China Eximbank provides $300 million preferential buyer’s credit for Bac Giang-Lang Son Section of Hanoi-Lang Son Expressway Construction Project

On October 30, 2014, the Prime Minister of Vietnam, Nguyen Tan Dung, made the Ministry of Finance of Vietnam responsible for a $300 million China Eximbank preferential buyer’s credit (PBC) for the Bac Giang-Lang Son Road Section. This is part of Phase I of the Hanoi-Lang Son Expressway Construction Project. The loan reportedly carried an interest rate of 2% and a maturity of 20 years. The proceeds of the loan were to be used by the borrower to partially financed the total cost of the project's first phase ($382.2 million). The purpose of the project was to construct a 63.8 kilometer long, 25 meter wide, toll road connecting the Hanoi-Bac Giang area within Bac Giang province to the Mai Sao commune within Chi Lang district and Lang Son province. The road runs parallel to the existing National Highway 1A (Vietnam’s 2,300 km transnational highway) and it is part of the larger 143 km Hanoi-Lang Son Expressway (CT.03), which connects the capital with the border town of Huu Nghi (Huu Nghi International Border Gate) in Lang Son province. Upon completion, the project was expected to reduce travel time from Hanoi to Lang Son province from 3.5 to 2.5 hours and expand trade between Vietnam and China. The contractor responsible for project implementation is unknown. Construction began on January 5, 2015, was completed on September 29, 2019, and opened to traffic in January 2020. The expressway was implemented on a Build-Operate-Transfer (BOT) basis and it will collect toll revenue for 17 years from 2020-2037. According to a press release from the Chinese Embassy in Vietnam, in 2016, the Vietnam Ministry of Transport initiated renegotiations with China Eximbank in search of more favorable loan terms. The Vietnam Ministry of Finance and Ministry of Planning and Investment were concerned about repayment abilities, public debt levels, and the restrictions related to the use of Chinese contractors and equipment. According to a 2019 VN Express article, this road section was supposed to be completed by the end of 2018 but 'the Ministry of Transport had to select a new investor for the project after the original one ran out of capital.'

Additional details

1. The Vietnamese project title is Đường cao tốc Hà Nội Lạng Sơn or dự án cao tốc Hà Nội - Lạng Sơn or Autoroute Hanoï-Lang Son (Đường cao tốc Hà Nội – Lạng Sơn) or Đoạn Bắc Giang – Lạng Sơn or Dự án cải tạo, nâng cấp quốc lộ 1 đoạn Hà Nội - Bắc Giang. The Chinese project title for the Bac Giang-Lang Son section is 北江—谅山段 and for the entire Hanoi-Long San Expressway is 河内—谅山段. 2. The China Eximbank loan that supported this project is not included in the Overseas Development Finance Dataset that Boston University’s Global Development Policy Center published in December 2020. 3. Asian Development Bank (ADB) was originally going to provide debt financing on this project but was seemingly replaced by China Eximbank. Instead, ADB provided technical assistance (see "Official Letter 2167/TTg-KTN of 2014" and ADB documents). 4. It is unclear when China Eximbank signed the financing agreement. This issue warrants further investigation.

Number of official sources

8

Number of total sources

19