Foreign investors are showing more interest in the country’s transport projects under the public-private partnership (PPP) investment model after the government announces its involvement in the projects.
Lotte Group is interested in the North-South expressway project
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South Korea’s Lotte Group has recently worked with the Vietnamese Ministry of Transport as it wants to invest in the North-South expressway project under the PPP investment model.
The interest of the Korean group in one of Vietnam’s large transport projects has been reinforced after the government has decided to participate in the project. Accordingly, among 11 sections of the project, the government will join three.
According to Transport Minister Nguyen Van The, all the 11 sub-projects have their investment plans approved, including three to be executed with state funding, namely Cao Bo-Tay Son, Cam Loc-La Son, and My Thuan 2 bridge. Eight others will be built under the PPP model. The National Assembly has also approved to use VND14.5 trillion (US$630.4 million) for site clearance for the whole 654-km project.
As planned, site clearance will be carried out soon and cleared land will be handed over to developers by the end of 2019’s first quarter, The said, adding that the country will have contractors for PPP sub-projects in early 2020.
These are good signals for interested overseas investors, who often raise concerns on the risk-sharing mechanism of site clearances in PPP projects between the government and businesses, reflecting the country’s strong determination to leverage private investment.
Site clearance in Vietnam is often a slow process, thus causing risks to financiers. In this project, the government will take responsibility for the work and partly fund in each of the eight PPP sub-projects, while potential investors will do the rest.
Furthermore, the country has approved the use of VND27.5 trillion (US$1.19 billion) as state capital contribution in PPP investments, thus making it PPP projects more bankable.
Besides Lotte Group, other foreign investors from the EU, the US and Japan have recently also shown interest in the project, which is estimated to cost over VND118.7 trillion (US$5.16 billion).
Resolving bottlenecks
Government guarantee for investment risks are considered the topmost concerns for foreign investors when they invest in the country’s transport projects under PPP model as the current legal regulations haven’t dealt with the issue.
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.
At present, the PPP investment model in the country is regulated by Decree No.15/2015/ND-CP and Decree No.30/2015/ND-CP, and the government is mapping out a Law on PPP Investment to streamline the regulations.
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.
In addition, the law is also hoped to create a fair playground for state-owned and private enterprises and harmonize 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.
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.
