Effect assessment of the national road maintence fund on vietnam road network maintenance sub sector

Due to the above issues, Vietnam "National Road Maintenance Fund” was established in December 2012 and officially activated on January 2013 by the Decision o f Government with the goals

UPPSA LA UNIV ERS ITÉ T &

VNU UN I V ER S I TY O F ECONOM1CS & BUSINESS

Author: Hao, Khuc Thi Nguyet

Supennsor: Dr Sven-Erik Svard

Local supervisor: Assoc.Prof Dr Nguyet, Hoang Thi Thuy Class: M P P M - I N T A K E 7

H a n o i, J a n u a r y - 201 5

My first thank is for Uppsala University, Sweden and Economic College — Vietnam National University who have collaborated to develop programs and organize a training course o f “Public Management - M aster Degree) which is very exciting, useful and practical, especially to the govemmental offícers, including me

who are working for the Vietnamese govemmental offìces The lectures delivered

by Professors and Doctors who have full experience in theory and practice which brought leaming interest to the leaners I, once again got chance to go to university vvhere I had graduated as B.A Economist with university degree Thereíore I

decided to choose this training course to improve my knovvledge

I would like to express my sincere thanks to Proíessor Sven-Erick Svard who

owns valuable expenence via many years o f lecturing in one o f the most reputed

European universities He has reserved wholehearted and thoughtful instructions

towards us, the leamers Individually, I got my study and implement studv stages

correctly oriented

I also would like to reserve these sincere thanks to Associate Proíessor, Dr

Hoang Thi Thuy Nguyet who has scientiíĩc style 'of lecturing to transíer leaming

and studying motive and excitement to us right on the fìrst days I got very

impressive in the way the Proíessor put forward macro-matters but they were so

close to daily life o f her; and made extremely abstract matters simple and easily

understandable ones

I express my sincere thanks to all officials o f Ministry o f Transport, Directorate for Road o f Vietnam and particularly National Road Maintenance Fund

Office who have considerately provided me important and necessary data and

iníbrmation to be integrated into and made my thesis clariíìed and lively

Finally, this thesis writer permanently and highly appreciate the assistances

vvith enthusiasm from the CITE Center as well as great emotion from all the 7th

course attendants which greatly contribute into my completion o f this thesis

Yours Faithfull,

Ha Noi, January 2015

A B ST R A C T

N am e of the S tu d y: Effect assessment o f the “National Road Maintenance FuncT

on Vietnam Road Maintenance sub-sector

Thesis Degree: Master

Date o f Presentation: 6th December 2014

P rese n ted by : Khuc Thi Nguyet Hao

condition and to ensure sm oothly o f transportation, in comparison.

Due to the above issues, Vietnam "National Road Maintenance Fund” was established in December 2012 and officially activated on January 2013 by the Decision o f Government with the goals that the fund could meet a main part o f existing demand by providing Capital collected by annual fee o f transportation vehicles

This study is to assess the considerable changes in road network maintenance

in Vietnam, compared to road conditions before the road network was funded for maintenance by the said Fund; Besides, this study considers other impacts o f the

"National Road Maintenance Fund" such as changes on management method o f

govem m ent agencies, application o f Science and technology on road maintenance as vvell as raisc in avvareness o f residents.

The study applied 03 researched methods to clarify the impact o f N RM F on Vietnam road system, as bellovvs:

Firstly, the study analyzed statistical data over a period o f 5 years from 2010

to the end o f December 2014 and divided into two speciíìc periods

- Phase 1, from 2010 to the end o f 2012 (03 years) is the period o f road

maintenance activities in Vietnam operating under 100% o f the annual State budget.

- Phase 2, from January l st, 2013 until the end o f 2014, which means 02 years since the NRM F was established and has put into operation to manage all revenues which are collected o f transportation vehicle, associating with the annually additional State budget, in order to provide funding for activities related to the road maintenance sub-sector

AU using data are collected from reliable sources such as Ministry o f Transportation Directorate for Roads o f Vietnam and National Road Maintenance Fund including: (i) annually actual funds using for road maintenance operations, particularly for the highway system; and also the supported funding to the local before/after N RM F establishing; (ii) The number o f road and bridge has been maintenance by funding through NRMF; expenditure o f applied Science and technologies on road maintenance sub-sector which has been paid by the NRMF; and changing o f managemcnt method what is exccuted by State agencies in road maintenance sub-sector through nevvly applied policy documents for project bidding and approval

Based on the actual data collected above, comparison between the phase 1 with the phase 2 was implemented in order to assess the N R M F ’s impacts on road maintenance sub-sector beíore and aíter its íormation and operation

Secondly, the author also conducts intervievvs 03 ỵroups directly related to road maintenance operation They are: (i) Government Officials represent those

w ho implement State p olicy and Capital management under the Fund m ech a n ism (ii)

constructors and consultant companies represent companies which directly carry out

road maintenance contraction as bid contract as vvell as Consulting firms w ho are

supervisors in construction site; (iii) transportation firms and local residents vvho benefited from the quality o f roads change rapidly due to N RM F investment.

