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VietNamNews

Private investment urged for infrastructure

Update: March, 26/2012 - 09:39

The economic slowdown has caused Viet Nam to cut public investment, to look at more efficient uses of capital and to mobilise extra resources, especially in the private sector. Public-Private Partnership (PPP) is being considered as an option. Viet Nam's management bodies and foreign entrepreneurs have joined in talks about PPP at the 9th Viet Nam-France Economic and Financial Forum, the Viet Nam News reports.

Pham Van Khanh, head of Construction Economic Department, Ministry of Construction

 

Pham Van Khanh
When Viet Nam cut public spending two years ago, the construction sector faced many difficulties. The country needs about US$2-3 billion a year for urban expansion and more to develop new urban infrastructure, including social housing, transport, energy and telecommunications. This makes the mobilisation of capital from the private sector crucial for development.

The Vietnamese Government carried out projects under the form of Build-Operate-Transfer (BOT), Build-Transfer (BT), Build-Own-Operate (BOO) in which Government contributed in the form of land use right. However, such contribution methods posed difficulties for investors, especially when it's hard to calculate land prices in Viet Nam because of its complicated origin and the changing market.

I agree that PPP projects also have difficulties with this kind of contribution. Moreover, mechanisms for PPP need to be improved in specific and clear ways. In the past few years, the private sector has begun providing public services such as water supplies and waste treatment. They proved effective and successful.

Regarding planning activities and consulting costs, Viet Nam has seen the consequences of poor planning in recent years. Thus the country is seeking qualified planning advice.

Viet Nam has regulations on costs for construction consultancy, design and planning based on market-regulated prices. However, administrative procedures, including those in the construction sector, need to be improved. So, we are working to complete mechanisms involved in planning and public-private partnerships, to ensure a healthy competitive market for all consulting agencies.

Dang Xuan Quang, deputy general director of the Foreign Investment Agency cum director of the Inter-Ministerial PPP Task Force.

 

Dang Xuan Quang
The Ministry of Planning and Investment estimates that Viet Nam needs about $160 billion to invest in infrastructure development and public service delivery in the next 10 years. This means it needs an average $16 billion each year while capital allocation from the State budget would only meet about 60 per cent of the demand. The PPP model was considered as an ideal way for the country to deal with a shortage of capital while also achieving the goals set for infrastructure development. Moreover, the private sector, including both domestic and foreign investors, could improve investment efficiency thanks to their experience, technology and efficient capital use.

The pilot application of the PPP model was stipulated in the Prime Minister's Decision No 71/2010/QD-Ttg issued in 2010. It has created a legal corridor for attracting private sector investment for infrastructure and public service development. The five-year pilot stage, which kicked off last year, offers time for Viet Nam to accumulate experience from other countries and then to adjust its regulations to become compatible with international norms. Under the decision, ministries, sectors and localities propose promising PPP projects to the Ministry of Planning and Investment (MPI) including those on transport, urban infrastructure, energy, water supply and health care.

The MPI will review the projects' feasibility. So far, we have received 28 PPP project proposals nationwide.

It's impossible for Viet Nam to wholly follow a PPP model that applies in other countries and it's too early to describe in detail the form PPP will take in Viet Nam because we are in the pilot stage. I have been asked by many lawyers and legal consultants whether the legal framework for PPP is too simple. On the contrary, the legal framework for BOT is much more sufficient and detailed. In fact, decision 71 is not a legal framework but rather an outline of principles for the partnerships. In a project, a contract represents legalities, rights, responsibilities and obligations of each party. Similarly, joining a PPP project is like joining a game, with public and private investors as players, sitting around negotiating the rules. Of course, if the rules are clear in detail, the rights and benefits of relevant parties would be better. We hope that after the five-year pilot operation, Viet Nam will have a comprehensive and practical framework for PPP.

Public infrastructure and services directly benefit and affect Vietnamese people, so the Vietnamese Government still imposes ceiling service fees to ensure that investors' profits do not violate public interests. Government's management bodies are willing to discuss with investors on the issue to reach a common voice harmonising the benefits of investors and public. In fact, many projects on public services such as road, water or power supply have to face the imposition of ceiling fees but many have managed it.

Olivier Souquet, director of HCM City-based DeSo architectural firm

 

Olivier Souquet
As a partner in PPP projects in Viet Nam, I found the biggest difficulty lies in public governance. When we work with the Department of Investment and Planning in provinces, they usually are confused about our role: a consultant or a constructor. This may be a result of their poor governance and capacity. In addition, during project implementation, there is a lack of control and transparency. Few of them have a wide or open vision, causing incomplete planning at provincial level. In some cases, provincial planning does not stick to the national master plan, which affects the implementation of projects.

Another concern is that in Viet Nam, charges for consultancy depend on the value of land. I don't think this is a good practice. In many cases, foreign consulting agencies like us become less competitive as we usually provide services with higher charges when compared with domestic fellows.

Eric Dinh Gia, director of Vinci Construction Company

Among PPP projects that Vinci has joined in Viet Nam, two projects in HCM City provided typical lessons. One was the construction of a 400-car parking lot in HCM City. We conducted the project's feasibility study but then it was delayed for about four years because the construction could affect the city's planning. Moreover, profit for the investor in this sector could not be ensured due to a regulation on ceiling parking fees, although the State offered incentives such as preferential land leases. The other project was the HCM City No 1 Urban Railway. We were depressed and shocked when the Government announced its protective price. In terms of commerce, such a move makes businesses hard to survive. So, before calling for private sector participation in infrastructure and public services development, Government needs to consider it more closely.

Georges Germa, Veolia Water (SEA) Holding Pte. Ltd.

There is no a fixed form of PPP projects throughout the world; each project has its typical features, urging flexible adaptation. Our latest PPP project was a few years ago in Shanghai. China's situation at that time was quite similar to Viet Nam's current situation. PPP is an issue of two parties, Government and private enterprise. When the Government has demands and is prepared to co-operate, the private sector will join in. However, in my opinion, until now, Viet Nam needs more preparation, including a political will and improved legal framework to facilitate the implementation of PPP. — VNS

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