Strengthening Public-Private Partnerships

The infrastructure sector in Vietnam is still limited and lacks of synchronization. Moreover, although the needs to improve and upgrade the current situation are quite great, there are an insignificant number of private investors in this sector because the current legal framework is not attractive enough to investors and it does not create favourable conditions for transactions of PPP.

 

Report from Asian Development Outlook (ADO) pointed out that, so far, the level of private investment in the vital infrastructure still remains limited. Plus, PPP investment form, which is quite popular in Vietnam, is often very different from the international standards. Most PPP projects do not apply the competitive bidding mechanism.

 

Mr Tomoyuki Kimura, Asian Development Bank’s Country Director in Vietnam said: “Attracting private investment mainly through PPP mode will contribute to raising capital for the project, and also help Vietnam reach job knowledge and technology worldwide, improve efficiency and quality of public services. A solid legal framework for PPP can enhance the comprehensiveness and quality of public service".

 

In fact, the need for synchronisation of infrastructure is higher as the economy becomes blooming. In recent years, Vietnam has put ​​a great effort to improve the quality of infrastructure; however, it apparently does not catch up with the economic development. This delay has significantly affected the speed of economic development across the country.

 

Currently, the quality of infrastructure in Vietnam is lagging far behind most economies in the Southeast Asia. Accordingly, Vietnam needs about US$170 billion to invest in infrastructure such as electricity, water supply, and traffic in the period from 2011 to 2020. Capital sources from state budget and official development assistance are estimated to meet a half of the identified requirements.

 

Creating a level playing field for investment projects in the form of public - private partnership (PPP) will be the key factor to enhance the comprehension and the quality of public services. It means that the Government should strengthen the legal framework to attract private investors in infrastructure development and public services, helping people access the services easily with reasonable price.

 

To solve these difficulties as well as to promote the infrastructure renovation and upgrading in the future, the Government has decided to establish a National Steering Committee of the PPP chaired by one of deputy prime ministers. The Steering Committee serves to advise the Government, rather than approve PPP projects. The Ministry of Planning and Investment has set up a PPP office to coordinate PPP projects at central level.

 

In the year of 2013, the Government required the Ministry of Planning and Investment to make up a draft decree with the aim of improving the legal framework for PPP, modifying regulations related to the current PPP by a more favourable legal framework for users and managers. The draft decree is currently in the process of consultation with government agencies, development partners and private sector to propose more comprehensive management regulations. The decree is expected to approve at the end of 2014. Besides, the process of selecting investor will be modified in the new Bidding Law and take effects from July, 2014.

 

Financial feasibility of many infrastructure projects should be reinforced due to low service tariff (urban transport, wastewater treatment, sanitation and renewable energy, etc). In that case, the Government may consider solutions of the State to ensure the feasibility of finance for projects. 

 

Private investors have shown their great interest in the infrastructure projects. Creating a level playing field to attract capital will be an important stepping stone for the new development in the future. With the involvement of private investors, the supervision will be strengthened, thus, the quality of the work will be enhanced.

 

However, private investors still have many concerns when participating in this field because of transparency in the bidding process and advantages of state-owned enterprises in accessing to preferential capital resources, or directly getting direction from the State. A level playing field requires great efforts in the renovation of state-owned enterprises, including the strengthening of business management. Another important factor is to ensure clarity and consistency in policies with the participation of the private sector in the economy and investment in the form of PPP. The Government has to continue to resolve limitations that investors have to face when participating in PPP.