According to the World Bank, around USD 25 billion worth of investments in Infrastructure is needed annually so that it can cope up with Vietnam’s burgeoning economy. In response to this, Vietnam’s Ministry of Planning and Investment is proposing an amendment to the Public-Private Partnership (PPP) law to make its Infrastructure sector more attractive to potential investors.
The draft law submitted to the National Assembly, which is expected to be approved in May 2020, sets out risk sharing mechanisms the lack of which has been a major concern of private investors, together with other risks associated with long-term projects such as financing sources. Thus, there is also a concern for the government on how to choose financially-capable investors for the key Infrastructure projects. Among the amendments to the PPP law include:
- The minimum scale of the projects will be stipulated in the law and the government will specify details for each field (minimum capital requirement should be VND 200 billion, or USD 8.6 million, except for operation and maintenance projects), or the minimum capital requirement will not be stipulated in the law but the Government can adapt according to the country’s socio-economic development needs.
- A mechanism will be set up for risk sharing between the Government and investors, including adjusting prices, fees or contractual terms, capped at 50% of the deficit between actual revenue and contracted revenue.
- A government foreign currency guarantee will also be ensured with a limit of 30% of the project’s revenue less the expenses, in Vietnamese Dong.
- To raise capital, investors are allowed to issue corporate bonds but not public stocks.
An appraisal council will be set up by the government to assess each PPP project, the type of partnership contracts, as well as suitable investors. A development fund will be established and in addition, a separate budget will be allocated for each project.
(Source: Viet Nam News, Vietnam Plus)