Interviewing results o f group (i) to clarify the impact o f the N R M F changing the mode o f operation management and also policy applies o f State agencies on the road maintenance sub-sector

After interviewing group (ii), it is discovered the fact that, apart from the traditional state-owned company beĩore, but now the company carried out construction bid has included many different economic sectors such as the private equity company, the limited liability companies and joint stock companies with

State Capital associated private participate Thank to suffícient and tim ely funding

what is more attractive to companies on roads maintenance sub-sector leading vanous competitive environment and managers also has beneíited when having the better road with lovver costs The quality o f construction is also increased when to

seek cost reduced measurements as applying Science and technology and new ly

management practices

Targets o f interviexving group (iii) are íinding out proíìts what automobile transportation companies benefited after reducing cost o f fuel and depreciation of vehicle as well as saving labor due to the smoothly operated road system In addition, residents who use road system everyday, particularly in poor locals have been excited o f the upgrading quality o f the roads that were maintained by NRMF funding

At last, SW OT analysis method was applied to recognize N R M F ’s chances

as well as its obstacles in order to build a rational master plan in which management agencies could be eníorced for N R M F development in the future

Result and Conclusion

After analyzing the actual data collected from the Rovemment agencies on road niaintenance operation and iníbrmation interviewed by questionnaire, it is found that NRM F íòundation is the rational decision o f Vietnam Government, adapting to the socio-economic circumstances o f Vietnam today In addition, through positive results o f the N R M F ’s activities brought back, one o f the goals of Vietnam Government, which is oriented strategy on development o f maintenance sub-sector toward the step by step o f full privatization, is clearly supported prooís

especially in the remote and isolated areas where annual State revenue is low Thereíore, with positive effects, it can be seen that in general, the National Road Maintenance Fund plays a vital role for the development o f transport sector in Vietnam

Due to the extremeiy limited staie budget, which is not insufficient to sponsor the social welfare system such as maintaining the road network in goođ operation, the NR M F Capital, which contributed by resident is the íĩrst step in the privatization process o f road maintenance works

With the íunding o f the NRMF, shorted Capital situation are overcome in part Road and bridge systems, after many years o f lacking fund for fragmented

repair, with fund o f much higher from the Fund than from State budget beíore have their quality improved to ensure smooth movement on the roads for the people This

is signiíĩcant to remote and isolated area vvhere the local State budget is low have

created b elieí to the people, brought into full play direct contribution by the people (according to audit report prepared by the Vietnam State Audit Office in September 2014)

Enhancing accountability because management mode by a State

administrative agency that is responsible for road maintenance is thereíore changed

as the timely provided fund meeting progress As a result o f this, interest in participation in this íield is attracted by several economic sectors Road maintenance becomes more competitive, so bidding method to select contractor with high quality and low cost has been applied Application o f Science and new technology, which has been the first time to be supported by the Fund, changed previously subsidized construction process Companies are obligatory to be interested in studying and íĩnding out how to reduce cost o f materials and laboring increasing liíecycle for their constructed structures

Awareness o f preserving public assets has been raised up because o f recognition o f practical and quick efficiency from annual contribution that they did

The study also shows that, for the V ietnam ’s social economy, in which majority (70%) population live on agriculture and individual business is mainly, thereíòre, tax collection to meet social welfare is very diffícult and impossible As

State budget relies mainly on export, which is very constrained and public debt is

increasing, privatizing road network maintenance is an objective that Vietnam Government set up is fully reasonable Forming the Fund to directly manage revenue and allocate investment right in the fiscal year with transparent results shall generate belief o f the public in effìciency o f their direct contribution

Recommendations

This studies show that, NRFM play a vital role in the transport sector in Vietnam, particularly in road maintenance sub-sector In the future, with the goal o f sustainable development NRMF, I have some recommendations as follows:

- The biggest constraint is seeking a developing íĩnancial source for N R M F to satisíy road maintenance works The Government should consider on other income sources such as collecting electricity inửastructure user fee, optical cable fee etc As reality shovvs that, Vietnam transport infrastructure are ìnvaded by power lines, vvater pipes and ĩiber optic cable a lot, especially in big cities Thereíore, said rented fees could be abundant revenues for further needs o f the NRMF Taking advantage o f study assistance o f the WB, M OT needs to assign consultant that build

up a 5 year road toll collection plan with the aim o f making use o f revenue from leasing inữastructure transport into communication and electncity

- Government also early encourages various business modes, promote

privatization process on road maintenance sub-sector in order to elim inate State

abundant

- Based on the positive support from the road users on the impressed results brought back by NRMF, to built up legal corridor for NRMF foIlowing direction o f increasing revenue from road toll imposed on road vehicles in compliance with GDP growth and to look for other sources as well

- For further construction projects, maintenance should be subjected to an item

in the contract, guaranteed by the contractor for at least 5 years after construction completion and handing over

- Government should quickly develop other transportation modes such as: (i) railway transportation (this is under a study conducted by MOT) and (ii) continuing

- In order to achieve high efficiency in collecting fee, the Government should issue penalty regulations to vvell control road fee, particularly motorbike users.

