Private investors need a transparent legal environment
The capital needed to upgrade the country’s infrastructure is estimated to account for 10-11 percent of GDP during the 2009-2020 period and this required other economic sectors to get involved in the field.
Over the past two years the public-private partnership (PPP) model has taken shape and proved efficient in many large and important projects such as Phu My thermal power plant 2 project, Cau Co May build-operate-transfer (BOT) project in southern Ba Ria-Vung Tau province and An Suong-An Lac upgrading project on National Highway No.1 in Ho Chi Minh City.
However, Dang Huy Dong, Deputy Minister of Planning and Investment, says, the model has only been used in pilot projects.
“We need to do it the right way so that it can become popular with the public. The projects should be accepted widely by the government agencies, the public, financial institutes and the domestic and foreign private sectors. They need to find it good enough to engage with it. Vietnam desperately needs have a more complete legal framework to attract more foreign investment,” he Dong says.
PPP is a model for mutually beneficial partnership between the state and the private sector, showing the equality for mutual benefits. Therefore the duties and responsibilities of both parties must be made clear in terms of both benefits and risks for the investors. There must be a list of projects which need the assistance from the private sector.
Pham Sy Lien, Deputy Head of the Vietnam Construction Association, agrees that cooperation between the state and the private sector in developing the country’s infrastructure should be specified in the policy. When a project does not need state involvement, it should be left to the private sector. When a project needs the state’s support as a guarantor for the initial capital, this can be achieved through the PPP model. Most importantly, the project must prove feasible enough to attract private investors.
“Banks are reluctant to grant loans for investments in the country’s infrastructure as they do not make large profits. The private investor can only provide 30 percent of the total capital. They must borrow the rest from banks. The government should acted as a guarantor if the project cannot attract the private sector, the state must do it anyway. The state must share the risks with the private sector,” Lien says.
Kamran Khan, an Infrastructure Finance Advisor for the World Bank, says that the biggest difficulty when choosing a contractor is that private investors in Vietnam and other countries are not capable of taking on such large projects while many state contractors can. This snag in providing opportunities for private investors must be ironed out in a fair and reasonable way.
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