Foreign investors call for greater flexibility in Vietnam's upcoming PPP law

A lack of a unified legal framework governing PPP is the main factor that Vietnam’s infrastructure sector growth potential is capped at 6.1% per year through 2029.

There may be concern that an open and flexible public-private partnership (PPP) law may lead to policy abuses, but on the contrast, limited investor protection to a greater extent can be disincentive to “good investors”, according to Toru Aguin, chief representative of Japan Bank for International Cooperation (JBIC) in Vietnam.

 Overview of the online conference. Source: IPS. 

More flexibility in PPP law needed

As the Covid-19 pandemic has led to growing global uncertainties, foreign investments are becoming risk-averse and may slowdown, Aguin said at an online conference discussing the prospect of Vietnam’s upcoming PPP law on May 13.

 Toru Aguin, Chief Representative in Vietnam of Japan Bank for International Cooperation (JBIC). Source: IPS. 

“In this context, for Vietnam to develop quality PPP infrastructure, it is essential to develop a legal environment which more than ever responds to the expectations and concerns of foreign investors,” Aguin suggested.

Referring to recent estimation made by the Economic Commission of the Party's Central Committee that Vietnam would need US$15 billion annually for energy investments, Aguin said he has “high hopes” for the PPP, especially as national budget is limited and cannot afford such a huge amount.

Aguin recommended the PPP law to provide appropriate support from the government, saying this is essential for foreign investors and lenders to see high predictability and stability of PPP business in the long run.

This would include guarantees for contractual performance and foreign currency convertibility, as well as proper recognition of the Step-in Right of foreign lenders in case of emergency as a security holder.

Moreover, every single PPP project is different. Therefore, the law should leave room for parties’ agreement on a project-by-project basis, he said.

On this issue, Nguyen Thanh Hai, lawyer at Baker McKenzie, said investors expressed concern over risk sharing mechanism and project’s financial feasibility.

“The law should allow greater flexibility for investors during the contract negotiation process. The government should have a long-term vision of 10 years or more”, Hai said. 

 Managing Director of KIND in Vietnam Park Jae Hyun. Source: IPS. 

Managing Director of Korea Overseas Infrastructure and Urban Development (KIND) in Vietnam Park Jae Hyun said while it is clear that the government should share risks with investors in public projects, the government should reconsider the risk sharing mechanism in terms of revenue.

Park said the government should raise the threshold to trigger risk sharing mechanism when the actual revenue is equal to 90% of the financial plan, instead of 75% as in the current draft law.

Efficient PPP law to boost economic growth

 

Regarding suggestions from foreign businesses and investors, Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) Vu Tien Loc said the government expects the PPP law to create breakthrough in Vietnam’s infrastructure development, otherwise, Vietnam would fail to attract high quality foreign capital inflows.

As the country is further integrating in global economy, a well-developed legal environment would make an investment destination more attractive than the others, Loc stressed.

Loc agreed with previous opinions there should be clear details in the law to ensure mutual benefits, as well as risk sharing between all parties involved.

According to Loc, PPP mechanism should be expanded to other fields of energy and public services, and not only limited to transportation infrastructure, a move Loc said would help utilize experience and expertise of private investors.

Loc noted as government agencies are still struggling to disburse the target amount of US$30 billion in public investment, partly due to complicated administrative procedures.

“It is essential for Vietnam to avoid a similar situation in drafting the PPP law, so that more resources are utilized in the most efficient way and lay the foundation for stronger economic growth,” Loc urged.

There is currently an absence of a unified legal framework governing  PPP in Vietnam similar to that seen in some of its regional peers (e.g. the Philippines, Thailand).

Instead, there are provisions covering PPP dispersed in other pieces of legislature, such as the Law on Investment, Law on Construction and the Law on Bidding, continues to government directives on PPPs alongside Decree 63. As such, in a bid to further improve the current PPP framework, the Standing Committee of the National Assembly had passed a resolution for the creation of a PPP law back in 2017.

While certain types of government guarantees are provided for through various laws and decrees, the inadequacy of these guarantees and the lack of clarity of related articles and provisions have been a common stumbling block for foreign participation in Vietnamese PPPs.

Furthermore, there is no guarantee for project revenues, considered a major financial risk for investors and a key issue which is currently being addressed by the implementation of the new PPP law.

Fitch Solutions, a subsidiary of Fitch Group, said a lack of a unified PPP legal framework is the main factor that Vietnam’s infrastructure sector growth potential is capped at 6.1% per year through 2029, despite having one of the fastest growing economies in the world.

Fitch forecast Vietnam’s economy to grow at an average of 6.4% year-on-year in real terms over the next decade through 2029, as it emerges as a choice for manufacturing hub and continues to attract foreign direct investments.

“A comprehensive PPP law is currently being crafted and discussed in Parliament. When passed, we believe the law will reduce project risk and be a boost to growth of Vietnam’s PPP market,” stated Fitch. Hanoitimes

Ngoc Thuy

Ownership, risk-sharing must be clarified in PPP law: experts

Ownership, risk-sharing must be clarified in PPP law: experts

Ownership rights and risk-sharing mechanisms must be clarified in public-private partnership (PPP) law to encourage the participation of private investors and ensure efficiency as well as transparency of PPP projects.

 
 

Other News

.
Starbucks suspends social media ads over hate speech
Starbucks suspends social media ads over hate speech
BUSINESSicon  29/06/2020 

The coffee giant said it would pause advertising on some platforms in an effort to address hate speech.

