|The Ninh Binh-Cau Gie Highway, which leads to Ha Noi. Legal framework improvements aim to attract more private investment for infrastructure projects. — VNS Photo Thai Ha
HA NOI (VNS) — Viet Nam has started improving its legal framework to attract more private finance into infrastructure, officials said yesterday at a conference.
Deputy Transport Minister Nguyen Hong Truong said in his opening remarks that infrastructure development plays an important role in the country's plan to become an industrial nation by 2020.
"Because the State budget is limited, the Government considers attracting domestic and international infrastructure investors critical," he said.
Many documents had been issued in recent years to improve the legal framework for public-private-partnership (PPP) projects, Truong said. The upcoming PPP decree, which is expected to be approved this month or in early January, is expected to invigorate investment in infrastructure projects.
According to Le Van Tang, director of the Public Procurement Department at the Ministry of Planning and Investment, the new PPP decree covers more PPP project forms, ranging from BOT (Build-Operate-Transfer) to BOO (Building-Owned-Operate).
It will replace previous decrees, which only provided general guidelines on PPP investment, and to regulate BOT, BT (Build-Transfer) and BTO (Build to Order) projects.
The new decree stipulates higher fiscal incentives for investor-proposed projects. It also covers competitive bidding, policy publicity and price negotiation time frames.
After the decree gets approval, the Ministry of Planning and Investment will issue instructions on its implementation.
According to Nguyen Danh Huy, head of the Transport Ministry's PPP Project Management Unit, the transport sector estimated that private investors will pour about VND235 trillion (US$11.2 billion) into infrastructure projects between 2016 and 2020.
In 2014, Huy said the transport sector has been given VND43 trillion ($2 billion) in private investments for infrastructure projects.
Aside from ground transport, the transport sector will focus on attracting investments for railways, seaports and the proposed Long Thanh International Airport.
Viet Nam lacked a legal framework adhering to international standards, which has deterred many foreign investors, Huy said. Meanwhile, domestic investors often lacked the capacity to assess risks associated with PPP projects, he added.
According to Huy, the Transport Ministry and other relevant agencies will soon release a list of projects needing private investment with diversified PPP forms.
Le Tuan Anh, deputy head of the Finance Ministry's Investment Department, said most BOT project investors must rely on commercial banks and with the rate-of-return for BOT projects lasting up to 20 years, investors and the banks carried a lot of risk.
"PPP is not a magic wand," he said. "We still need to increase the attractiveness of the projects, considering it often takes a long time for investors to get back their initial investment."
Nguyen Thi Thuy Hanh, a representative from the State Bank of Viet Nam's Credit Department of Economic Sectors, said banks still faced many difficulties for lending money to infrastructure project investors.
Her department estimates that commercial banks have lent VND135 trillion, accounting for 89 per cent of total investment, for 63 PPP projects currently under the supervision of the Transport Ministry.
Infrastructure projects typically required investment periods of 20 to 25 years, but the banks' funds were primarily intended for short-term loans, Hanh said.
In addition, banks must carry the risks involved, such as capabilities of investors, subcontractors' work and project delays, she said.
Pham Quang Dung, chairperson of Tasco Joint Stock Company, said the Government should come up with policies that reduced risk for commercial banks and investors. — VNS