PPP projects set pulses racing

Hanoi’s beltway 4  illustration photo

The four public private partnership (PPP) projects are southern Bien Hoa-Dong Nai expressway, a Ho Chi Minh City elevated road, Song Hau 1 water plant and a section of Hanoi’s beltway 4.

These projects came from a list of 24 entries submitted by the ministries of Transport, Construction (MoC), Industry and Trade, Hanoi and Ho Chi Minh City people’s committees to get rolling under PPP form.

According to Ministry of Planning and Investment’s Foreign Investment Agency deputy head Dang Xuan Quang the selection was based on projects’ attraction and other important factors such as capital recouping, private sector’s capacity to tap technology advantages as well as their management and operational expertise as seen in prime ministerial Decision 71/2010/QD-TTg providing regulations on PPP project pilot implementation.

“These are just preliminary assessments. We are teaming with relevant state agencies to draw project records so as to render projects’ overall investment efficiency in a comparative correlation between PPP and state investments,” said Quang

Challenges lie on the fact that the state must work on analysing expenses and interests of existing alternative investment forms from the state and private equity investor angle, from there appraising PPP form’s investment efficiency, projects’ profitability, and drafting incentives to make PPP projects appealing to investors.

Besides, defining risk sharing models in each investment area should be flexible since private equity investors involve in each PPP project at different levels.

The experiences of South Korea, one of four nations with high ratio of PPP infrastructure projects in 2010, show that lack of professional expertise in drafting and assessment PPP projects, vague risk-sharing schemes, and non-transparent investment incentives were holding back PPP projects’ implementation in the period before 1999, according to France-based Organization for Economic Cooperation Development’s senior economist Celine Kauffmann.

Relative to one of the first four PPP pilot projects Song Hau 1 water plant MoC’s Construction Economics Department deputy head Tran Van Khoi expressed concern at water price and waste-water treatment charge setting vagueness.

“The project will lose its charm to investors if those factors are not made clear and  transparent for investors to draft their investment records,” said Khoi.

Khoi also suggested outlining suitable PPP models to each infrastructure field.

Quang voiced the need to hire professional international consultants in drafting PPP project proposals.

“Prestigious consultants will make projects more lucrative to investors,” said Quang adding that after these four pilot projects got prime ministerial approval their pre-feasibility reports should be given to reputed foreign consultants.