed many countries into recession. To stimulate demand to save the economy, many countries such as the U.S. and Japan were determined to provide taxpayers with money to encourage them to buy or change cars. Why did these countries choose cars, not otherwise, to stimulate the demand? That is because of the important role and driving force of the automotive industry to the economy. The automotive industry has a widespread impact. Its development will affect a series of other industries, from mechanical engineering, metallurgy, power, electronics to rubber, plastics, chemicals and many supporting services. The role of the industry in boosting the technology is also of great importance.
Vietnam is fully aware of the important role of the automobile industry in the development of its economy. That is why Vietnam still set the growth targets for this industry in the early years of the renovation period when its gross domestic product (GDP) per capita was only a few hundered dollars a year.
It is possible to say that the automotive industry development policy has not been successful. It is because of the small scale of the domestic market and the low purchasing power, and the conflict between the concern that the increase of personal vehicles will cause traffic jams on one side and the expectation of developing the automotive industry on the other.
At present, a car sold to consumers is 2.5-3 times higher than its original price because it is subject to many kinds of taxes and heavy fees. If the Ministry of Transport’s proposal for collecting tolls is approved, this will certainly have a big impact on the local automotive industry and the hope to develop this industry will therefore turn sour.
Of course, Vietnam has the right to choose between developing the automotive industry and restricting the demand for personal vehicles to reduce traffic congestion. It is apparent that these two targets cannot be reached at the same time. Once it has made a choice, the Government should steadfastly announce its decision so that businesses will be able to set their business plans.
… to the target of attracting private sector
Another important target the Government wants to achieve is to attract the private sector’s investment in the road network. This field has so far been mostly invested by the State budget or the official development assistance (ODA). Without the engagement of the private sector, Vietnam can hardly improve the infrastructure system.
Solutions to attracting investment from the private sector through different forms such as build-operate-transfer (BOT) and build-transfer-operate (BTO) have not been successful so far. The main cause is that there are two few cars on the roads, so it is very hard to recover the investment capital by toll collection. Meanwhile, some neighboring countries, especially Thailand, are successful with this business model.
Recently, the Government encouraged the investment in the form of public-private partnerships (PPP), in which the State will share part of the costs to help cut initial investment cost. If the number of automobiles in circulation does not rise, the hope will be still far away.
If the State continues to choose tightening the demand for buying personal vehicles as a top solution to reducing traffic congestion, it will have to continue to play a key role in providing capital sources for traffic infrastructure development. Toll collection will, of course, help the Ministry of Transport have a fairly big amount of money for investment. It is wondered if that is the optimal solution to dealing with traffic infrastructure inadequacies when the private sector still turns its back to this sector.
In addition, some other issues should be clarified. First, what is the root cause of traffic congestion? Is it because of the increase of personal vehicles, or other important inadequacies? How much money should be poured into HCMC and Hanoi to relieve traffic pressure when hundreds of thousands of people from the provinces come to these two economic hubs every year? Can the State have enough resources for doing that? Finally, what are the impacts on the provinces and other cities and the whole economy if tolls are collected while traffic congestion mainly takes place in Hanoi and HCMC.