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

UPPSALA UNIVERSITÉT &
VNU UN IVER SITY OF ECONOM1CS & BUSINESS

UPPSALA
UNIVERSITET

______________ _

_

T ll/

VNU‘UC
B,.
—

MASTER THESIS OF MPPM

EFFECT ASSESSMENT
OF T H E “ N A T IO N A L R O A D M A IN T E N A N C E FƯND” ON
V IE T N A M R O A D NETVVORK M A 1N T E N A N C E SUB-SECTOR

Author:

Hao, Khuc Thi Nguyet

Supennsor:

Dr. Sven-Erik Svard

Local supervisor: Assoc.Prof Dr. Nguyet, Hoang Thi Thuy

Class:

MP P M - I NT A KE 7

Han oi, J a n u a r y - 2015


ACK N O W LEDG EM ENT
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 - Master 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 of 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 Study: Effect assessment o f the “National Road Maintenance FuncT
on Vietnam Road Maintenance sub-sector.
Thesis Degree: Master
Date of Presentation: 6th December 2014
P resented by : Khuc Thi Nguyet Hao
Supervisors
- Dr. Sven-Erick Svard
- Assoc. Prof. Dr Hoang Thi Thuy Nựuyet
Objectives
Years ago, all o f Vietnam road maintenance activities had been paid by the
State budget, which was very limited. The financed State subsidies was equivalent of
about 20% to 29% with the actual needs what are required by proposal of
Directorate for Roads o f Vietnam in order to preserve exiting road system in a good

condition and to ensure smoothly 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 of 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.


Research Method
The study applied 03 researched methods to clarify the impact o f NRMF 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 NRMF 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 of
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 NRMF 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 of 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 policy and Capital management under the Fund m echanism (ii)

constructors and consultant companies represent companies which directly carry out
road maintenance contraction as bid contract as vvell as Consulting firms who are


supervisors in construction site; (iii) transportation firms and local residents vvho
benefited from the quality o f roads change rapidly due to NRMF investment.
Interviewing results o f group (i) to clarify the impact o f the NRM 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 timely 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 of 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, SWOT 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 NRM 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 NRMF 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.


With two years only, Vietnam 's road and bridge nehvork has been well
preserved with longer life, also provided road users smooth traffic services,

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 NRM 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 belieí 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 of 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 of
sustainable development NRMF, I have some recommendations as follows:
- The biggest constraint is seeking a developing íĩnancial source for NRM 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, MOT 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 eliminate 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 of
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


to build and develop sea favorable transportation routes, which run along the
country.
- 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 NRMF
against the road users’ contributions.
- Last but not least, Government needs to build a special mechanism on salaries
o f the staíís working in NRM FO and other priority measures, which could be
reduced corruption.
Above are my study and assessment that are so primary on impacts by
NRMF in its 2 years o f establishment and operation; and looking for measures in
order to aífirm the roles of NRMF 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 of 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 CONTENTS

1. ỈN T R O D U C T IO N ................................................................................................................. 1
1.1. B ackground........................................................................................................................ 1
1.2. Research questions and objectives..............................................................................3
1.2.1. Objectives...................................................................................................................4
1.2.2. Research questions...................................................................................................4
1.2.3. Research Scope..........................................................................................................4
2. FRAME OF REFER EN 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 ance.............................................................. 5
2.1.2. Roles o f road network m aintenance..................................................................... 5
2.1.3. Factors affect road maintenance activities..........................................................7
2.2. Model of Road Maintenance Fund................................................................................7
2.2.1. Objective of NRMF establishment........................................................................8
2.2.2. Revenues o f Road Maintenance F un d.................................................................. 8
2.2.3. Road Maintenance Fund Management U n it........................................................9
2.2.4. Fund allocation amongst road management agencies...................................... 9
2.3. Vietnam National Road Maintenance F u n d .............................................................. 10
2.4. Literature rev iew ............................................................................................................. 13
3. STUDY M E T H O D ................................................................................................................13
3.1. Methods o f collecting and analyzing D ata............................................................. 14
3.2. SWOT 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
NRMF 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. Changing o f managem ent mechanism o f govemment agencies on Road
maintenance before and aíter N R M F was established.............................................19
4.1.2.1. Contractors selection m ethodof national road management and
maintenance unit: From 2012 backM ard:............................................................. 19
4.1.2.2. Contractors selection method o f national road management and
maintenance unit after N R M F was established:...................................................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 fmancing o f N R M F ......................................................................................