- NRMF need to closely coordinate with WB funded consultants to early build

up LRMF model nationwide to create consistency and control o f revenue and expenditure íavorably

- MOT, NRMF should continue usiníỉ the media, educating and disseminating and building propaganda campaigns to direct beneíĩts brought back from N RM F against the road users’ contributions

- Last but not least, Government needs to build a special mechanism on salaries

o f the staíís working in N R M FO and other priority measures, which could be reduced corruption

Above are my study and assessment that are so primary on impacts by

N RM F in its 2 years o f establishment and operation; and looking for measures in order to aífirm the roles o f N RM F to Sub-section NRMF in particular and transport sector in general I wish to receive sincere comments from the tutors and mates

Key words:

Ministry o f Transport (MOT); Ministry o f Finance (MOF); Ministry o f Planning and Investment (MPI); Road Maintenance Fund (RMF); National Road Maintenance Fund (NRMF); National Road Maintenance Fund Office (NRMFO) Local Roađ Maintenance Fund (LNRMF); Directorate for Road o f Vietnam (DRVN); World Bank (WB)

TABLE OF C O NT ENTS

1 Ỉ N T R O D U C T IO N 1

1.1 B ac k g ro u n d 1

1.2 Research questions and objectives 3

1.2.1 O bjectives 4

1.2.2 Research q u e stio n s 4

1.2.3 Research Scope 4

2 FRAME OF R E F E R E N C E 5

2.1 Theoretical basis on road network management and m aintenance 5

2.1.1 Concepts o f road network m ain ten an c e 5

2.1.2 Roles o f road network m ainten ance 5

2.1.3 Factors affect road maintenance a c tiv ities 7

2.2 Model o f Road Maintenance F u n d 7

2.2.1 Objective of NRMF establishm ent 8

2.2.2 Revenues o f Road Maintenance F u n d 8

2.2.3 Road Maintenance Fund Management U n it 9

2.2.4 Fund allocation amongst road management a g e n c ie s 9

2.3 Vietnam National Road Maintenance F u n d 10

2.4 Literature re v ie w 13

3 STUDY M E T H O D 13

3.1 Methods o f collecting and analyzing D a ta 14

3.2 SW OT A n a ly s is 15

4 DATA A N A L Y S IS 15

4.1 Analyze secondly data 15

4.1.1 Assessment o f effects by “ Road Maintenance Fund” to Capital investment o f road maintenance for the road maintenance fund beíore and after N RM F íoundation 15

4.1.1.1 Investment for road maintenance before having N R M F 16

4.1.1.2 Investment on road maintenance from N R M F 16

4.1.2.1 Contractors selection m ethodof national road management and

m aintenance unit: From 2012 backM ard: 19

4.1.2.2 Contractors selection method o f national road management and m aintenance unit after N R M F was estab lish ed : 20

4.1.2.3 E v a lu a tio n 1 \

4.1.3 Apply Science and Technology in Maintenance Fund beíore and after having fm ancing o f N R M F 22

4.1.3.1 Reality o f m aintenance activities before having íĩnancing o f NRMF22 4.1.3.2 A pplying Science and technology when N R M F vvas íormed and put into o p e r a tio n 23

4.1.3.3 E v a lu a tio n ">3 4.2 A nalysis o f prim ary data (base on results o f interv'iews) 23

4.2.1 Impressed encreasingly fưnding leads to management m ethods 24

4.2.2 A pplying csience and te a c h o n lo g ie s 25

4.2.3 Road transport system greatly im p ro v e s 25

4.3 S W O T analysis for next years (2015-2020) 25

4.3.1 C h a lle n g e s 26

4.3.2 O p p o rtu n itie s

4.3.3 S tren g th s 29

4.3.4 W eak nesses 30

5 C O N C L U S I O N 30

6 R E C O M M E N D A T I O N 31

ABBREV IATION

Figure 1: Organization Chart o f Viet Nam Road M anagement F u n d 11

Figure 2: Diagram o f Collection and Allocating Financial F u n d 12

Figure3: Comparison among road mantenance investmen (2010-2014) 18

LIST OF TABLES Tabìe 1: H ighway m aintenance budget in the p e rio d 2010-2012 (Compare allocated Ịund and requested fund fo r road m ainten ance) 16

Tabỉe 2: A ctual C apital for the highwav svstem p erio d 2013-2014 17

Table 3: A dditional C apital levels f o r locaỉ road system p e rio d 2013 -2 014 ] 7

Tahle 4: Com parison changes o f the Capital for road m a in ten a n ce 18

Table 5 C om panson betweeu reũl source o f Capital o f N R M F and the dem and o f C apital bv D R VN requested b \ vears 26

LIST OF APPEN DIX

Appendix 1: Ọuestionnaire o f interviewing government offícials from MOT MOF, DRVN

Appendix 2: Ọuestionnaire o f interviewing representative o f construction companies and consultant íìrms

Appendix 3: Ọuestionnaire o f interviewing representative o f Automobile transportation companies

