Public-private partnerships urged

Viet Nam’s era of economic renewal was launched by the 6th Party Congress in 1986, and the first Law on Foreign Investment was passed shortly thereafter in 1987. It was subsequently amended in 1990, 1992, 1996 and 2000, before the demands of globalisation required a more equitable investment environment for both foreign and domestic investors. In 2005, therefore, the National Assembly passed the unified Law on Investment which took effect on July 1, 2006.

Under the Law on Investment, investment procedures are simplified and made more uniform, which helps attract more foreign investment capital.

Regulations issued pursuant to the law include Government Decree No 78/2006/ND-CP of August 2006 on offshore investment; Decree No 108/2006/ND-CP of September 2006; Decree No 101/2006/ND-CP of September 2006 providing for the re-registration, transformation and registration for new investment certificates of foreign-invested enterprises under the provisions of the Enterprise Law and the Investment Law; Prime Minister’s Decision No 88/2009/QD-TTg of June 2009 promulgating the regulation on foreign investors’ contribution of capital to and purchase of shares in, Vietnamese enterprises; Decree No 108/2009/ND-CP of November 2009 on investment in the form of Build-Operate-Transfer (BOT), Build-Transfer-Operate (BTO) or Build-Transfer (BT) contracts; and Decision No 71/2010/QD-TTg of November 2010 promulgating the regulation on pilot investment in the public-private partnership form.

The latter two regulations are designed to work together to facilitate private investment in public infrastructure projects.

A BOT contract is a form of agreement signed between a competent State body and an investor in order to construct and commercially operate an infrastructure facility for a fixed duration, upon expiry of which the investor would, without compensation, transfer the facility to the State of Viet Nam.

Under a BTO contract, the facility is transferred to the State upon completion of construction, but the investor is granted the right to commercially operate the facility for a fixed period of time in order to recover invested capital and a return of investment. A BT contract, meanwhile, means the investor would return the project to the State upon the completion of construction, and the State would then create conditions for the investor to implement other projects in order to recover invested capital and a return on investment; or make a payment to the investor in accordance with an agreement in the BT contract.

The most important aspect of Decree No 108/2009/ND-CP is that it created a fully transparent legal framework for these projects, providing clearly for the sources of capital that would be used to implement projects. It has successfully encouraged the construction of new infrastructure facilities as well as efforts to improve or expand existing works such as roads, tunnels, railways, airports, seaports, and power plants, with BT projects were implemented the most successfully compared to other ones.

The Prime Minister issued Decision No 71/2010/QD-TTg last November, expanding on these approaches with the nation’s first regulation on public-private partnerships.

In addition, Decree No 24/2011/ND-CP amending a number of articles of the Decree No 108/2009/ND-CP of 2009 on investment in the form of BOT, BTO, BT contracts was issued on April 5 of this year, and took effect on May 20. This decree focuses on feasibility study reports of BOT and BTO projects, elaboration and approval of these reports; and widening the scope of encouraged investment domains.

Finally, a draft decree amending Decree No 108/2006/ND-CP of 2006 detailing and guiding the implementation of a number of articles of the Investment Law is undergoing a period of public comment before it is issued. It is expected to reform administrative procedures and better protect the legal rights and interests of investors.