22

4.1.3.1. Reality o f maintenance activities before having íĩnancing o f NRMF22
4.1.3.2. Applying Science and technology when NRM F vvas íormed and put
into o p e ra tio n .................................................................................................

23

4.1.3.3. E v alu atio n ........................................................................................................">3
4.2. Analysis o f primary data (base on results o f interv'iews)...................................23
4.2.1. Impressed encreasingly fưnding leads to management m ethods.............. 24
4.2.2. Applying csience and teach o n lo g ies...............................................................25
4.2.3. Road transport system greatly im p ro v e s........................................................25
4.3. SW O T analysis for next years (2015-2020).......................................................... 25
4.3.1 .C h allen g es.................................................................................................

26

4.3.2. O p po rtun ities.....................................................................................................
4.3.3. S treng ths...........................................................................................

29

4.3.4. W eaknesses..................................................................................................

30

5. C O N C L U S IO N ................................................................................................................... 30
6. R E C O M M E N D A T IO N .................................................................................................... 31


ABBREVIATION

Directorate for Road o f Vietnam

DRVN

Local Road Maintenance Fund

LRMF

Ministry of Transport

MOT

Ministry O f Finance

MOF

Ministry o f Planning and Investment

MPI

Road Maintenance Fund

NRMF

Nation Road Maintenance Fund

NRMF

Nation Road Maintenance Fund Office

NRMFO

State Audit Office oíV ietnam

VSAO

Asian Development Bank

ADB

World Bank

WB

The

Japan

International Coopcration

JICA

Agency
Asian Development Bank

ADB


TABLE OF FIGURES
Figure 1: Organization Chart o f Viet Nam Road Management F u n d ........................... 11
Figure 2: Diagram of 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 erio d 2010-2012 (Compare allocated
Ịund and requested fund fo r road m aintenance).........................................................16
Tabỉe 2: Actual C apital for the highwav svstem p eriod 2013-2014..............

17

Table 3: Additional Capital levels fo r locaỉ road system p erio d 2013-2014..............] 7
Tahle 4: Comparison changes o f the Capital for road m aintenance............................18
Table 5. Com panson betweeu reũl source o f Capital o f N R M F and the dem and o f
C apital bv DR VN requested b \ vears.......................................................

26

LIST OF APPENDIX
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

of

interviewing

representative

transportation companies
Appendix 4: Ọuestionnaire o f interviewing residents

of

Automobile


1. INTRODUCTION
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 of
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 of 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 of 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 of

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


2

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, improvement 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 of
lacking Capital for road maintenance and management 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 management 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 of
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 odem 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 of 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 manaeement 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


3

maintenance and later on, gradually strong enough to provide sufficient fund, instead
o f State budget for road maintenance requirements.
The NRM 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 NRMF 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 of 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 of
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 NRM F” o f more than
a year of 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/ND-CP dated 13 March 2012

4

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 NRMF 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 of resident. Therefore,
it can be seen that road maintenance fund plays vital role for the development of
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 of 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 (mainly 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 NRMF Offíce and Directorate for
Roads of Vietnam under Ministry of Transport. In order to assess and compare the
differences o f road maintenance beíore and after NRMF be established, fíngerers
and data collected during the period of ycars from 2010 to 2014 have been separated

’ Decree No. 18/2012/ND-CP dated 13 March 2012


5

on two phases that are from 2010 to the end o f 2012 and from at the beginning of
2013 to the end o f 2014.
2. FRAME 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
maintenance 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 works”.

