Draft PPP law proposes minimum investment, risk-sharing mechanism

Legal plans to help promote more public private partnerships (PPP) in Viet Nam have been submitted to the National Assembly for approval.

 

Minister of Planning and Investment Nguyen Chi Dung said only when a concrete legal framework is in place, more private companies will invest in State-owned projects.

The draft law, consisting of 11 chapters with 102 articles, supplements a number of policies to the existing Decree No 63/2018/ND-CP on PPP investment.

It is designed to eliminate the areas that are not realistically suitable for PPP or have been implemented in PPP format but are not effective and unattractive to private sector.

With regard to the scale, the Government reported two options for the National Assembly to consider in order to draw financially capable investors for key infrastructure projects and limit spreading investment.

First, the minimum scale of the projects will be stipulated in the law and the Government will specify details for each field (but not lower than VND200 billion, or US$8.6 million, except for operation and maintenance projects).

Second, the law will not stipulate the minimum scale and assign Government to specify the number for each field, which can be adjusted to the country’s socio-economic development periods.

Unlike public investment projects, partnership schemes are often complex and risky, which requires long-term commitments from investors. The draft law proposes setting up an appraisal council to further investigate each plan.

PPP projects are divided in three groups, including user-pays (Build-Operate-Transfer, Build-Transfer-Operation, Build-Own-Operate and Operation-Maintenance), government-pays (Building-Transfer-Leasing, Building-Leasing-Transfer) and resources exchange for infrastructure (Building-Transfer).

The Government also proposes setting up a development fund and a separate budget to deal especially with these projects.

Enterprises will be allowed to issue corporate bonds to raise capital for the project but not issue public shares.

To ensure the feasibility, the draft law also establishes a mechanism to ensure foreign currency balance with a limit of 30 per cent of the project’s revenue in Vietnamese dong after subtracting the expenses in Vietnamese dong.

In addition, a mechanism of risk sharing between the Government and investors will also be set up, including adjusting prices, fees or contractual terms but does not exceed 50 per cent of the deficit between actual revenue and contracted revenue.

Vu Hong Thanh, chairman of the National Assembly Committee for Economic Affairs, agreed with the need to enact the law but said it still needs further research and thorough review.

The establishment of appraisal council for PPP project was necessary, Thanh said, but he also emphasised the efficiency, professionalism and simple administrative procedures to save time and money.

For investor selection, Thanh said it must be done through competitive bidding, publicity, transparency, minimising the bidder’s appointment (preferred bidder) or restricted bidding.

In the discussion with the PPP law team on Monday, Prime Minister Nguyen Xuan Phuc also emphasise the importance of the law, saying investors believe it will protect their interest and when in place, they will invest.

He said to entice investors, the law should ensure both sides must have economic benefits; procedures should be fast, simple, transparent and objective.

The message from the Government’s leader is that all areas could be open for private investment, except for the fields that the State must take control such as currency, defence and national security.

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