Appendix 4: Ọuestionnaire o f interviewing residents

1 INTRO DUCT IO N

1.1 Background

In Vietnam and most other countries in the world, road transportation is a major mode and accounted for the biggest portion o f inland transportation Trend o f social-economic development is ongoing to increase in the coming years In order to meeí increasing road transportation demand, beside investment in new road inĩrastructure, íurther supplementation into existing road network, rehabilitation and upgrading existing roads, road management and maintenance is certainly not only an ìmportant strategy to extend road network life cycle, but also an important task in road transportation inírastructure management strategy

For the last two decades, Vietnam road network has reached a significant progress in both quantity and quality as it could be said In 1993, the WB and ADB officially kicked off a comprehensive renovation on road netvvork via funding for Vietnam Government for ODA projects o f National Highway 1 Rehabilitation Projects This National Highxvay 1 is considered as the backbone o f the road transportation system nationwide and connectivity from a very up-north point to a very down-south point o f the nation Right after these donors, it was also involvement the Government o f Japan who reserved ODA project íìnancing through -ỈICA for upgrading the National Highway 5 (NH5) which is an important commercial route connecting Hai Phong sea port which is the biggest in the north o f the country to Hanoi Capital More and more donors then agreed with Vietnam Government to complete a lot o f big road infrastructure projects, which connect cities, iocal point economic regions, airport terminals, seaports and national border corridors with Lao PDR, China, the Kingdom o f Thailand and the Kingdom o f Cambodia

Developed road transportation has ensured goods circulation demand among regions in the country and among neighboring countries; timely solved people’s traveling demand to íacilitate exploitation o f regional potential, considered as economic structure transition; and contributed in the task o f poverty eradication and poor mitigation in the remote and isolated areas

During the process o f operation o f a certain road, maintenance is a necessary task and a must as required to maintain the existing technical speciíications and sustainability o f such road, ensure traffìc safety on that road and utilize investment

efficiency In fact, this road maintenance requirement has not been signiíicantly considered and invested in The main reason is because o f lacking o f State budget allocating for annual road management and maintenance, which is very constrained The State budget allocation for this is met only 30% o f actual requirement for national road while for provincial roads, it is even much lower There is a great difference in financial provision between road maintenance and Capital reserved for road rehabilitation, upgrading, im provem ent and new road construction; taking fund for national road maintenance alone, it is equal to only 11% o f fund for Capital construction, including road upgrading and new road construction As a result o f

lacking Capital for road maintenance and managem ent and Capital unsustainability,

many national roads are under operation vvithout maintenance or they are just at least received care taken when there is an emergency event but regular attention on maintenance is ignored The road m anagem ent and maintenance have not been periodically followed speciíĩcations, which made the rapid deterioration o f the road neUvork This even happens to the newly constructed roads, which have been newly upgraded with high quality o f pavement

In this regards State above, in 2008, Road Acts was passed by the National Assembly which created major premise for the Government to promote investment

in road transportation development under which the preservation and maintenance o f the existing road network was included Socio-economic development strategy for period o f 2011-2020 o f the country determines that “construction o f inírastructure system in consistency with some m o d em structures, íbcusing on transportation system and big city urban inírastructure” is a breakthrough At the same time, transportation development strategy to 2020 Vision to 2030 has been approved by the Prime M inister1, which promulgated that “road maintenance, effìcient operation

o f roads, sustainability o f the existing road transportation inírastructure have to be taken care” These policies indicate that the Government determines to develop transportation infrastructure system in general and road transportation infrastructure system together with road m anaeem ent and maintenance in particular On the other hand, the Road Acts also provides other direction to the road maintenance vvhich is establishment o f Road Fund to centralize and mobilize other types o f capitals which,

in short term, together with State budget, litt up the Capital burden on road

'D ecision N o.35/2009/Q D -T T g dated 3rd March 2009

maintenance and later on, gradually strong enough to provide sufficient fund, instead

o f State budget for road maintenance requirements.

The N R M F was established by Vietnam Government 2with fmancial source o f annual road user charges accounted on road users o f motorized vehicles, annual State budget providing as supplementation and other revenues relating to road users The Fund shall be used for road maintenance and other related operations o f the whole road network in Vietnam Since then, road network management and maintenance in Vietnam has shiíted into new age

After two years o f implementation o f the Fund, road maintenance activities have been changed from State budget provision mechanism into N RM F mechanism

In last June 2014, basing on the report to the Prime Minister by the Central Road Fund Board, the most positive changes can have been seen on both quantity and quality o f the roads which have been providing services to people's and goods’ transportation needs From the fact, raising points as questions o f whether NRMF, a unit holds control o f revenues relating to road operations, is necessary or not Or such revenues should be collected by the Government and then allocated to NRMF via annual State budget allocation.

