Vietnam building up legal framework for competitive PPP market

Vietnam has every reason to believe that just in the next 3-4 years or less, Vietnam will have a real PPP market, first in the power sector, and then in the water and road sectors.

PPP, or public-private partnership, involves a contract between a public sector authority and a private party, in which the private party provides a public service or project and assumes substantial financial, technical and operational risk in the project.

If there are two projects, one of them shows the better capability to collect fees to take back the investment capital, while the other project is located in remote area, which project will be prioritized for private investors?

The question was raised by Dang Huy Dong, Deputy Minister of Planning and Investment, who is in charge of compiling the legal framework for the implementation of the PPP model in Vietnam.

Dong was so glad when hearing the answer from relevant ministries and branches that the more favorable project will be given to private investors.

The agreement reached among Truong Tan Vien, Deputy Minister of Transport and Pham Hung, Deputy Director of the Energy Department of the Ministry of Industry and Trade on the issue is the reason that has urged Dong, once again, to send a message to private investors that the Government of Vietnam always attaches much importance to and encourages the capital investment from the private sector, both domestic and foreign, in the field of infrastructure development and public services.

“I can say for sure that the Government will prioritize giving favorable projects to private investors,” Dong said. “We need to encourage the participation of private investors and we need to be sure that the projects are feasible”.

Dong went on to say that this is one of the core factors which need to be clarified to build up a competitive PPP market in Vietnam. However, at this moment, PPP is still in the trial basis.

Dong, when talking with the local press, said that in just 3-4 years, or even two years, Vietnam would have a real PPP market. The PPP mode would be implemented in the power sector first, and then in the water and road sectors. “However, in order to do that, conditions must be good: all the systems must not have barriers, while the government, ministries and branches, and local authorities need to have strong determination,” Dong said.

Affirming that Vietnam’s PPP market has great potentials to develop, while the interests of investors in the mode of investment are very big, Dong said that the key to the success of PPP projects is the transparency.

“I know some BOT (build – operation – transfer) projects only saw the negotiation process ending after four years. The too long process proves to be unacceptable for foreign investors,” Dong said.

Sharing the same view with Dong, other experts agree that with PPP projects, the transparency must be considered the top priority.

“Private domestic and international investors must see clearly the investment opportunities and the profits from projects. Meanwhile, the administration procedures must be simple,” said Simon Andrew from the International Finance Corporation IFC. He also said that it is necessary to publish the information about PPP projects on official websites, so that investors and the Government can easily keep watch over the projects.

Philip C. Erquiaga from Asian Development Bank (ADB), said that one of the most important thing in the PPP development is choosing the priority orientations and successfully building pilot projects.

In fact, Vietnam has begun implementing PPP with some pilot projects. Right after the government released the Decision No 71 on implementing the investments under the PPP mode in the trial basis, the Ministry of Planning and Investment has kicked off the plan to build a commercial PPP market by asking ministries and localities to register the projects to be implemented under PPP mode.

However, though the document was sent in November 2011, there has been no reply. – DTCK

Tags: Vietnam Infrastructure, Vietnam PPP