Australia supports Economic Reform in Vietnam (Aus4Reform)
PPP draft: Balancing benefits between parties
PPP draft: Balancing benefits between parties
The difficult problem of Draft PPP Investment Law that is agreements and risk allocation principles in both the State and investors ...
The draft is complicated and difficult
Public-private partnership (PPP) investment has been identified as a very necessary and appropriate model for Vietnam. For many years, the Government has called for investment in this form. But in reality, PPP has not attracted for foreign private investment. Only 336 PPP projects have been implemented so far, including 140 BOT projects, 188 BT projects and other projects.
The reason why private investors are not interested in this form because the legal framework is not adequate and inappropriate. Currently, the legal regulations for PPP are just at the Decree level, so it does not guarantee the highest legal framework to regulate PPP-related activities. Meanwhile, PPP projects have large capital scale and long investment period and they need a legal framework to ensure stability for the projects.
|Public-private partnership is an effective solution for infrastructure development in the context of limited budget resources|
The draft law on PPP has been submitted to the Economic Committee of the National Assembly for verification, but there are still many opinions because as the National Assembly deputies said "this is a complicated and difficult law". This draft is based on inheriting the previous regulations to implement PPP projects such as Decree 108/2009 / ND-CP and Decree.
According to foreign investors, PPP is the mode of project implementation, in which private enterprises benefit from investment, construction, maintenance and operation of public infrastructure; while the Government reduces taxes and gives partly financial support. But “in order to promote investment in PPP, investors need to be allowed to have different options to raise investment capital. However, at present, "strict regulations have become an obstacle for investment", said Mr. Ryu Hang Ha - Chairman of Korea Business Association in Vietnam (Kocham).
In addition, the most important point is the "government guarantee" in sharing risks with investors. "The completion of the legal basis for recognizing the various methods of capital mobilization of private enterprises and" government guarantee "to minimize risks of investors who are able to help PPP project in infrastructure field will be carried out more actively, ”Mr. Ryu Hang Ha emphasized.
Many foreign investors and sponsors also said that "the most important thing is the reasonable balance of risks". Mr. Kenneth Atkinson - Chairman of UK Business Association in Vietnam said: Foreign sponsors need to ensure certain effectiveness in project implementation and receive appropriate benefits to avoid unexpected risks. Besides, the issue of the balance of risks varies by project and depends on the circumstances, and according to foreign enterprises' representatives, it is "not easy to build to law".
Investors have money, technology, and their own concerns
In order to contribute to the Government to finalize this difficult draft soon, within the framework of the "Australia supports Vietnam's economic reform" (Aus4Reform) program, the National Assembly's Economic Commission in collaboration with the Ministry of Planning and Investment - the agency in charge of the Draft Law is held a seminar to exchange expert opinions on some key contents of the Law project. At this seminar, the risk-sharing mechanism is of particular interest to foreign experts.
“Investors have money, technology and they have their own concerns. How do they care about project guarantee? When violating the contract, how to handle it? ”, Ms. Lynn Tho - International expert about PPP of Singapore EY Company said.
The difficult problem of the PPP draft is risk sharing but it must also balance risks and ensure the interests of both the State and investors. According to Ms. Lynn Tho, the support of the Government with PPP is very important. This is the story of many countries, not just Vietnam. Accordingly, it is necessary to make investors feel safe and protected.
“There are projects where there is a demand risk that makes investors and sponsors always worry. PPP projects usually last 20 - 25 years, it is difficult to predict what happens in such a long time, so the Government should think about supporting the cash flow for the project, ”she shared.
Sharing the same view, Mr. Sanjay Grover - ADB's international expert also said that the rights of investors must be guaranteed, otherwise there will be no investors participating in PPP projects, especially foreign investors. “The government's risk-sharing mechanism with PPP is very important for Vietnam to attract private investment, especially foreign capital flows. The government should spend much, but it is still cheaper than taking all the risks, "the expert recommends.
On behalf of the drafting board, Deputy Minister of Planning and Investment Nguyen Duc Trung also realized that risk sharing is a really necessary mechanism to attract PPP projects. Therefore, the PPP draft will provide guarantee mechanisms such as foreign currency conversion mechanism, risk-sharing mechanism ... to attract investors.
“PPP project is essentially a public investment project but due to limited resources, so we call on private investors to implement and in all projects, the Government is involved to ensure the effective implementation of projects, "Deputy Minister Trung said.
As planned, the PPP Law Project is being submitted to the National Assembly, which is scheduled for discussion at its 8th meeting (October 2019) in the upcoming October and approval at the 9th meeting in May 2020.