Vietnam struggling to secure new PPP contracts since 2021

The government is now focused on addressing the underlying factors contributing to this decline and revitalising the sector.

On July 11, a seminar titled Promoting PPP investments for the development of socioeconomic sectors in Vietnam took place, signalling the government's commitment to enhancing collaboration between the public and private sectors.

During the seminar, Duong Ba Duc, head of the Investment Department at Vietnam's Ministry of Finance (MoF), shared valuable insights into the performance of PPP investments in the country.

The data reveals that the period from 2010 to 2014 witnessed a surge in signed PPP projects. They were predominantly within the transportation sector, with a focus on the build-operate-transfer (BOT) and build-transfer models.

However, from 2015 to 2020, the landscape shifted as efforts concentrated on addressing stalled electricity-related BOT projects and resolving issues within existing PPP contracts.

Since the implementation of the PPP Law in 2021, the number of new contracts has dwindled, although three transportation-related BOT projects were carried over from the previous period.

Additionally, eight new projects, consisting of seven transportation initiatives and one build-transfer-lease project in the water sector, are currently in the preparatory investment stage.

The relatively low number of new projects has raised questions about the underlying factors contributing to the decline in these investments since 2015.

“Are these challenges attributable to legal frameworks, implementation processes, or other unforeseen circumstances?,” Duc questioned.

Tasked with identifying these obstacles and proposing necessary amendments and revisions, the MoF is set to submit a comprehensive report on Decree No.28/2021/ND-CP to Prime Minister Pham Minh Chinh in the third quarter of 2023.

Following an extensive review, which encompassed feedback from various stakeholders such as ministries, local authorities, investors, and relevant organisations, the MoF has identified the key issues that demand attention and resolution.

One significant obstacle lies within the PPP Law, falling under the jurisdiction of the National Assembly, which necessitates amendment and supplementation. Some argue that the provision limiting state capital participation in PPP projects to a maximum of 50 per cent of the total investment (Article 69 of the PPP Law) is unsuitable.

Suggestions have been put forward to remove or increase this limit, potentially allowing for up to 70 per cent of the total investment.

While ongoing discussions on law and regulation revisions are underway, strict criteria governing the allowance of state capital exceeding half of the total investment is crucial for the efficient utilisation of public funds, as emphasised by Duc.

Another challenge lies within revenue sharing reduction. The MoF asserts that the provision enabling the use of reserve budget funds to address revenue-sharing reduction, as stipulated in Article 83(3) of the PPP Law, is incongruent with state budget laws and does not fully align with the intended purpose of reserve budget usage.

To address this concern, the Investment Department proposes exploring amendments to allocate a specific budget line item within medium-term public investment plans.

Furthermore, additional suggestions advocate for sharing reduced revenue with PPP investors or enterprises when actual revenue falls below 75 per cent of the figure stated in the contract without resorting to price adjustments or contract term modifications, as currently outlined in the PPP Law.

Supplementary regulations outlining the state's responsibilities when it fails to allocate sufficient funds for payments to investors are also being called for. Moreover, there is a proposal to consider independent auditing to assess the proposed revenue-sharing value, rather than solely relying on state audits as mandated by the current law.

Duc highlighted that these concerns primarily fall within the remit of the National Assembly, as they involve provisions within the PPP Law. Acknowledging these issues, the MoF plans to collaborate with the Ministry of Planning and Investment, relevant ministries, and agencies to compile a comprehensive report for further consideration and decision-making.

As Vietnam strives to draw more private investment through the PPP model, addressing these obstacles and implementing effective reforms are essential for creating an attractive investment environment.

The government's commitment to reviewing and refining the PPP framework underscores its dedication to fostering sustainable and mutually beneficial partnerships with both domestic and international investors.

By creating an enabling environment that ensures the efficient utilisation of public funds and promotes transparency and fairness, Vietnam aims to enhance its appeal as a sought-after investment destination.

Vow made to bridge PPP investment gaps The government has ordered an overall review on policies involving public-private partnership in a bid to woo more private investment.

PPP model needs more balancing, equality for private investors Vietnam's increased demand for infrastructure development in the coming years requires governmental policies that encourage the private sector's participation, said economists and policymakers.

Promoting PPP in economic and social infrastructure The Party Central Committee's Economic Commission in collaboration with the Central Theoretical Council of the Communist Party of Vietnam and the Asian Development Bank (ADB) organised the workshop on promoting PPP in economic and social infrastructure in Vietnam, on July 11.