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Sep 13, 2019 / 05:10

Investors need predictable policy environment for sustainable PPP cooperation: Expert

A lack of consistency in policies and credible guarantee from the government would prevent investors from participating in any PPP projects, said an expert.

A predictable and consistent policy environment is necessary to maintain sustainable cooperation in public-private partnership (PPP), according to Nguyen Huu Dung, board chairman of VinaCert Certificaiton and Inspection Company. 
Overview of the conference. Source: Nguyen Tung.
Overview of the conference. Source: Nguyen Tung.
“All regulations and information related to PPP projects have to be fully disclosed to the public, preventing any unexpected risks to investors,” Dung said at a conference discussing the PPP financing mechanism in Vietnam held in Hanoi on September 12. 

Nico Barrito, director of Regions of Climate Actions, or R20, in Asia Pacific, said the PPP financing, which has been widely used in Vietnam, is a form of sustainable economy, as “many economic issues are not only solved by the government, but also from joint effort of the business community.”

“It would take many years to address the issue of infrastructure developments based on public investment fund, while enterprises could invest and cover the cost through revenue generated from the project itself,” Nico added. 

Nico referred to a number of public transportation projects in Indonesia being invested through the PPP mechanism, adding in long term, the PPP would enhance national competitiveness. 

However, for the PPP to realize its full potential in Vietnam, Nico said all parties must fulfil their commitments. “For investors, it would be the commitment to the quality of the project, while there should be political commitment from the government side.”

A lack of consistency in policies and credible guarantee from the government would prevent investors from participating in any PPP projects, Nico asserted. 

Addressing shortcomings in PPP projects in Vietnam, PPP expert at the US Agency for International Development (USAID) Doan Giang listed out major issues, including the procurement process not being used in contractor selection for some PPP projects; lack of preparation for PPP project, leading to the selection of incompetent contractors and risks of incurring additional costs and construction delay.

Moreover, Giang raised concern over the unavailability of risk sharing mechanism between investors and the public sector, as well as inefficient risk prevention measures. 

Giang, nevertheless, noted such mechanism should not be abused as the government should only apply the risk sharing mechanism in case of necessity or for efficient project, which is a common practice globally. 

Giang stressed the government plays a key role in developing an enabling environment for PPP, focusing on drafting clear legal basis, dispute resolution mechanism, and procurement rules. 

Moreover, the government has to set aside budget to make project viable, including guarantees or tax incentives, as well as accounting of government liabilities. 

R20 Director Nico Barrito suggested the government should consider providing subsidy for certain PPP projects, especially those in the transport infrastructure sector to attract investors. 

Another issue is technology transfer. In case of PPP projects in the energy sector, it is essential for smooth transfer of technologies and operation method among all parties for sustained and efficient operation in a long period of time. 

According to the Global Infrastructure Outlook, Vietnam will need over US$600 billion to reach its infrastructure goals by 2040. 

The Asian Development Bank estimated Vietnam would need at least US$16.7 billion per year on average for the 2015 – 2025 period to cover capital needs for infrastructure development. 

Meanwhile, the World Bank suggested the figure could rise to US$25 billion per year, much higher than the average investment capital in the 2011 – 2015 period.