Turning Point in Attracting Private Investment

10:25:00 AM | 14/7/2020

The Public-Private Partnership (PPP) Law was recently passed by the National Assembly with the approval rate of 92.75%. As such, Vietnam now has a common law, creating the highest legal corridor to attract private investment in essential infrastructure fields.

The Public-Private Partnership (PPP) Law consists of 11 chapters and 101 articles, which is a unified law regulating investment activities, attracting the private sector to invest in a number of important and essential infrastructure sectors. According to the Minister of Planning and Investment Nguyen Chi Dung, the development and promulgation of the Law on PPP investment is to create a strong legal corridor to ensure that all parties properly implement contractual obligations for long-term stability during a PPP project. This provision is also a joint statement, showing the State's commitment to the legal aspect of domestic and foreign investors, creating peace of mind for investors when participating with the State to invest in PPP projects. From this perspective, many provisions of the PPP Law have been highly appreciated by investors.

Accordingly, in the field of investment, the PPP Law focuses on five essential areas of transport; power grids, power plants; irrigation, clean water supply, drainage, sewage and waste treatment; health, education - training; information technology infrastructure. Regarding the scale of investment, in order to concentrate resources, the PPP Law stipulates the implementation of PPP investment for the projects with e-commerce worth VND200 billion, except for projects in areas with socio-economic difficulties, special difficulty or in the field of health, education - training (from VND100 billion). This regulation is suitable for many localities and different investment fields to serve socio-economic development in difficult places, with great social significance and helping many beneficiaries when public investment resources are still limited.

Besides, different from previous regulations - PPP projects are classified according to the law of public investment, PPP Law stipulates the classification of projects associated with the authority to decide investment policies (National Assembly; Prime Minister; Ministers, heads of central agencies and provincial People's Councils).

Especially, the amplitude of increase and decrease of revenue is 25% (corresponding to the increase of revenue from 125% and above, and a revenue decrease of 75% or less). This mechanism aims to minimize risks for PPP projects, especially those caused by changes from the State. This is considered a new and very important mechanism.

In addition, the PPP Law clearly stipulates that the State Audit only audits the management and use of public finance, public assets and activities related to the management and use of public finance, public assets participating in the PPP project; conducts auditing when implementing the mechanism of sharing of the increase/decrease of revenue; and audits the entire value of the PPP project assets when transferred to the State. The law does not specify whether the content of an audit is on compliance, operation or finance. This is a content that has received high appreciation from the private investor community, including foreign private investors.

According to many experts, the PPP Law is to avoid "borrowing" the provisions of other laws during the application process, and at the same time, ensure a stable legal framework for long-term and high-risk PPP contracts. The law provides additional forms of support, incentives and investment guarantees from the State for PPP investors to increase the attractiveness of the project, as well as ensure the successful implementation of the project.

In fact, PPP investment is one investment type that has been implemented for many years, including BOT projects in transport infrastructure construction. Up to now, 336 PPP projects have contracts signed (of which 140 apply BOT contracts, 188 projects apply BT contracts and 8 projects apply other types of contracts). More than VND1.6 million billion has been mobilized to invest in developing the national infrastructure system. Vietnam is stepping up infrastructure development in the context of limited State budget resources, so the promulgation of the Law on PPP Investment is considered a boost to attract important capital sources from foreign investors.

In addition, the solutions in the Law can remove, to some extent, the bottlenecks in attracting private investment into the socio-economic infrastructure development of the economy. The law is expected to increase capital mobilization for the economy and stimulate domestic demand. And these are solutions that can have immediate impact on increasing the recovery rate of the economy after the Covid-19 pandemic.

By Ha Thu, Vietnam Business Forum