M&A deals could help VN businesses restructure amid pandemic
M&A deals could help VN businesses restructure amid pandemic
BUSINESSicon  29/06/2020 

Merger and acquisition (M&A) deals will likely increase post-pandemic, which industry insiders see as a chance for enterprises to restructure their operations to be more viable.

How will mobile money affect e-wallets?
How will mobile money affect e-wallets?
BUSINESSicon  29/06/2020 

Non-cash payment activities have developed strongly in recent years with many payment services such as digital banks and e-wallets.

Vietnam lures US$6 billion FDI into industrial parks
Vietnam lures US$6 billion FDI into industrial parks
BUSINESSicon  29/06/2020 

Nearly US$6 billion in foreign direct investment was poured into Viet Nam’s industrial parks (IPs), processing zones and economic zones (Ezs) in the first half of the year, according to the Ministry of Planning and Investment (MPI).

Gia Lai to have $44m hi-tech agricultural zone
Gia Lai to have $44m hi-tech agricultural zone
BUSINESSicon  29/06/2020 

A 100-ha hi-tech agricultural zone is scheduled to be built in the central highlands province of Gia Lai to develop breeding pigs and produce organic cattle feed and fertiliser.

Vietnam seeks quality FDI from EU
Vietnam seeks quality FDI from EU
VIDEOicon  29/06/2020 

Vietnam has undergone profound changes since first opening its doors to FDI more than 30 years ago.

Vietnamese business bemoans support conditions
Vietnamese business bemoans support conditions
BUSINESSicon  29/06/2020 

Amid numerous difficulties, slow-paced implementation of government-led policies to assist enterprises hit by the health crisis are leaving many businesses in the lurch, making it hard to boost local production, a key driver of  economic growth.

Real estate booms in HCMC's suburban areas
Real estate booms in HCMC's suburban areas
BUSINESSicon  29/06/2020 

The real estate market is picking up in the areas surrounding Ho Chi Minh City as inner-city options become limited and the infrastructure of these provinces is improving.

COVID-19-induced uncertainty affects bond markets
COVID-19-induced uncertainty affects bond markets
BUSINESSicon  29/06/2020 

The COVID-19 pandemic continues to drag on local currency bond markets in emerging East Asia, including Vietnam, as investment sentiment globally and in the region wane and containment measures limit economic activity.

HCM City’s housing industry faces difficulties
HCM City’s housing industry faces difficulties
BUSINESSicon  29/06/2020 

The property industry in Ho Chi Minh City, and in fact the country in general, faces several problems that need urgent solutions, especially with regard to legal provisions.

No licenses for transport firms with foreign holding of over 51%
No licenses for transport firms with foreign holding of over 51%
BUSINESSicon  29/06/2020 

Vietnamese transport firms wherein foreign investors contribute over 51% of the chartered capital will not be licensed, according to the Ministry of Transport.

Vietnam apparel firms won't see instant benefits from EVFTA
Vietnam apparel firms won't see instant benefits from EVFTA
BUSINESSicon  29/06/2020 

Vietnamese apparel companies will not enjoy immediate tariff cuts after the EU-Vietnam Free Trade Agreement (EVFTA) comes into effect, as they have to overcome strict rules of origin.

Vietnam slashes auto registration fee by half
Vietnam slashes auto registration fee by half
BUSINESSicon  28/06/2020 

Prime Minister Nguyen Xuan Phuc has just signed Decree 70 allowing the cut of 50% of the registration fee for customers who buy locally-produced and assembled automobiles, effective June 28.

Vietnam’s logistics industry hit hard by Covid-19 pandemic
Vietnam’s logistics industry hit hard by Covid-19 pandemic
BUSINESSicon  28/06/2020 

The Vietnamese logistics industry is among those hit the hardest by Covid-19, as the unpredictability and duration of the pandemic have presented multiple challenges in both the short and long terms, 

Major businesses undergo slow recovery after Covid-19
Major businesses undergo slow recovery after Covid-19
FEATUREicon  28/06/2020 

Despite the positive business results witnessed in the early months of the year, many listed companies have been cautious with their pre-tax profit targets.

Limit on capacity continues to hinder solar panel installation
Limit on capacity continues to hinder solar panel installation
BUSINESSicon  28/06/2020 

With the rising prices of electricity pushing many enterprises and households to install rooftop solar panels that partly help reduce electricity bills, the cap on solar power capacity is hindering the process.

Petrolimex pushes for PGBank-HDBank merger before Aug 31
Petrolimex pushes for PGBank-HDBank merger before Aug 31
BUSINESSicon  27/06/2020 

Petrolimex, which holds a 40% stake in the Petrolimex Group Commercial Bank (PGBank), sought to complete the merger between PGBank and the HCMC Development Bank before August 31, said the Vnexpress website.

Energy revolution
Energy revolution
BUSINESSicon  28/06/2020 

The first solar panel, which was invented by French physician Alexandre Edmond Becquerel in 1839, has become a significant watershed for the energy sector in the future. 

FDI inflows drop 15.1 percent year on year in first half
FDI inflows drop 15.1 percent year on year in first half
BUSINESSicon  27/06/2020 

Vietnam recorded a year-on-year decrease of 15.1 percent in foreign direct investment (FDI) inflows to 15.67 billion USD as of June 20, according to the Ministry of Planning and Investment (MPI).

WB debars Vietnamese firm for collusive and fraudulent practices
WB debars Vietnamese firm for collusive and fraudulent practices
BUSINESSicon  27/06/2020 

The World Bank Group has announced the seven-year debarment of Vietnam-based Sao Bac Dau Technologies Corporation (SBD) in connection with collusive and fraudulent practices under the Danang Sustainable City Development Project

 
 
 
Leave your comment on an article

OR QUICK LOGIN