Completing Legal framework for PPP Project Development

11:28:49 AM | 9/19/2019

Public-private partnership (PPP), characterized by private engagement, is considered one of the most effective ways to implement activities towards sustainable development and enhance competitiveness for Vietnam.

PPP application is also a significant success. According to statistics, Vietnam currently has 336 PPP projects, including 140 BOT (build - operate - transfer) projects, 188 BT (build - transfer) projects and eight projects of other investment forms. These projects raised about VND1,609,295 billion for national infrastructure development. In particular, many investment restructuring and management models from “public investment - public management” to “public leadership - private management”, “public investment - private management”, “private investment - public use”, are being successfully applied in some localities.

Seeking transparency and consistency

Dr. Vu Tien Loc, President of the Vietnam Chamber of Commerce and Industry (VCCI), said Vietnam needs a strong, stable legal framework to engage more private capital and impose the supervision of private investors and adapt to private governance methods to enhance public investment performance in the coming time.

He said that the legal corridor for PPP investment is still overlapping and inconsistent. For example, the current detailed regulations on PPP are just at the decree level, and a decree is governed by various laws such as the Law on State Budget, the Law on Investment, the Law on Public Investment, the Law on Environmental Protection, the Law on Enterprises, the Law on Land, the Law on Construction, and the Law on Public Debt Management.

However, these projects are just designed for public or private investment projects, not “dualistic” projects such as PPP, resulting in certain shortages. The legal framework on PPP at the decree level should not be contrary to those laws and the vitality of PPP is also killed. Laws that do not reflect the true nature of public-private partnerships lead to numerous difficulties and inadequacies of PPP project implementation, he analyzed.

Currently, PPP regulation in Vietnam is considered unreasonable, non-transparent and unstable by many investors. A PPP project contract usually lasts 20-30 years. Investors and lenders are only confident to pour funds into projects when laws are transparent, stable and consistent.

On the other hand, the legal framework lacks support and guarantee mechanisms, including supports, incentives and investment guarantees from the State, for PPP investors to increase the attractiveness of projects and ensure successful implementation.

Current regulations in Decree 63/CP specify State-contributed capital, which is considered a support tool for the construction phase to increase the feasibility of the project. However, in fact, except for important projects allowed by the National Assembly for application of a separate mechanism, no PPP project has accessed this sort of funding in the medium-term public investment plan because of limited public investment fund and procedures, and capital arrangement processes remaining unreasonable and unsuitable for PPP projects. In addition, while carrying out foreign investment attraction projects, international organizations and some investors complained about the absence of assurance and guarantee tools in current PPP policies.

Mr. Dau Anh Tuan, Director of VCCI Legal Department, said PPP projects are socially divided, even prejudiced. Few people see good points of this mode of investment.

In addition to foreign currency and revenue risks, policy risks are also very substantial. Among concerns is the scope of application and the order of PPP project implementation, guaranteeing the publicity and transparency of investor selection and project operation, especially government guarantees like the guarantee of foreign currency balance, and revenue-sharing mechanism for the government and investors.

Mr. Doan Giang, International PPP Expert at the United States Agency for International Development (USAID), affirmed that the legal framework is currently fragmented, and laws are still binding and obstructing PPP.

Proposals on PPP Law enactment

Many experts affirmed that priority should be given to promulgating the PPP Law and researching new PPP models such as BTL model (Build - Transfer - Leasing), and the State needs a risk sharing mechanism with investors. For example, when an investor invests in a road, underestimated users will lead to loss and then the State needs a risk-sharing and cost-sharing mechanism with investors.

Dr. Vu Tien Loc said, “To foster PPP, we propose the National Assembly issue the PPP Law and strengthen institutions to promote and develop PPP markets, and establish a national PPP development fund. That is what we need and must do soon. The Public-Private Partnership Committee asks the Prime Minister and national committees for specific action plans in this direction.”

“Apart from unsuccessful PPP lessons, we also have good PPP practices nationwide, ‘public ownership - private management’, ‘private investment - public use’, and outsource leasing in some localities and ministries. We also suggest prompt study of strategies for promoting the development of selective key economic sectors to apply public-private partnership methods in investment research and development to support and foster the private sector in Vietnam, towards the autonomy and sustainable development of the country in the new context,” Dr. Vu Tien Loc said.

Huong Ly