Transparency and Guarantee of Investors’ Interests Needed

11:44:42 AM | 12/16/2021

It is necessary to focus on protecting investors' interests and improving public transparency to draw private funds into infrastructure.

Publicity and transparency needed

Vietnam has 336 public–private partnership (PPP) contracts with a total investment value of VND1,600 trillion (US$71 billion), approximately equal to the total public investment in five years from 2015 to 2019, Dr. Vu Tien Loc, Chairman of the Vietnam International Arbitration Center (VIAC), said. However, recently, some projects have caused public outrage, including Cai Lay - Tien Giang BOT and Thu Thiem BT. Harsh public reaction is one of the reasons why the cash flow into PPP has been delayed for many years.

Mr. Loc said that one of the main reasons for public anger to PPP projects is that the government has not introduced an input mechanism for public opinion. Therefore, he suggested adding a provision on collecting public opinion before deciding and signing a PPP contract.

He proposed the drafting agency add information to be obligatorily disclosed, for example, publicity of PPP contracts and annexes except for contents specified as state secrets and intellectual property (this information will be redacted); publicity of project appraisal reports, publicity of project activity reports, and periodical disclosure of project output and revenue.

Specifically, the agency that submits or decides investment must collect public opinion by posting related information on its website at least 60 days before submitting it to competent authorities for making an investment decision.

If a project collects revenue directly from users, the submitter or the decision-maker must send a written consultation to affected subjects or their representative organizations. For example, a road project needs to consult transport firms, transport associations and impacted people. An airport project needs to consult aviation businesses.

Information provided for public opinion must include project fundamentals, benefits to users, fee/price, application time, pre-feasibility study report, feasibility study report and draft contract. Opinions on the project must be summarized, explained and sent to competent contract-signing entities or persons.

Guarantee of investor interests

He added that many investors have complained about the lack of respect for PPP contracts from governmental agencies, some of which requested investors against their contracts. In addition, some gave an excuse that they are not bound to their unsigned contracts.

“This causes a lot of trouble for investors because they take time to give explanations to governmental agencies about laws and contracts. More dangerously, this makes the investment environment for PPP projects in Vietnam very risky and difficult to attract investors,” said Loc.

Marking solutions, Mr. Loc suggested that the drafting agency supplement the regulation that governmental agencies and officials, whether they sign PPP contracts or not, must respect them and responsibly fulfil contractual commitments. He also added that it is necessary to protect investor interests, not only when laws are in effect but also when they are changed. This is of great concern for investors, given the changing context of Vietnamese laws.

The provision on investment guarantee is specified in Article 13 of the Law on Investment when laws are changed. However, this ruling is only defined as changes in legal documents on investment incentives. Meanwhile, PPP projects always require much higher stability in the investment environment.

For that reason, Mr. Loc proposed the drafting agency add a clause on investment guarantee in case of law changes, built on three principles: First, if new rules give higher benefits and incentives, investors can apply new legal documents; second, if new issues are detrimental to their legitimate interests, investors may apply the old rules (excluding laws on national defense, national security, social order and safety, social ethics, community health and environmental protection reasons); and third, if these exclusions are enforced, investors will be compensated. The investor must make a written request within 3 years from the effective date of the new legal document.

By Huong Giang, Vietnam Business Forum