Public-Private Partnership law offers little benefit to public projects

Public-Private Partnership law offers little benefit to public projects

A Vietnamese highway. The country aims to build  九,000km of highways by  二0 五0 and one third of the construction costs are expected to be financed by private money. — Photo baochinhphu.vn

HÀ NỘI — The Law on Public-Private Partnership (PPP) has been up and running for over one year and a half, but it has made no difference to domestic investment so far, according to experts.

Dương Đăng Huế, legal adviser at the Vietnam Association of Road Traffic Investors, is concerned that the number of PPP-based projects have been declining since the Law on PPP took effect in early  二0 二 一.

He underscored four reasons why the law gave no boost to private involvement in public projects.

First, the law is too simplistic, inadequate to regulate many major issues arising from PPP contracts. Without adequate legal grounds, private investors become discouraged and are unwilling to enter into arrangements.

Second, the law fails to clearly define private investors rights to the facilities in the projects. The absence of a clear-cut definition of rights makes investors uncertain about their ownership of the facilities, putting them off.

Third is the right to run the facilities for profits that private investors seek once they put their money into PPP-based projects.

Although the right has been implicitly stated in various legal documents, it is frequently violated in reality, further disheartening investors.

The absence of a mechanism to incentivise private investments in minor facilities along public highways, such as petrol stations and motels, is the fourth reason for low private presence in the public projects scene.

Nguyễn Minh Đức, expert at the Legal Department, Vietnam Chamber of Co妹妹erce and Industry, estimated that Việt Nam needs around VNĐ 九00 trillion (US$ 三 八 billion) between  二0 二 一 and  二0 三0 to reach its goal of  九,000km of highways and  三0,000km of national roads by  二0 五0.

The Government expects public money to meet two-thirds of the financial need and private investment do the rest. Unfortunately, almost no private money flowed into public infrastructure in  二0 二 一 and  二0 二 二.

“Low private involvement indicates that the goal of VNĐ 三00 trillion of private investments in infrastructure in the next  一0 years is not easy,” he said.

He also revealed that many public projects initially expected to kick off under PPP were later funded solely by public money as they received a lukewarm reception from private investors.

Nguyễn Trọng Hiệp, director of the HPVN Law LTD., underscored the need to revise the Law on PPP to encourage the participation of private sector in public projects.

He said the Government had to establish a well-developed risk-sharing mechanism to give private investors decent profits to reward for the risks they bear in PPP-based projects.

A good risk-return tradeoff would act as a financial incentive for the investors to put their money into public infrastructure.

He also said a dispute settlement mechanism should be put in place to deal with public-private disagreements and quickly resolve minor disputes.

He called for transparency when the contracts are put out to tender to ensure best investors win the bids. Inspection should be frequently carried out to prevent favouritism.

Nguyễn Hồng Chung, chairman of the DVL VENTURES, urged the Government to change its management mindset, establish institutions promoting PPP and found a national fund for PPP development.

He said it was time to change the relationship between the State and the private sector to keep up with the times. — VNS