Shortcomings in PPP Project Implementation

3:51:46 PM | 6/11/2022

PPP projects have actively helped improve transport, energy and urban infrastructure among others in the past time. However, some difficult problems are still appearing in PPP project implementation.

First, funding: According to the PPP Law, enterprises are now completely dependent on credit capital from commercial banks. Commercial banks often mobilize short-term capital for medium and long-term loans while transportation projects usually borrow for up to 15-20 years. Because there are certain risks and loan limits are often very low, companies lack interest in this kind of investment.

Second, lending interest repayment: Traffic investment projects must take back investment funds from fees to pay interest but their payback period is usually very long. Revenue is usually lower in the first years of operation and augments later but they must pay high-interest rates in the first years before getting lower later. In addition, operators have a phased roadmap for fee hikes but often encounter problems with authorities that do not allow such scheduled roadmap for fee hikes, thus placing the former in a difficult position that hinders it from seeking sources for interest repayment. In order to thoroughly solve the funding issue, the government needs to research and introduce appropriate policies for transport infrastructure projects (by reducing loan interest rates, extending repayment terms, and adjusting repayment plans for banks).

Third, unclear regulations: The PPP Law was created with two guiding decrees for its enforcement. However, there are still some problems that have not been specified and guided specifically, thus affecting the project progress. Management agencies are confused about guidance for companies that, however, lack interest due to unclear rights, interests and responsibilities.

Fourth, inequality: In theory, a PPP project is a partnership between the public and private sectors. However, in reality, enterprises and investors often suffer losses when they must properly and fully perform their contractual responsibilities while State agencies are usually not responsible for problems arising under their power (like delayed ground clearance and untimely funding). This makes businesses reluctant to join PPP projects because their responsibilities and interests are not guaranteed.

In fact, if there is no important change in awareness, legal basis and supervision to ensure transparency, relevance and harmonization of interests, PPP investment and management will not be effective, and hardly be strongly and sustainably developed.

Source: Vietnam Business Forum