Fine-tuned PPP rules needed to lure foreign investment in transport

The Transport Ministry has proposed the government streamline legal framework for the public-private partnerships (PPP) model to attract foreign direct investment (FDI) into the country’s transport infrastructure, according to deputy transport minister Nguyen Ngoc Dong.

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Vietnam will construct a new high-speed railway system from the North to the South

The government should apply the profit guarantee policy for transport infrastructure projects to make it more attractive to investors, Dong said.

In the long run, Dong suggested the government to submit the PPP Law to the National Assembly for approval so that foreign investors can feel secure when joining Vietnam’s transport infrastructure projects.

At present, PPP investment in the country is regulated by Decree No.15/2015/ND-CP and Decree No.30/2015/ND-CP. Despite improvements, guaranteed policies, considered the topmost concerns among foreign investors, remain absent from the decrees.

Experts said that the lack of this regulatory mechanism has discouraged foreign investors from joining transport infrastructure projects in Vietnam. Thus, up till now, no PPP transport infrastructure projects have been successfully executed by foreign investors in the country, despite their great interest.

According to Vu Quynh Le, deputy director of the Bidding Management Department under the Ministry of Planning and Investment, the PPP Law should specify risks in the implementation of PPP on the principle of sharing risks to the party that has the strongest capacity in handling them.

Besides dealing with major issues such as enhancing investment efficiency, investment process and procedures, investment attraction measures and legitimacy of PPP contracts, the law is also expected to change mindsets in PPP implementation. Accordingly, the most feasible projects will be prioritized for PPP, while the selection of investors for PPP projects will be more transparent.

Investment process and procedures will also be formulated to suit characteristics of PPP projects, contract forms and different scales and management levels, prioritizing the reduction of administrative procedures and decentralization.

In addition, the law is also hoped to create a fair playground for state-owned and private enterprises and harmonized interest between the state and investors, while introducing a coherent, transparent, smooth and attractive legal corridor for investors to engage in long-term and risky PPP projects.

Lack of investment capital

According to Dong, FDI capital in Vietnam’s transport infrastructure has remained modest and the country needs a large amount of private investment for the industry’s development through the PPP model as the state cannot afford it.

The Ministry of Transport estimated that the total capital for developing the transport infrastructure in the country for 2018-2023 is estimated at roughly VND1,015 trillion (US$48 billion).

Some VND651 trillion (US$28.67 billion) will be needed for road transport infrastructure development and some VND119 trillion (US$5.24 billion) will be needed for railway transport construction. The amount necessary for aviation and marine transports will be VND101 trillion (US$4.44 billion) each. Of the total, more than VND300 trillion (US$13.21 billion) is expected to come from the private sector, especially from foreign funds.

Transport Minister Nguyen Van The said that the investment for infrastructure development is among the top priorities in Vietnam as the country has planned to continuously finalize the building of its expressway system.

From now to 2020, the country will complete the construction of 654 kilometers out of 1,300 kilometers of North-South Expressway under the PPP model. The state will contribute some 40 percent of the total investment capital.

Besides upgrading the port system, Vietnam will also consider constructing a new high-speed railway system from the North to the South, The said, adding that the country will also invest to build the Long Thanh International Airport to make it become among large airports in the region.