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Infrastructure draws private investment
Efforts to raise more capital from the private sector for infrastructure development projects were on the right track, according to the Ministry of Planning and Investment.
From now to 2020, Viet Nam will need US$160 billion to develop its economic and technical infrastructure, including transport systems, bridges, power plants, water supply networks and waste treatment plants.
Meanwhile, traditional capital sources such as the State budget, Government bonds and development assistance from foreign governments only help satisfy half of the demand. This means that more than 50 per cent of investment must be mobilised from domestic and foreign enterprises.
Deputy minister of Planning and Investment Dang Huy Dong said investment co-operation between the State and the private sector was crucial in ensuring growth during the next decade.
"During the next 10 years we must focus investment on infrastructure, especially transport, power, water systems and the environment, if we want to reach a growth rate of 7 to 8 per cent," said Dong.
The National Assembly and the Government have issued many legal documents such as the Law on Investment, Bidding Law, Construction Law and Land Law as well as Decree No.78/2007/ND-CP and Decree No.108/2009/ND-CP, which regulate investment models including BTO (Build-Transfer-Operate), BT (Build-Transfer) and BOT (Build-Operate-Transfer) to create a clear legal framework for investors.
Director of the Centre for Procurement Support Vu Quynh Le said that so far, there had been 110 projects invested under the BOT, BT and BTO models.
Economist Nguyen Minh Phong from the Ha Noi Socio-economic Research and Development Institute said a limited State budget required the Government to call for investment from the private sector, a common trend in many countries around the world.
Private investment would help improve the quality of infrastructure projects, Phong said.
According to the World Bank's report on investment in infrastructure in Viet Nam, in recent years, capital from the private sector accounted for only 20 per cent of the total investment in infrastructure.
Foreign enterprises were still hesitating in investing in the field due to concerns over investment efficiency, interest return ratios and capital guarantees.
Pham Sy Liem, Deputy Chairman of the Viet Nam Federation of Civil Engineering Associations, said many BTO, BT and BOT projects had not proved efficient and thus could not win the confidence and attention of investors.
Liem attributed the problem to inconsistent regulations on construction and investment management, as well as the tardiness of capital allocation, complicated administration procedures and price fluctuations.
Land clearance was often the most difficult problem facing investors as it was very time-consuming and costly, he added.
Ineffective projects
Dong said the lack of transparency in bidding procedures had made such projects ineffective.
In such circumstances, the Public-Private Partnership (PPP) model is considered an effective alternative solution for BTO, BT or BOT.
Under the model, the Government will list some priority projects calling for private investment and open bids to select competent and experienced foreign or domestic contractors.
According to the Bidding Management Department, for PPP projects the State will contribute 30 per cent of capital, while the rest will come from private enterprises, who can get loan of up to 49 per cent of the capital.
Dong said the new PPP model had been applied efficiently in many countries. It was defined with clearer procedures and responsibilities regulated for each side.
Under Prime Ministerial Decision No.71/2010/QD-TTg on regulations to govern pilot investment under the private-public partnership model, the model will be applied in two or three pilot projects so that agencies can draw lessons and complete legal framework in the area.
Economist Phong said it was important to have a law on public investment to ensure PPP projects do not get bogged down with the same old problems that have been discouraging investors for years.
It was necessary to have specific sanctions for violations to ensure the efficiency of co-operation between the State and the private sector and the durability of the projects, said Phong.
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