Until now, there have had none o f the studies to be conducted to analyze effects

or impacts by the NRMF as well as its role or its necessity to road netvvork maintenance under transport sector Individually, having becn as an officer o f transport sector for more than 17 years, this is the right period the transport sector has the biggest and most vigorous change due to renovation policies and experience leamt from developed countries in the world, particularly the establishment o f Road Maintenance Fund which is a signiíĩcant progress to make the policy makers change their view points on the need o f road maintenance, placing a comer stone for íĩradually socializing the public goods which reduces a heavy burden o f road maintenance expenditure from State budget It is thereíbre, since the “birth o f N R M F” o f more than

a year o f operation, to make me, a member accompanying with N R M F ’s operation, interested and excited in selecting the study on NRMF effect assessment and what NRMF has ben bringing about to road maintenance in Vietnam

1.2 Research questions and objectives

2 Decree N O 18/2012/N D -C P dated 13 March 2012

1.2.1 Objectives

In this study, through real data I collected which describes the reality o f road network mainíenance in Vietnam in period between 2010 and 2014, an analysis is undertaken to identiíy effect by the NRM F onto road maintenance sub-sector beíore and after its establishment3

This study is to assess the considerable changes in road netvvork maintenance

in Vietnam where the financial source o f RMF can bring back, compared to road conditions before the road network was íunded for maintenance by the said Fund; road and bridge network to be well preserved with longer life, to provide road users smooth traffic services, especially in the remote and isolated areas where annual

State revenue is low Beside, this study also consider other impacts o f RMF such as changing management method o f govemment agencies, applying Science and technology on road maintenance as well as raising awareness o f resident Therefore,

it can be seen that road maintenance fund plays vital role for the development o f transportation sector in Vietnam in general, toward the step by step o f full pnvatization o f road maintenance activities in particularly contributing to eliminate

the State budget.

1.2.2 Research questions

This study vvant to íìnd out that, since established in December 2012, hovv has the NRMF impacted on the road maintenance sub-sectors o f Vietnam due to impressed increasingly investment funding

1.2.3 Research Scope

The study undertakes on road network maintenance includirm national road

and provincial roads (m ainly in diffìcult provinces with low State revenue in

Vietnam such as Nghe An, Nam Dinh, Hoa Binh, Quang Binh, Ha Nam) The study mainly bases on documents available in Central NRM F Offíce and Directorate for Roads o f Vietnam under Ministry o f Transport In order to assess and compare the differences o f road maintenance beíore and after NRM F be established, fíngerers and data collected during the period o f ycars from 2010 to 2014 have been separated

’ Decree No 18/2012/N D -C P dated 13 March 2012

on two phases that are from 2010 to the end o f 2012 and from at the beginning o f

2013 to the end o f 2014

2 FRAM E OF REFERENCE

2.1 Theoretical basis on road network management and maintenance

2.1.1 Concepts of road netvvork maintenance

The Road Acts in 2008 provides “ Road maintenance is taking action o f road

m aintenance and repair in order to uphold technical standards and speciĩications o f

the operated roads”4 MOT providing deíìnition on road structure maintenance including: “Road maintenance is a series o f actions taken to preserve normal

operation and saíety use o f the w orks”.

According to direction by M o f Vietnam “Road maintenance is total actions

o f m anagem ent, routine maintenance, periodic m aintenance5and em ergency repair as needed6 in com pliance with technical speciíications reíerrirm to each typical type o f

works”

Examples o f ways in which diííerent countries contract road maintenance

services, in general, road maintenance activities can be broken into four categories:

Routine works; Periodic works; Special works and Development

2.1.2 Roles o f road netvvork maintenance

Maintenance o f a construction structure, including road structure maintenance

is a part o f its cycle It is thereíbre to keep on operating saíely in the same original conditions to ensure its design liíecy cle as per design Standard o f the road structure, its maintenance is obligatory.

Proper road maintenance contributes to reliable transport at reduced cost as there is a direct link between road condition and vehicle operating costs (VOC) An

improperly maintained road can also represent an increased safety hazard to the user leading to more accidents, with their associated human and property costs7.

4C irc u la r N o 10/2010 T T -B G T V T d ated 19 A p n l 2010)

(in c lu d in í medium repair and big repaư)

‘ (d u e to natural dis asler w o rk s b r e a k d o w n o v e rl o a d e d p ro b le m elc.)

Road maintenance is essential in order to (i) preserve the road in its originally constructed condition, (ii) protect adjacent resources and user saíety, and (iii) provide efficient, convenient travel along the route Uníortunately, maintenance is often neglected or improperly períbrmed resulting in rapid deterioration o f the road and eventual failure from both climatic and vehicle use impacts It follows that it is impossible to build and use a road that requires no maintenance8.

Road management and maintenance should be taken care regularly and continuously to ensure roads are operated in safe and smooth mode with timely treatment to damages which may cause congestion, traffíc accidents and emergency cases due to heavy rain and seasonal monsoon or force majeure (typhoon, ílood, slide etc.); to detect and prevent acts o f encroachment to road infrastructure, right o f way (ROW) encroachment If road maintenance is not suííĩciently taken proper care, road inírastructure will promptly deteriorate and damage, and as a result, non-safe operation will be and in case o f rehabilitation, it will be very costly and reduce efficiency of govemment and society’s investment

During operation and maintenance period, causes o f defects shall be early prevented, damages shall be early detected and timely repair and thereíore cost for overcoming these deíects and repair shall be reduced and less complicated If the repair is not taken place, damages and deíects can get worse, then the repair shall cost a large amount o f money And repair altematives shall be complicated

