Reasonable risk allocation critical for PPP success: WB
Reasonable risk allocation critical for PPP success: WB
For public-private partnerships (PPPs) to be successful, they must be recognized as long-term ones, where both the public and private sectors need to share not only rewards but also risks, stated Ousmane Dione, World Bank country director for Vietnam, at an international workshop in HCMC today, March 27.
The HCMC People’s Committee, in collaboration with the WB in Vietnam, held the workshop on PPPs in the environment, water, health and education sectors in the city. The event was aimed at discussing measures to use the State budget effectively as well as strategies to mobilize more private funds into infrastructure and service development in these selected sectors.
The city’s chairman, Nguyen Thanh Phong, remarked in his opening speech that PPPs have become increasingly popular in almost all aspects of life. The investment format is the most stable in terms of capital mobilization and can help save the State budget, reduce the pressure of public debts, develop infrastructure and create a competitive environment among economic stakeholders.
Phong noted that while PPP is regarded as one of the most effective solutions to address the capital shortage among infrastructure and service projects, the number of PPP projects has accounted for only 5% of the city’s public investment projects. Still, capital provided by the private sector has trebled the total medium-term public investment for the 2016-2020 period.
Despite some achievements, there remain many challenges and obstacles that need to be resolved to enhance the effectiveness of PPP projects. Also, the legal framework needs to be adjusted in a more appropriate manner, according to the city chairman.
“HCMC expects enterprises and international organizations to persevere with investment cooperation and put their faith in the city’s reforms,” he said, adding that 2019 has been chosen as a year of breakthroughs for administrative reforms and the improved execution of a National Assembly resolution on piloting a special mechanism to bolster the city’s development.
The move is meant to boost competitiveness, attract investment and bring about substantial changes to cut down on red tape for local residents and businesses. He stressed that the city government was committed to creating the most conducive conditions for investors who wish to conduct business there over the long term.
Addressing the workshop, Dione of the World Bank stated that HCMC is a rapidly urbanizing mega-city and an emerging economic powerhouse in the Southeast Asian region, being counted among the country’s most attractive destinations for foreign direct investments. To maintain its economic competitiveness and meet the challenges stemming from an aging demographic, the city will require further investments in infrastructure, especially in areas such as transport, health, education and the environment.
“Like most cities across the world, public investment alone will not be sufficient to meet the large infrastructure and service delivery needs of HCMC,” he noted, underlining the need to increase the efficiency of its public investment and to work toward leveraging more from the private sector.
He stated that PPPs have proven to be a very successful framework, helping governments around the word such as Singapore, Indonesia, and Turkey provide the much-needed infrastructure to underpin future economic growth as well as provide broader social benefits.
However, he stressed, this does not mean PPPs are always successful in these countries or in all sectors. For PPPs to be successful, it is important for the public and private sectors to establish effective risk allocation strategies for their projects.
“As with any partnership, if the risks and rewards are not shared fairly, then it is very likely that the partnership will fail. PPPs must be a win-win exercise for all stakeholders,” he explained.
The legal, regulatory and institutional frameworks also need to be clear and robust to enable investors to accept risks over the longer term with some certainty provided by the framework within which these risks are being taken, according to the official.
He said the central Government has introduced several regulations over the years to promote private sector investment in infrastructure, service delivery, and equipment provision. However, despite some successes, notably in the transport and energy sectors, private sector investment is still relatively low.
To address various constraints in the execution of PPP projects, the Government is currently drafting a new PPP law, which will consolidate all the PPP related legislation under one law and provide a comprehensive and enabling regulatory framework to facilitate PPP projects.
