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Private businesses encouraged to invest in infrastructure projects
The Vietnamese Government encourages all economic sectors to invest in infrastructure construction projects. However, many private businesses hesitate to invest in these projects due to high risks and hurdles in the legal system.
Deputy Minister of Planning and Investment Truong Van Doan says Vietnam has so far relied on the State budget and official development assistance capital (ODA) to develop infrastructure projects. Yet, these two capital sources cannot meet the increasing demand for such projects, including roads, seaports and airports, in the coming years. Therefore, infrastructure development needs a helping hand from private businesses.
“It is necessary to increase the private economic sector’s awareness and, at the same time, develop a legal framework in line with international norms and practices to help the sector work closely with the State,” says Mr Doan.
The Public Private Partnership (PPP) - a popular model in the world - has been applied in Vietnam for a long time. Many State- and foreign-invested PPP projects have been carried out in the country.
“Several PPP projects to build hydro-electric power plants and infrastructure facilities have proved effective, bringing about many socio-economic benefits to community,” says Dang Huy Dong, head of the bidding management department under the Ministry of Planning and Investment (MPI). “To develop this model, the Government should create good conditions for private businesses to invest in projects beneficial to society.”
According to the MPI, Vietnam needs at least US$25 billion every year to invest in infrastructure projects. However, domestic and foreign capital resources only meet 50-60 percent of the demand.
To date, 80 PPP projects capitalised at US$5.5 billion have been implemented in Vietnam in the form of Build-Operate-Transfer (BOT) and Build-Transfer (BT). Transport projects alone make up 95 percent of the total capital.
Under the PPP model, the Government will negotiate with investors to provide the best services at the lowest prices for the people. Meanwhile, investors want to offer services at high prices to bring in the highest profit. The crux of the matter is to seek a common voice between the State and private investors.
Pham The Minh, Vice President of the Vietnam General Construction Association, says many investors do not want to pour their money into PPP projects, as Vietnam has not developed a legal framework for these projects yet and administrative procedures remain cumbersome.
“The fact is that we lack seaports but the State asks foreign businesses to establish joint venture companies with domestic partners. This prevents foreign businesses from investing in PPP projects since investing in other areas is much simpler,” says Mr Minh.
Dang Huy Dong, head of the Bidding Management Department, explains, “If we satisfy investors’ demands, we will face losses at some time in the future and the quality of services will not be as good as expected.”
The Government issued Decree 78 in 2007 governing investments in the form of Build-Operate-Transfer (BOT). However, several provisions of the decree fail to keep pace with the development of the national economy.
“We will revise the decree to make it more adaptable to new changes,” says Mr Dong.
Many experts suggest that Vietnam seek an appropriate PPP model instead of copying it from other countries. In addition, it is important to take into account the capabilities of concerned parties, including investors, consultants, managers and appraisers.
Ben Darche, an international PPP consultant, says that in India, the Government supports 40 percent of capital for PPP projects, while in the Republic of Korea, the Government covers land clearance and compensation to support investors.
VOV
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