PPP Funding Channel for Transport and Energy Infrastructure Development

10:12:29 AM | 12/13/2021

In addition to policies on public-private partnership (PPP) investment, many solutions need to be applied consistently to boost private investment in transport and energy infrastructure development.

Modern transport infrastructure development to spur interregional economy and energy development for business demands and sustainable environmental protection are two of strategic tasks for socioeconomic development of Vietnam.

Vietnam aims to have 5,000km of highways by 2030. Currently, it has 1,163km of expressways and 786km is under construction.

In Power Master Plan VII, renewable energy is expected to be raised to 4.5% of electricity production in 2020 and 6% in 2030. Accordingly, the growth must reach 16 billion kWh (6-7,000 MW) and 42-45 billion kWh (15-20,000 MW).

The investment demand for transport and energy infrastructure is huge while social resources are enormous and the PPP model is considered an effective channel to mobilize finance and technology from the private sector for transport and energy infrastructure development in Vietnam.

According to the Procurement Management Department, the Ministry of Planning and Investment, the legal framework for PPP investment has been basically completed to accelerate enforcement of PPP investment policies. The PPP model appeared more than 20 years ago, with the initial legal framework being a governmental decree on BOT investment contract. It was then gradually developed from Decree No. 15/2015 to Decree No. 63/2018. Most recently, the National Assembly passed the Law on PPP Investment, effective from January 1, 2021. The PPP Investment Law features attraction of more private resources, especially from foreign investors.

In particular, the Ministry of Planning and Investment drafted and submitted Directive No. 30/CT-TTg dated November 23, 2021 on accelerated implementation of PPP investment and bidding policies to the Prime Minister for approval. This directive presses relevant bodies to quickly complete detailed instructions for effective enforcement of PPP Law.

Although the policy basis is being gradually completed, many barriers are lying in the way to draw PPP investment fund. Some associations and investors have reported on PPP policy matters such as tax, land, state budget, management and use of public assets. In addition, PPP is a complex investment method engaged by many stakeholders (government, businesses, lenders and others) in a long-term contract, with many potential risks.

In order to further promote the PPP investment method in the coming time, experts recommend that the policy framework on PPP should be consistent to attract the private sector into specific PPP projects in line with their objectives, nature and characteristics. Moreover, many other factors are needed, including an enabling investment environment, macroeconomic stability, better national credibility, better planning quality and capital market diversity.

Each ministry, branch and locality also play a very important role in enforcing the law quickly and effectively. Accordingly, competent authorities need to select appropriate projects that produce socioeconomic effects. At the same time, the financial and commercial feasibility must be ensured. Risk distribution must be a reasonable and acceptable to investors.

Additionally, ministries, branches and localities should prioritize allocating a part of state fund for PPP projects. Investment promotion also needs to be taken into account to widely woo domestic and foreign investors.

As for difficulties that existed prior to the effective date of the PPP Law, competent authorities will need to support investors to deal with them as per contracts signed and rule of law. That will contribute to strengthening investors' confidence in new projects.

By Vietnam Business Forum