Vietnam: Determination of starting price for auction of definite-term transfer of rights to operate road infrastructure assets

According to Article 5 of Circular No. 86/2019/TT-BTC of the Ministry of Finance of Vietnam, a starting price for auction of definite-term transfer of the right to operate road infrastructure asset is the lowest price that an auction of definite-term transfer of the right to operate road infrastructure asset begins with (excluding costs of maintenance of that asset).

Specifically, a starting price for auction of definite-term transfer of the right to operate road infrastructure asset shall be determined on the basis of the residual value of the asset at the time of transfer according to the re-evaluation, traffic volume (if the asset is road), the remaining depreciation time of the asset, additional investment, estimated revenues and expenditures incurred when operating the asset during the transfer period

In which:

- The residual value of assets at the time of transfer and the remaining depreciation time shall be determined in accordance with law regulations, including Ministry of Finance’s regulations on asset management and depreciation.

- Additional investment value is the value of investment made by the transferee of definite-term transfer of rights to operate road infrastructure asset in the transferred project according to the planning approved by a competent authority in accordance with law regulations on investment and relevant laws.

- Traffic volume (if the asset is road), estimated revenues and expenditures incurred when operating the asset during the transfer period shall be determined according to proposal of the Ministry of Transport or provincial People's Committee that shall ensure the conformity of determined values with specific characteristics, properties as well as supply and market conditions of each asset.

- Other reasonable and allowable expenditures (if any):

+ Repayment of loan principal and interest shall be determined according to terms and conditions of specific loan agreement or loan facility for the purposes of investment and construction of road infrastructure assets. In case the repayment of loan principal and interest is included in the asset’s value, this repayment amount must be deducted from the residual value of the asset.

+ Costs of management and operation of the asset by the transferee shall be determined for each type of asset during the transfer period, including:

• Managerial staff expenditures, including payments made to managers such as salaries, allowances, social insurance, health insurance and unemployment insurance contributions and premiums, and trade union fees. Salaries of managers shall be determined in accordance with law regulations on salaries and relevant legislative documents in corresponding with each type of road infrastructure asset.

• Costs of materials serving the performance of managerial duties, including office supplies, repair of fixed assets, machinery, equipment, working instruments and devices, etc.

• Costs of management equipment in office.

• Depreciation of fixed assets such as buildings, warehouses, structures, means of transport, transmission equipment, management machinery and equipment in offices (if any).

• Taxes, fees and charges as regulated by law.

• Land rents (if any).

• Costs of services from external suppliers serving managerial staff such as electricity, water, telephone, etc.; costs of consulting services, surveys and formulation of leasing or transfer plan (if any).

• Other cash expenses other than the aforementioned expenses such as convention expenses, business trip expenses, traveling expenses, expenditures on female workers, fees for attending conventions and other reasonable and allowable expenses incurred during the management of road infrastructure asset.

In case any cost items of management and operation of the asset are stipulated in technical – economic norms or policies promulgated by competent authorities or applicable laws (such as law on taxation, law on accounting, law on statistics and relevant laws), and have prices set by the Government, these regulations shall prevail; otherwise, the head of the authority or unit in charge of managing and operating the asset shall consider giving approval for determined cost items and assume responsibility for such approval.

If any cost item concerns different products, tasks or duties which cannot be separated such as depreciation of assets, salaries, social insurance, health insurance and unemployment insurance contributions or premiums, trade union dues, cost of management and operation of the asset, etc., they should be aggregated and distributed to each product or task according to relevant criteria and characteristics in conformity with applicable law regulations.

View more: Circular No. 86/2019/TT-BTC of the Ministry of Finance of Vietnam takes effect from January 20, 2020.

Thu Ba

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