Investors slow to partner State
Investors slow to partner State
When looking at Decision 71 on regulations for pilot investment under the form of Public-Private Partnerships in Viet Nam, investors found it difficult to join, said the United Kingdom's PPP Solutions Limited director, David Wright.
At a workshop on sharing experiences in PPP development and design of financial mechanisms in Viet Nam held yesterday by the Finance Ministry and British Embassy, he said that the country needed to draft and pass PPP laws and rules in accordance with international practices as soon as possible.
To ensure PPP work in Viet Nam, besides political and senior official commitment, the Government needed effective legal and institutional structures, he said.
In Decision 71, the PPP Unit under the Ministry of Planning and Investment (MPI) receives PPP project proposals from localities and feasibility study reports, and recommends those suitable for Government approval.
Project preparation was not only the responsibility of the MPI but also various State ministries and agencies, he said, urging the need to simplify the process and delegate decisions to appropriate levels.
Moreover, effective and efficient funding and financing mechanisms were needed because any PPP contractor, mostly in infrastructure projects, wanted to get enough money back from service users and the Government to recover costs, repay loans and make a return on their investments.
But Decision 71 said that State contributions should not exceed 30 per cent of project values unless there are exceptional cases. The private sector must comprise equity capital accounting for 21 per cent of project value and loan capital accounting for 49 per cent of project value, but the Government would not guarantee bank loans.
Wright said that only a very small number of projects would require less that 30 per cent of State support to make them commercially viable, therefore, the regulation would only address a small proportion of the infrastructure gap.
Deputy Finance Minister Tran Xuan Ha said that pilot PPP project implementation showed insufficient contributions from the State and the private sector, and a lack of co-ordination between the two. He also confirmed the key role of PPP projects, especially in the private sector, to develop infrastructure over the next ten years.
MPI's Foreign Investment Department deputy head Dang Xuan Quang said that the ministry had upgraded the inter-ministerial PPP Unit to a PPP Office that would play an administrative role to develop PPP projects.
He also suggested PPP support funds including one so-called Viability Gap Fund (VGF) that would offer loans for projects with partial credit from commercial banks. State contributions in the form of capital, tax incentives and fee policies would ensure projects were viable, he said.
Director of the Ha Noi Investment Development Fund To Thi Hanh said that regulations on PPP projects were far too general, confusing agencies and investors.
" Investor equity accounting for 21 per cent of a project's value is too much, so it's difficult to find investment," she said, adding that they were also struggling to access bank loans with competitive interest rates that would last the duration of the projects.
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