PPP Investment in Health Sector Remains Rough

The Law on Public-Private Partnership (PPP) applying to the health sector is hindering private health investors.

Many shortcomings

Mr. Dau Anh Tuan, Deputy General Secretary of the Vietnam Chamber of Commerce and Industry (VCCI), said that the Law on PPP Investment took effect from January 1, 2021. However, so far very few PPP projects have been approved for investment. Some provisions in the Law on PPP Investment and its guiding documents have revealed inadequacies that make it difficult for authorities and investors to carry out PPP-invested infrastructure projects.

Currently, health socialization policy continues to be encouraged by the Party and the Government, but localities are applying and guiding legal regulations differently for investors to invest and build private hospitals, said Mr. Nguyen Tien Quan, General Secretary of the Vietnam Private Hospital Association, noting that some localities instruct investors to apply the Law on Investment and the Law on Bidding, while others apply the Law on Investment but do not use regulations in the law but in decrees instead. Some localities allow investors to apply the socialization policy on the construction of private hospitals, but they must be combined with the Land Law.

Since the PPP Law took effect, some localities have guided investors to apply and implement projects according to this law but they are confused about its enforcement.

Specifically, according to the Law on PPP, the investment scale in health projects cannot be less than VND100 billion. Nevertheless, according to Mr. Quan, in fact, the investment value for the same hospital project is different between that of an investor and that of a governmental agency.

Bidding for PPP projects proposed by investors should be abandoned

There is another problem. Besides PPP projects proposed by the governmental agency, the law stipulates that investors can propose PPP projects by themselves.

However, the biggest concern of investors is that, even if a project is proposed by an investor, an open bidding or competitive negotiation is required, he said. "This is the root of the painful problem of ‘fake bidders and real bidders’ in project bidding", he explained.

Therefore, Mr. Quan suggested that there should be specific regulations to protect genuine investors, even, if it is necessary, bidding for PPP projects proposed by investors should be annulled.

As for the revenue-sharing mechanism, the PPP Law stipulates: “When the actual revenue is above 125% of the revenue in the financial plan in the PPP project contract, the investor and the PPP project company will share 50% of the difference of the actual revenue with the 125% revenue level in the financial plan with the State.”

“When the actual revenue is less than 75% of the revenue in the financial plan in the PPP project contract, the State shares with the investor and the PPP project company 50% of the difference between the 75% of the revenue level in the financial plan with the actual revenue.”

This regulation is difficult to be applied to the health sector, he added, explaining that healthcare is a specific field and it requires businesses to spend all profits for reinvestment, upgrading, restoration and maintenance. So, they will have no profit to share with the State. If they stop investment after construction, hospitals will be quickly outdated and inefficient.

Furthermore, in health investment, the termination of a PPP project contract will lead to many consequences and significant influences on investors as well as difficulties for authorities to handle.

Source: Vietnam Business Forum