10 highlights that turn PPP into a ‘magic wand’ for investors

Public – Private Partnership (PPP) is being in the spotlight now as several infrastructure projects on transport and ports, etc. are attracting plenty of private investors with investment capital up to trillions dong. PPP is considered to be a “magic wand” in mobilizing investment in many transport infrastructure projects of the country. On 25 Mar, Ministry of Planning and Investment organized a seminar introducing Decree No. 15/2015 / ND-CP on investment under the form of public-private partnerships and Decree No. 30/2015 / ND-CP regulations detailing the implementation of some articles of investment selection in the Law on Procurement. According to MPI, Decree No. 15/2015 / ND-CP on investment under the form of public-private partnership with 10 new points is considered as a breakthrough to turn PPP into a “magic wand” that would draw a lot of investors’ attention.

1- Consistent with international practice, gaining momentum for Vietnam’s reform process The Decree has come close to infrastructure development policies of World Economic Forum 2012, 2013, 2014. This trend is to attract an enormous amount of foreign private investors and funding from international financial markets into infrastructure projects. Moreover, Decree 15 highlights information disclosure and transparency in order to create an investment-friendly environment.

2- Expanding the investment sectors Decree 15 regulates most of traditional public investment channels from transport and utility infrastructure projects to public services such as health care, education, sports and culture. PPP is prioritized in the planning and implementation of the next 5-year socio-economic development plan.

3- Supplementing new types of contract In addition to existing BOT, BTO, BT, Decree 15 includes other types of contract such as BOO, O&M, BTL, BLT. Accordingly, there are two groups of contract. Firstly, investors directly collect fee from end-users or generate revenue through contract of exclusive product consumption. Secondly, investors’ revenue comes from multiple payments of the state organizations depending on the quality and progress of the work.

4- Emphasis on project preparation Decree 15 requests investors to thoroughly study and prepare the investment before being selected. It is time Vietnam opened their well-prepared projects to local and international financial market.

5- Monitoring the output rather than input The new decree focus on monitoring project’s output. This is a new approach which clarifies requirements for the quality of works and services to be provided without targeting a specific technology. Investors with optimized technological solutions will be selected through bidding to ensure the highest quality.

6- Specifying the public capital of the project In case of a non-refundable public projects, the State has to participate in. This Decree clarifies capital attraction for such projects by contributing state capital; payment to investors; supports to build auxiliary projects; land clearance; resettlement compensation, etc.

7- Clarifying two methods for investor participation In the first case, the State comes up with an idea, makes proposals and FS report. Investors are allowed to consult during the project implementation and bid to implement the project. This is the main approach for projects under socio-economic planning and sector planning. In the second case, investors on the contrary comes up with an idea, makes proposals and FS report. Once the report is approved, state agencies open bidding to select investors. Investor who proposed will be given certain preferential in bidding. In case of not being selected, project study cost paid by the investor will be reimbursed.

8- Easing concerns of lenders Decree 15 specifies the implementation mechanism to take on projects from lenders that was agreed with competent state agencies. A number of investment guarantee for PPP projects include guarantee of investor and SPC’s responsibility, project mortgage, land use rights, foreign currency balancing.

9- Clearly defining the role of the State and establishing the point of contact Decree PPP determines the role of state investment in PPP: As a party, a partner of the contract who delivers commitments and shares risks with investors; in charge of building infrastructure, monitoring quality and efficiency of investment. At the same time, the Decree also specifies PPP point of contact for implementation, led by the State Steering Committee of PPP.

10- Reducing procedures for C-Group Projects Compared with international practice which is only for large scale PPP projects, Decree 15 regulates small scale projects (i.e C-Group Projects) under the Public Investment Law. This is particularly beneficial for agriculture and rural development projects that are of great significance to the community. To create flexibility, Decree reduces some procedures for this type of project: not necessary to go through study report step; SPC establishment and investment register.

Source: http://cafef.vn/vi-mo-dau-tu/10-diem-moi-giup-ppp-thanh-cay-dua-than-doi-voi-nha-dau-tu-20150325110031133.chn

Translated by Giang Bui

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