Kecping the road netvvork system in normal and safe conditions depend son a lot o f aspects o f climate and hydrology Storm and flood cause landslide, slope sliding and other phenomenon that damage the road inírastructure At places vvhere the ground water or hydrological phenom enon's are complicated, damages to road embankment and pavement shall be caused High temperature and rain shall make road pavement quickly aged and deteriorated

Vehicle load directly affects bridge components and road and road facilities and makes them deteriorated Road damages and quick deterioration o f national and provincial roads are also because o f circulation o f overloaded vehicles

As time passed by, road pavement strength decreases; loading capacity o f bridges, culverts and other road íacilities also reduce and more damages appear with more seriousness On the other hand, socio-economic development creates increase

o f transport demand and daily traffíc volume on roads; and vehicle loading also increases because o f cargo transport demand pressure and proĩit bom by the transport operators In this view, vehicle-loading control to protect road and bridge system is one o f the urgent needs at present The above mentioned issues directly impact road and bridge system and make it deteriorated as operation time passed by and for a certain period o f operation time (or as indicated in detailed design) periodic repair (medium or big repair) is a must or investment upgrading, rehabilitation or improvement to the roads and bridges This is highly agreed by the road network managers and intemational and national experts

The existing íactors, vvhich are insuffícient in road management and maintenance, in suííìcient in íĩnance and ineffícient use o f fund which impact quality

o f road maintenance and road inírastructure lifecycle

Nowadays, preservation and extension o f life cycle o f road transport infrastructure becomes ơne o f the ìmportant contents in ro ad asset management strategy in many countries

2.1.3 Kactors affect road maintenance activities

- Management mechanism and implementation method of govem m ent

agencies

- Investment fund

- Science and Technology in road maintenance construction

Out o f the above factors, policies and fund are the most important ones that affect the whole operation o f road maintenance

2.2 Model of Road Maintenance Fund

Finding a method that collect differently íinancial sources in order to meet the road maintenance demand is always urgent need o f any govemment Model o f Road Maintenance Fund is encouraged to apply According to the primary statistic o f WB,

in the world now there are 55 nations that have their RMF established They are ASEA N countries, developed countries and South American and Latin American Aírican

2.2.1 Objective o f RMF establishment

The main objective o f RM F establishment is to ensure íìnance for road network maintenance; however, in some countries a part o f this fund is reserved for road system development, urban transport system and urban railvvay development

In the countries with RMF established, Japan, as example, reserves a part o f the Fund for Capital investment in road system developinent and other part for road management and maintenance or for urban transport development, urban railway etc Particularly American established two RMF, one for national road network and the other for provincial road network In general, Establishment o f RMF is expectation o f govemments who wanted to have a suffícient, actable and sustainable fund reserved for road maintenance

According to study conducted by the w, management and operation a national road netvvork is equal to revenue o f one o f 500 leading biggest Corporation

in the worlđ To operate such a big property and rely only on State budget allocated fund will be insufficient to the requirements On the other hand road management organization is authorized to manage such a big íortune should be authorized to manage annual road maintenance and repair fund from the RMF

Road management organization needs to operate the road nehvork like to operate an enterprise Revenue from toll fee or relevant related road fee must be reserved for road fund for road maintenance and repair, and this Fund shall be managed by a committee

Road users are customers and need to understand that if road network is maintained well, transportation fee shall be decreased and as the íìnal result o f decrease in product price

Establishment o f RMF shall be participated by the road users and during the fund management process, that need to be supervised, give appropriate requirements during road operation and usage period and also generate consensus and support o f the public in road investment and maintenance

2.2.2 Revenues o f Road Maintenance Fund

Each country has its own revenue for its RMF such as: Fuel used tax imposed

on transport vehicles including gas, fuel, diesel, lubricant; this revenue is accounted for 85-95% total revenue o f the Fund; Road user fee, bridge user fee and ferry user

fee; Annual vehicle fee depending on each type o f vehicles; Fuel surcharge imposed

on heavy duty vehicles; Fee and fine upon super sized and super loaded vehicles; Charge on intemational transit vehicles (on intemational registered vehicles), fee on intemational vehicle transit permit issuance.(the above are common as they are directly related to the road users); and Tax on vehicle register; Fee on motorized inspection; Vehicle parking fee and road Act violation íìnes

Generally, the Fund revenue is mainly served national road netvvork maintenance In some countries (like China, India etc.) they have established expressway investment fund, and revenue for this Fund is through fuel charge and upon number o f vehicles using expressway (as per type o f vehicles and mileage) This style meets road maintenance requirements and meets investment and rehabilitation needs

2.2.3 Road Maintenance Fund Management Unit

To have RMF managed transparently, publically an effectively; and used correctly in the right purpose, the countries have formed Fund Management Council with representatives from M OT (Road Sector), MOF, Businesses Community, Road users (Industrial and Commercial Chamber, Transport 'Operators, Automobile Transport Association etc.) and maybe, representative from local authority Chairman o f the RMF Management Council is appointed or voted by the Council Purpose o f the Council operation is to provide advisory to Ministers o f Transport and Finance to manage the Fund in the most effective way The Council shall build up operation regulations including: (i) Obtaining support from the communities in more expenditure to road nehvork; (ii) The Fund’s expenditures; (iii) Mode o f management o f the Fund, and (iv) Relationships betvveen and among the council and MOT