According to direction by M o f Vietnam “Road maintenance is total actions
o f management, routine maintenance, periodic maintenance5and emergency 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 of 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 liíecycle 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 ircu la r No 10/2010 T T -B G T V T dated 19 A p n l 2010)
(in c lu d in í medium repair and big repaư)
‘ (d ue to natural disasler. w ork s bre a k d o w n . o v e rl oa de d pro ble m. elc.)
7 (R oa d M ain ten a n c e on W orl d B ank d oc um e nt)


6

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 of encroachment to road infrastructure, right of
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 of money. And repair altematives shall be complicated
Kecping the road netvvork system in normal and safe conditions depend son a
lot of 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.

R In d o c u m e n ts o f Tr an sport D e partm e nt o f the US).


7

As time passed by, road pavement strength decreases; loading capacity of
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.road 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
ASEAN countries, developed countries and South American and Latin American
Aírican.


8

2.2.1. Objective of RMF establishment
The main objective o f RMF 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 of
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 of
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 of
the public in road investment and maintenance.
2.2.2. Revenues of 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


9

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 MOT (Road Sector), MOF, Businesses Community, Road
users (Industrial and Commercial Chamber, Transport 'Operators, Automobile
Transport Association

etc.) and maybe,

representative

from

local

authority.

Chairman of the RMF Management Council is appointed or voted by the Council.
Purpose of 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

of

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.


10

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 of 3rd generation.
2.3. Vietnam National Road Maintenance Fund
But until March 2012, Vietnam established NRMF for road maintenance;
there have so far been no studies on the effectiveness o f NRMF o f Vietnam.
Thereíore, although NRM 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 NRMF 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 15thof 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 Vietnam’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 Road M ainten ance Funds, Hanoi, March 13, 2 0 1 2
l(>N o . 1 9 7 / 2 0 ] 2/T T -B T C : Circular g u id in g regulation on c o lle c tio n , paym cnt, m an ag e m e n t and use
charges by unit o f v e h ic le , H anoi, 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, gu id in g re gim e o f m an age m e n t, use, p aym cnt and settlem cnt o f R oad M ainten ance Fund,
use, p aym ent and settlem ent o f R oad M ainten ancc Fund, H an oi, D e c e m b e r 27, 2 0 1 2 .


11

management structure o f the NRMF 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
LRMF and issue regulations on the operation o f the Local RMFB.
The focus for management o f the Vietnam’s NRMF is the NRMFO 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 ofV ỉetnam 's RM 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 NRM F include road user registration fees to be
collected directly from vehicles, including: cars, trucks, trailers, semi-trailers and
two-wheeled and three-wheeled motorcycles. The total o f the road maintenance
budget will be comprised o f the above fees supplem ented bv annual allocation
from the Central State budget for NRM F or provincial budeet o f each province for
its LRMF. The NRM F may also collect other revenue related to road use, as
regulated by Viet Nam law. All monies collected from motorcycles are allocated


12

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 Fund

Annuat colỉecting fee of
vehicle transportatỉon

State

The NRMFB approves the revenue and expenditure plan ot' the fund; is
responsiblc for managing the use of 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
NRMMF.
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 of 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
NRM FO including staffing for specialized tasks and expenditures to operate the


13

FRM; Other expenses related to road management and maintenance authorized by
the NRMFB.
2.4. Literature review
Recognizing the importance o f maintaining the road, there are 55 countries,
vvhich so far have established the RMF to support the maintenance o f the national
road system. So the WB as an off-budgct mcthod introduces the concept o f RMF.
The effectiveness o f NRM F in developed countries and developing countries as a
solution for maintenance problem has gained attention and was evaluated separately
as w ell.''jennaro 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 MCA 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 of Vietnam. Thereíore, although NRM 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 NRMF to carry out
more effective and bring benefits to residents.
3. STUDY METHOD

11 S e c H e g g ie , lan G. and Picrs V ic k e r s (1 9 9 8 ), Kenneth M. Gvvilliam & Z m arak M .S halizi ( 2 0 0 0 ),
A D B ( 2 0 0 3 ).