Financing Urban Infrastructure Development:
HIFU’s Practical Experiences
Speech by Dr. Vuong Duc Hoang Quan
Director of Investment Department
Ho Chi Minh Investment Fund for Urban Development
(HIFU)
Hochiminh City Investment Fund
for Urban Development - HIFU
 HIFU is the 1st Local Development Investment
Fund in Vietnam – established by the decision of
Vietnam’s Prime Minister in June 1996 and
under the direct control of the Ho Chi Minh City’s
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.
HIFU Main activities
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Direct Investment
Lending
Entrusted Capital Management
Securities Market Participation
Municipal Bond Issuance Agency
Fund-mobilization methods used by HIFU
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Trusted management of state fund
Loan syndication with banks
Municipal bond issuance
Foundation of joint – stock companies
investing in infrastructure
1. Trusted management of state
fund
 Before1990s,
pay-back
“free”
mechanism
to
finance
investment
projects
 Upon HIFU’s 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.
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 owner’s
accountability when getting financed.
Trusted management of state fund (cont)
 HIFU has been trusted and assigned to
manage some other funds:
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Pollution Minimization Fund of Ho Chi Minh
City (USD 1 million)
Revolving Fund (USD 2.5 million) for cleaner
production program
ADB’s loan of USD 43.3 million for
environmental improvement of Ho Chi Minh
City.
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.
2. Loan syndication with banks
 Loan syndication is not a newly-invented
approach to rise funding
 Advantages:
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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
Loan syndication with banks (cont)
 HIFU has applied this approach successfully
to finance big infrastructure development
projects in the City:
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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
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
3. Municipal bond issuance
 First municipal bond issues ever in Viet Nam were
done by the City’s government and by HIFU in 2003
to raise fund for Ho Chi Minh City’s government with
total amount issued of USD 127 million
 Bonds issues by Ho Chi Minh City:
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“Plain vanilla” general obligations by the City
Semi-annual debt service
Principle and interest payment are made out of the
City’s budget resources.
Proceedings from municipal bond issues have
contributed to balancing capital resources needed for
the City’s urban infrastructure projects.
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 2’000 VND
(equivalent to approximately USD 120 million) of
municipal bond each year for the City.
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
state’s 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.
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 stateowned or private, to directly involve in the
development of City infrastructures
HCMC Infrastructure Investment Co. (CII)
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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)
Hochiminh City Investment Fund for
Urban Development - HIFU
Thank you!
HO CHI MINH CITY INVESTMENT FUND
FOR URBAN DEVELOPMENT
1997 - 2007