Regulations on investment under the model of public-private partnership in Vietnam
Currently, investment in infrastructure construction is an important activity for each country. However, using only state capital for investment will face many budget difficulties. Therefore, to attract investment participation from domestic and foreign investors, the National Assembly has passed the Law on Investment in the form of public-private partnership 2020, officially effective from January 1, 2021. . The promulgation of this regulation has created a strong enough legal framework to ensure the implementation of the parties involved. At the same time, it creates peace of mind for investors when participating with the State is investing in PPP projects. So what exactly is public-private partnership investment? What are the regulations on this issue?
So, let’s find out with Lawyer X through the article below.
Legal grounds
Law on Investment under the mode of public-private partnership 2020
Consulting content
What is public-private partnership investment?
Investment under the method of public-private partnership (investment under the PPP method) is an investment method made based on definite-term cooperation between the State and a private investor through signing; implementing PPP project contracts to attract private investors to participate in PPP projects.
To better understand the concept of PPP investment, let’s find out with Lawyer X: what are a contract for a PPP project and a PPP project?
A PPP project contract is a written agreement between the contracting agency and the investor or the PPP project enterprise on the concession by the State to the investor; PPP project enterprises implement PPP projects according to regulations.
Besides, a PPP project is a collection of proposals related to an investment. So, the project aims to provide public products or services through the performance of one or more activities. Specifically:
1. Construction, operation, and business of infrastructure works and systems.
2. Renovating, upgrading, expanding, and modernizing; operating and trading works, and existing infrastructure systems.
3. Operating and trading existing infrastructure works and systems.
Characteristics of investment under the model of public-private partnership
The law on investment under the PPP method has the following characteristics:
Firstly, PPP is a method of creating public assets. This property is aimed at economic and social development (infrastructure, energy, environment …)
Secondly, the State does not have to pay the investment for the project. So, the State will orient development, and create opportunities for private investors to participate in investment, exploitation, and consulting.
Thirdly, the PPP project is for public purposes. However, there is a public-private partnership in capital investment, project management, and investor selection.
Fourthly, on the distribution of benefits. Then, the State can solve the problem of lack of public investment capital; create a mechanism to support investment, and maintain ownership of the whole people. Besides, investors are allowed to freely conduct business to seek profits and contribute to the development of the country.
Investment sector
The parties may invest under the PPP method in the following fields:
1. Transportation.
2. Power grids, power plants, except for hydroelectric power plants, and cases where the State monopolizes them according to regulations.
3. Irrigation; clean water supply; drainage and wastewater treatment; waste treatment.
4. Medical; education.
5. Information technology infrastructure.
Investment scale
To focus resources and avoid spreading, the Law on Investment in the form of public-private partnership 2020 has regulated the investment scale for each field. Specifically:
1. From VND 200 billion for projects in the fields of transportation, electricity grid, power plants, irrigation… and information technology infrastructure. If it is located in an area with difficult or especially difficult socio-economic conditions, it must not be lower than VND 100 billion.
2. From VND 100 billion for projects in the fields of health, education, and training.
However, the regulation on the size of the minimum total investment above does not apply to projects under the type of O&M contract.
The process of implementing investment projects under the model of public-private partnership
Usual Process
For normal projects, parties implement PPP projects in 5 steps:
Step 1: Prepare and appraise the pre-feasibility study report, decide on investment policy, and announce the project.
Step 2: Prepare and appraise the feasibility study report and approve the project.
Stage 3: Select investors.
Step 4: Establish a PPP project enterprise and sign a PPP project contract.
Step 5: Implement the PPP project contract.
Process for high-tech application PPP project
For PPP projects with high technology applications on the list of high technologies prioritized for development investment; or new technology application. The process for these projects is more complicated, specifically:
Step 1: Prepare and appraise the pre-feasibility study report, decide on investment policy, and announce the project.
Stage 2: Select investors.
Step 3: Selected investor prepares feasibility study report.
Stage 4: Appraise the feasibility study report, and approve the project.
Step 5: Establish a PPP project enterprise and sign a PPP project contract.
Step 6: Implement the PPP project contract.
Related article:
- Procedures for suspension of investment projects under Vietnamese Law on Investment
- Transfer of investment projects associated with the transfer of land use rights in Vietnam
Frequently asked questions
PPP project contracts bring high risks to the contracting parties due to the long duration. Usually, PPP is a long-term cooperation commitment (about 10-50 years) in which the rights and responsibilities of the parties are distributed in proportion to the participation of each party.
The parties involved in the negotiation and signing of PPP project contracts include one party being the State – a public partner (Vietnam’s competent authority) and the other being a PPP investor. The PPP investor can be an independent legal entity; or a joint venture between many legal entities engaged in PPP investment activities.
The PPP mechanism creates a dynamic mechanism for reasonable assignment between the parties in the PPP project contract. So, the party that is better able to do a particular job will be assigned to perform that part of the job, and at the same time enjoy the benefits from that part.
The PPP model creates the sharing of benefits and risks through the philosophy of assignment. Specifically, each party undertakes the work that they do best. Normally, the State will take care of policies, legal instruments, and land. So, private investors are responsible for capital, human resources, and technology.
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