Yesterday Minister of Finance Vu Van Ninh met and worked with the Chairman of Ho Chi Minh City Le Hoang Quan on a project to set up an Urban Investment and Development Fund. During the meeting, a breakthrough solution was proposed to speed up investment projects.

Many apartment blocks are built in district 4

At present, the shortage of investment capital for building projects in the city is presenting a challenge for city authorities. For example, the Thu Thiem New Urban Zone project, one of the biggest in the city, needs VND 19 billion in order to compensate 13,000 households.

To cope with the undersupply of funds, city authorities have proposed a breakthrough solution under which land use rights will be accepted as a means to pool capital. Specifically, the city will found a Thu Thiem New Urban Investment and Development Joint Stock Company, whose functions will be to determine the value of the infrastructure already in place on the project site, to issue shares equivalent to its total value, and then to auction said shares to entrepreneurs who wish to invest in building projects.

By doing so, city authorities hope to generate enough funds to pay off land compensations for people affected by the Thu Thiem Project.

As planned, the Thu Thiem Joint Stock Company will have an estimated total registered capital of VND 8,000 billion, of which VND 6,400 billion will come from the land use rights values for the entire 65-hectare area, accounting for 80% of its total value. The remaining 20%, or VND 1,600 billion, is expected to be pooled by shareholders – state-owned construction companies with solid financial capacity and reputations.

The auction of the company’s shares is scheduled for the end of 2007, and the shares will afterward debut on the HCMC stock bourse, paving the way for the issuance of real-estate securities on the financial market.

The solution is expected not only to benefit the Thu Thiem Joint Stock Company, but also many other construction projects currently underway.

For instance, the total investment capital of the Hi-Tech Industry Zone Project is VND 8,500 billion, but the city can only finance VND 5,400 billion, mostly via the issuance of urban shares. The project’s infrastructure is scheduled to be completed in 2009 and put into operation in 2011. To achieve these targets, city leaders yesterday proposed that the Ministry of Finance allow a generation of funds similar to that of the Thu Thiem project, on the condition that the total debit balance will not exceed 200% of the total investment capital financed by the state budget for basic construction.

The solution has also been proposed for use toward a project to build 20,000 apartments over the next three years. If possible, it will benefit low-income residents who can buy their apartments by installments over twenty years, only paying VND 1,800,000 per month.