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State support at last
For almost two decades, there have been only 100 BOT (Build-operate-transfer), BTO (Build-transfer-operate) and BT (Build-transfer) projects or so in Vietnam, owing to the absence of a legal framework. Will there be any change when the country’s pilot PPP (Public-private partnerships) regulation takes effect?
Dau Thau (Bidding) newspaper, which releases five issues a week, is the only media outlet in Vietnam that the Prime Minister has tasked with unveiling the list of PPPs. Its editorial board wants to run more articles on such projects, which fascinate many private investors. However, this seems to be an uphill task as not every four-page issue manages to include a write-up on PPP. Dang Huy Dong, former editor-in-chief of this newspaper, is currently the deputy minister of planning and investment in charge of Vietnam’s pilot PPP scheme.
Thus seen, the State remains reluctant to join forces with private investors despite Vietnam’s pressing infrastructure concerns. Although the Prime Minister already signed Decision 71 on regulations for PPP about six months ago, few changes have taken place. It is therefore encouraging that Dong and his colleagues are determined to give PPPs more publicity over the next three years to raise awareness and generate consensus on this scheme.
For nearly two decades, owing to the lack of a legal framework, there have been only 100 projects, foreign-invested or otherwise, under the form of BOT, BTO and BT. The Ministry of Planning and Investment contends that this figure is indicative of the Government’s limited success in luring private investors to the realm of infrastructure development. More worrisome, however, is that 80% of large-scale BOT and BT transport projects have been acquired by the Government, says Nguyen Ngoc Long, standing vice chairman of the Vietnam Bridge and Road Association. He cites, as an example, Binh Trieu Bridge BOT project, which is swallowing funds from the State’s budget.
Given the lack of private investors, the Government must pour in its own financial resources and still fail to eradicate infrastructure bottlenecks. At present, Vietnam’s transport systems are perennially overloaded and trail behind development needs. Vo Hong Phuc, minister of planning and investment, is clearly aware of these problems and identifies the safety threshold for public debt (50% of GDP, as set by the National Assembly), dwindling official development assistance, and constraints facing the State’s coffers as impediments to the implementation of megaprojects worth US$150-160 billion. He admits that the Government can only quench about 50% of the capital thirst haunting these projects.
Phuc says that bilateral and multilateral donors, as well as local and foreign investors, have pinned much hope on a legal corridor for PPPs. In practice, various consultative meetings have been held with foreign partners, such as the World Bank (WB), the Asian Development Bank (ADB), Japan, the U.S., the UK., China, Korea and so on, to pave the way for more money to flow into infrastructure projects in Vietnam. Phuc also tried his best to persuade the Government to approve the aforementioned pilot PPP scheme as soon as possible. Thankfully, PPPs under this scheme have sprung up in several sectors since January.
A few bright spots
The response from international investors has been rather upbeat. Alain Cany, chairman of EuroCham in Vietnam, says that European business people in Vietnam welcome this pilot scheme, adding that donors and investors need a clear, appropriate legal framework before contributing US$1 billion or more to infrastructure projects. This organization suggests the Vietnamese Government assure investors and lenders of the ease with which project revenue can be converted and transferred overseas.
Alain Cany says that without such assurance, investors will be reluctant to lend a hand. The Vietnamese Government shares this view and has promised foreign investors embarking on PPPs easy access to foreign currency, which will enable them to repatriate legitimate income to their own countries.
Challenges remain, though. Several international financial institutions want the Government to back loans offered to private investors that undertake PPPs. However, as Phuc puts it, if only local investors are eligible for this incentive, foreign investors will perceive it as unfair. On the other hand, if all private investors can have their loans backed by the State, such problems as difficulty in lowering public debt will arise. As a result, Phuc proposes rejecting this request. This means Bitexco, which oversees the Dau Giay-Phan Thiet expressway project (the first PPP), will be extremely disappointed as its foreign partner wants the loan to be guaranteed by the State.
Ministries and local authorities have identified 24 PPPs so far; this number will increase over the next three years. The road ahead will be bumpy, especially because, as EuroCham says, it remains unclear when a comprehensive legal framework for PPPs will be in force. This organization warns that unless such a framework is implemented promptly and effectively, Vietnam will lose a golden opportunity and foreign investors may look for opportunities in other countries, where more incentives are available.
Thai Thi Thanh Hai from Deloitte, an international consultancy firm, adds that if Vietnam lures only a few PPPs within the next 5-10 years, this form of project will be deemed as unattractive.
Bearing in mind these issues, Dong told investors at a recent conference on PPPs that Vietnam has encountered the same problems as many other countries have since it implemented Decision 71 and has realized that the success of PPPs depends on the consistency with which a government pursues its important goal and the efficacy with which related agencies coordinate.
Unfortunately, apart from Dau Thau, few business newspapers have covered this event. In retrospect, many reporters say they were neither invited to this conference nor aware of the issues it raised. However, such media hiccups are not the greatest hurdle to PPPs.
Truong Dinh Tuyen, former minister of trade, has vehemently objected to the Government’s decision to let Nghe An Province invest in a deepwater seaport which is too close to Nghi Son Port in Thanh Hoa and Vung Ang Port in Ha Tinh. Such an approach to formulating projects, not least those financed by the State budget, is indeed the most daunting obstacle to PPPs.
vietnamnet, SGT
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