2.2.4 Fund allocation amongst road management agencies

According to experience o f the countries, there are two main ways o f RMF allocation as follows:

As per experience from the countries, thcre are two main ways o f road maintenance fund allocation as follow: (i) allocatiníỉ basing on a constrain íormula; (ii) allocating basing on real requirement

Many industrial developed countries, developing countries and under developing countries have established road maintenance fund or road fund which aíìer about 60 to 80 years o f operation, the Fund has developed from the lst

generation (depending mainly on State budget) to 2nd generation (relatively

independent, self managed) and 3rd generation (highly independent, self managed); Most o f developing countries have applied fund o f 2nd generation, developed have applied fund o f 3rd generation

2.3 Vietnam National Road Maintenance Fund

But until March 2012, Vietnam established NRM F for road maintenance; there have so far been no studies on the effectiveness o f N RM F o f Vietnam Thereíore, although N R M F o f Vietnam has been operated for nearly two year, it is time to study assessing the impact o f NRMF to the maintenance o f the road system then to have solutions for NRM F to carry out more effective and bring beneíìts to residents

Decree establishing the NRMF was signed by the Prime Minister on 13 March 2 0 129 The estabiishment decree has been followed by a number o f circulars, which together begin to deíìne the structure and detailed opêration o f the Vietnam ’s

R M F 10 The most detailed o f these the joint circular No 197/2012/TTLT-BTC-

‘Guiding Regime o f Management, Use, Payment and Settlement o f RMF o f MOF, was issued on the 15tho f November 2012 to define the process, requirements and responsibilities to collect funds from road users and manage use o f those funds for road maintenance in Viet Nam

The NRMF is to be used for National Highway maintenance and management through the DRVN and for maintenance and management o f sub-national roads under provincial responsibility through the Provincial People's Committees (PPCs) The V ietnam ’s RMF established at Central level is NRMF, and that established at provincial level is the LRMF The Prime Minister decides the organization and

9 N o 1 8 / 2 0 1 2 /N D - C P : D E C R E E on R oad M a in t e n a n c e Fun ds, H an oi, March 13, 2 0 1 2

l(>N o 1 9 7 / 2 0 ] 2 /T T - B T C : Circular g u id i n g regulation on c o l le c t i o n , p a y m c n t , m a n a g e m e n t and use

ch a rg e s by unit o f v e h ic le , H an oi, N o v e m b e r 15, 2 0 1 2 ; N o 2 3 0 / 2 0 1 2 / T T L T - B T C - B G T V T : Joint

circular, g u id in g r e g im e o f m a n a g e m e n t , u se, p a y m c n t and se ttle m c n t o f R oad M a in t e n a n c e Fund,

u se, p a y m e n t and s e ttle m e n t o f R oad M a in ten a n c c Fund, H a n o i, D e c e m b e r 2 7 , 2 0 1 2

management structure o f the N RM F and issues regulations on the operation o f the Management Board o f NRMF, which Controls disbursements from the NRMF Chairman o f the Board decides the organization and management structure o f the LRM F and issue regulations on the operation o f the Local RMFB

The focus for management o f the V ietnam ’s N RM F is the NRM FO That office reports to the IRMF Management Board chaired by the MOT Other members

o f the management board as the chart bellows:

Figure 1: Organization Chart o fV ỉetn a m 's R M F

Almost o f board members are assigned from MOT, MOF and MPI At the moment, on!y one member o f the management board is appointed from outside govemment The Vietnam Automobile Association represents some level o f road users on the Board

Sources o f íunding for the N R M F include road user registration fees to be collected directly from vehicles, including: cars, trucks, trailers, semi-trailers and

tw o-w heeled and three-w heeled motorcycles The total o f the road m aintenance budget will be com prised o f the above fees supplem ented bv annual allocation from the Central State budget for N R M F or provincial budeet o f each province for its LRMF The N R M F may also collect other revenue related to road use, as regulated by Viet Nam law All monies collected from m otorcycles are allocated

to the LRMF Other fees collected from vehicles are allocated 35% to the LRMF and 65% to the NRMF.

Figure 2: Diagram o f Collection and Allocating Financial F und

The NRMFB approves the revenue and expenditure plan ot' the fund; is responsiblc for managing the use o f revenues from the tund It supervises the application o f the NRMF and ensures that the monies collccted are spent prudently

and íor the purpose intcnded under the State management functions regulated by thc

Road Act Together with the MOF, MOT can submit rccommendation to the Prime Minister for adjustment to the allocation o f fees bctwccn the NRMF and the LRMF The NRMFB is responsible for guiding the administration and management o f the NRM M F

The permitted allocation o f tunding from the NRMF is for: Expenditures for routine maintenance; Expenditures for periodic maintenance (major and inedium repair); Road management services needed for road maintenance; Operational expenses and repair and upgrading o f vehicle weight inspecting stations; Financing

o f the offĩces o f the RMF, which carry out RMF Board’ assignment including staffing, special operations and irregular expenses; Expenditure for operation o f the

