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Economic Sector

Last updated: Wednesday, December 13, 2017

 

Seeking Private Capital Flows into PPP Infrastructure Projects: Project Standards Should Be Developed

Posted: Wednesday, November 29, 2017


According to the Asian Development Bank (ADB), in order to improve infrastructure to meet the national economic development needs from now to 2030, Vietnam needs a capital source of up to US$480 billion. State budget and public resources only meet about 30 percent, the remaining 70 percent must be mobilised from the private sector, ODA as well as other sources of investment. Therefore, PPP should be considered the most effective solution to the problem.

Great demand, limited public resources
According to estimates by the Ministry of Planning and Investment, the demand for planning and investment in infrastructure development in Vietnam from now to 2030 is quite large, about VND3,000 trillion, excluding high speed railway, waterway.

At the same time, the balance of State budget approved by the National Assembly in the medium term investment plan up to 2020 is about VND150 trillion, which does not meet the total demand. Therefore, the issue of mobilising non-State resources in various forms on the basis of strengthening the socialisation of infrastructure investment projects is the biggest solution drawing government attention in the coming period.

Assessing the status of the implementation of PPP projects for infrastructure development in past years, Deputy Minister Nguyen Van Hieu of Planning and Investment said that the implementation of policies in search and deployment of PPP projects in Vietnam still has many difficulties and challenges. "The characteristics of the PPP model in Vietnam are mainly expressed in the form of BOT contracts, focusing on roads and power plants. Major projects are implemented according to the proposal of the investor. Vietnam has limited ability in selecting investors, with limited capacity of domestic investors.

Standards should be set
Vietnam's goal of raising two thirds of non-State capital for infrastructure investment is an opportunity for investors but not a "free opportunity," said Alex Wong, Head, Global Challenge Partnerships & Member of the Executive Committee, World Economic Forum.

According to the WEF expert, for the private sector, these are shared responsibilities and a core ground for providing hints of infrastructure ties with the government. This should be a fair, shared, responsible and sympathetic relationship between the State and the investor in an investment project of this type. In addition, there are other issues that greatly influence the life cycle of an infrastructure project from the time the project is designed to the project's life cycle, such as risk mitigation, appropriate institution, environmental impact that the Government and investors need to identify in order to jointly expose private capital to PPP projects.

Considered a very big market for PPP projects, a good investment opportunity for both domestic and foreign enterprises, Vietnam will face more difficulty realising this goal due to the impact of the global industrial revolution 4.0.

In order to attract capital into projects and create a good opportunity to break away from the middle income trap, Vietnam needs to have its own ways and adjustments to meet the demand of capital from private resources for PPP projects. It is important to develop a PPP programme evaluation approach that is tailored to the specific requirements of the project preparation phase, pre-feasibility study, risk allocation, and favourable environmental design," said Justin Wood, Head of Asia Pacific at the World Economic Forum.

Nguyen Thanh








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