N R M FO including staffing for specialized tasks and expenditures to operate the

Annuat colỉecting fee of

as w ell.''jen n aro B Odoki and Paulina Agyekum Boamah (2012) developed an optimal fund allocation method for road maintenance on the basis o f Multi-criteria analysis (MCA) N R M F ’s impacts are o f multivariate priorities and M CA are considered as the current decision paradigm for meeting this requirement The application o f the models developed is compared against current practice in Ghana to determine which approach provides overall best períbrmance o f the road network Malkanthi and Matsumoto (2012) analyzed the eííectiveness o f Second Generation Road Fund and to propose whether it is desirable solution for Sri Lanka road maintenance problem This study shows very clear that inadequate ĩmancing for maintenance is a critical problem faced by Sri Lanka Spending on road maintenance

is about 0.0031% as proportion o f country’s GDP in Sri Lanka With the deficit budgetary arrangement, it is hard to achieve money from the general budget Therefore it is essential to look for an off-budget financing method

Thus, many countries having the develơpment level similar to Vietnam had have NRMF for long time and there are many studies evaluating the impact o f these funds to road maintenance work in their country But until March 2012, Vietnam stabilized NRMF for road maintenance There have so far been no studies on the effectiveness o f NRMF o f Vietnam Thereíore, although N R M F o f Vietnam has been operated for nearly two years, it is time to study assessing the impact o f NRMF

to the maintenance o f the road system then to have solutions for N RM F to carry out more effective and bring benefits to residents

3 STUDY M ETHOD

11 S e c H e g g i e , lan G and Picrs V ic k e r s ( 1 9 9 8 ) , K enneth M Gvvilliam & Z m a r a k M S h a liz i ( 2 0 0 0 ) ,

A D B ( 2 0 0 3 )

3.1 Methods of collecting and analyzing Data

This study obtained data that are documents from the DRVN, Transport Infrastructure Department o f MOT, VSAO and NRMF Collected Data o f implementation o f Road system maintenance in the period o f using govemment budget (from 2010 to the end o f 2012) will be compared with those data in the period o f using Fund budget (from 2013 to 2014) in order to íĩnd out the impact o f NRMF including improved road system rapidly, raised competitiveness betvveen

com panies because o f stable annual ĩinancing, applied Science and technology in road maintenance sector as well as raised awareness o f resident

This study also used questionnaires in order to gather assessm ents’ and comments o f stakeholder After interviewing (i) govem m ent official o f MOT, MOF,

N RM FO and DRVN who períormance State íunction on management road maintenance, (ii) contractors and consultant companies who bid and implement maintenance contract, and (iii) transportation fìrm 's representative and residents living in the poor area who are beneíĩted from using road system in order to fmd out the assessment o f the NRMF their appreciation on N RM F will be íbund out

Interviewing results o f group (i) to clariíy the impact o f the NRMF changing the

m ode o f operation m anagem ent and also policy applies o f State agencies on the road

maintenance sub-sector The author ìntervievved permanence Vice President of NRMF Board who is responsible for managing and controlling NRMF activities; Deputy Chief

o f NRMF office carrying out the plarming and decisions o f NRMF Board

Two contractors and one supervisor and Consultant Company are also interviewed in order to find out the impacts o f NRMF After interviewing group (ii),

it is điscovered the fact that, apart from the traditional state-owned company beíore, but now the company carried out construction bid has included many different economic sectors such as the private equity company, the limited liability companies and ịoint stock companies with State Capital associated private participate Thank to

sufficient and timely funding what is more attractive to companies on road maintenance sub-sector, leading various competitive environment and managers also has beneíìted when having the better road with lower costs The quality o f construction is also increased when companies íorced to seek cost reduced measurements as applying Science and technology and newly management practices

Besides, targets o f interviewing group (iii) are fmding out proíìts what automobile transportation companies beneĩited after reducing cost o f fuel and depreciation o f vehicle as well as saving labor due to the smoothly operated road system Chairman o f Vietnam Automobile Transportation Association and 50 local residents in Ninh Binh, Nghe An, Quang Binh, Cao Bang, Bac Kan, Yen Bai, Thai Nguyen, Bac Lieu and An Giang provinces are interviewed

The analyzine SW OT method is used in this study to recognize N R M F ’s chances as well as its obstacles in order to recommend some rational ideas in which management agencies could be applying as onented-strategy o f N RM F development

in the future

4 DATA ANALYSIS

4.1 Analyze secondly data

4.1.1 Effects of Capital investment on the road maintenance sub-sector beíore and after NRMF’s íoundation.

In the Report o f Audit o f State13, the NRMF activities have been evaluable apprised contributing o f physical changing road system They also created a trust in residents at íĩrst that their annual fee used for annual road maintenances Their said results were drawn after examining real road, vvorking with provinces and reviewing report o f DRVN, RNMF

In order to clariíy the said identiíy o f the Audit o f State, here by the author

vvill put the collected data from MOT, DRVN and RNM FO on comparisons

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l?Audit Report N o.2 60/BC -K TN V on collection/allotion o f the year 2013 o f NRMF issued by Audit o f State

in June 2014