Vietnam law has regulations on PPP project funding. Let’s find out this issue with Lawyer X through the following situation: “Dear Lawyer! I want to ask what are regulations on use of state capital invested in a PPP project in Vietnam? What are regulations on budgeting for public investment capital to be used in a PPP project? Thanks for answering my questions!”
Legal grounds
- 2020 Vietnam Law on Public-Private Partnership Investment
Use of state capital invested in a PPP project
– State capital may be used for the following purposes:
+ Supporting the building of construction works and infrastructure systems as part of a PPP project;
+ Paying PPP project enterprises for their provision of public products and services;
+ Paying costs of site clearance, site clearance compensation, support, resettlement; costs of support for construction of temporary works;
+ Compensating for the reduced revenue;
+ Covering costs and expenses incurred from performing activities by competent authorities, contracting authorities, PPP project preparation units, and bid solicitors within their duties as specified in Article 11 of 2020 Vietnam Law on Public-Private Partnership Investment;
+ Covering costs and expenses of PPP Project Assessment Boards and its subordinate units assigned to conduct the evaluation of PPP projects.
– The proportion of state capital participating in a PPP project as prescribed at Points a and c of Clause 1 of this Article must not exceed 50% of the project’s total investment. As for projects with many component projects, including those component projects developed according to the PPP investment approach, the state capital ratio specified in this Clause shall be determined in proportion to the total investment in such component projects.
– The Government shall elaborate on the use and management of state capital invested in PPP projects.
State capital used for supporting the building of construction works and infrastructure systems
– State capital used for supporting the building of construction works or infrastructure systems may be used for supporting project implementation during the construction phase in order to increase the financial efficiency of the project.
– The ratio of state capital used for supporting the building of construction works or infrastructure systems belonging to PPP projects shall be determined on the basis of the preliminary financial plan included in the pre-feasibility study report when an investment policy is granted.
– Proportion and value of state capital used for supporting the building of construction works or infrastructure systems shall be paid under PPP contracts.
– State capital used for supporting the building of construction works and infrastructure systems shall be allocated from the following funding sources:
+ Public investment capital prescribed under law on public investment;
+ Value of public assets prescribed under law on use and management of public assets.
– Use and management of State capital used for supporting the building of construction works and infrastructure systems shall be allocated from sources of public investment capital according to one of the following approaches:
+ Splitting a PPP project into subprojects. The use and management of state capital shall be subject to laws on public investment;
+ Aligning state capital with specific items according to the rates, value, progress and conditions specified under the contract.
State capital used for paying PPP project enterprises supplying public products and services
State capital-funded payments to PPP project enterprises which are used in BTL or BLT contracts on the basis of the quality of public products and services shall be allocated from state capital invested in PPP projects and other legal capital according to the law.
State capital paid for compensation, site clearance, support, resettlement; support for construction of temporary works
– State capital paid for compensation, site clearance, support and resettlement; temporary work construction support, shall be allocated from public investment capital in accordance with the law on public investment.
– Based on the size and characteristics of each project, the contracting authority shall consider separating the state capital used for compensation, site clearance, support and resettlement; support for the construction of temporary works into component projects or sub-projects, in compliance with the law on public investment and the law on land.
Costs of competent authorities, contracting authorities, PPP project preparation units, bid solicitors, PPP project assessment boards, units assigned to evaluate PPP projects
– Project preparation costs of competent authorities, PPP project preparation units; expenses for the evaluation conducted by PPP Project Assessment Boards and the units assigned to the task of evaluating PPP projects; expenses for organization of the investor selection or signing of contracts by competent authorities or bid solicitors shall be covered by public investment capital, other lawful capital sources, and shall be included in the total investment in each project.
– The selected investor shall be responsible for reimbursing expenses specified in Clause 1 of this Article to the state budget in accordance with the law on state budget or legal capital used for the project preparation.
– Expenses for project implementation after signing a contract by a competent authority or a contracting authority shall be covered by their regular capital.
Budgeting for public investment capital to be used in a PPP project
Budgeting for public investment capital to be used in a PPP project shall be subject to the following regulations:
– Based on an investment policy decided by a competent authority, public investment capital used in a PPP project shall be incorporated in the medium-term public investment budget plan;
– Based on the medium-term public investment plan, the feasibility study report approved by a competent authority, and results of investor selection, public investment capital used in a PPP project shall be integrated into the annual public investment plan;
– In case where a PPP project has the need to use public investment capital, but is not on the list of projects specified in the medium-term public investment plan, the competent authority shall consider adding it to this list, and use the contingent capital of the medium-term public investment plan. Processes and procedures for modification of a medium-term public investment plan must comply with the law on public investment;
– In case where a PPP project developed and executed under a BTL contract or BLT contract uses public investment capital to pay a PPP project enterprise, integration of public investment capital into the real annual and medium-term public investment plan shall be subject to the provisions of Clause 1 and 2 of this Article. Based on the PPP contract term, the public investment capital share may be dispensed over the next medium terms.
Arrangement of finances for execution of PPP projects
– Investors and PPP project enterprises shall be responsible for contributing equity capital, raising loan capital and other legal funds to implement projects under terms and conditions of PPP contracts. Total amount borrowed through various lending forms must not exceed total loan amount specified in a PPP contract.
– Within 12 months from the contract signing date, the investor and PPP project enterprise must complete the financial arrangement; as for projects subject to investment policy decisions of the National Assembly or the Prime Minister, this time limit may be extended, but not exceeding 18 months.
– Actions to be taken in the event that the investor or the PPP project enterprise fail to make financial arrangement within the time limit specified in Clause 2 of this Article must be specified in the invitation for bid.
Regulations on Equity contribution
– Investor’s equity contribution must be at least 15% of total investment in a project, excluding state capital specified in Article 70 and 72 of 2020 Vietnam Law on Public-Private Partnership Investment.
– Investors must make equity contribution according to the schedule agreed upon in the PPP contract.
Issuance or offering of corporate bonds of PPP project enterprises
– PPP project enterprises may issue and buy back separate bonds they have issued under the provisions of 2020 Vietnam Law on Public-Private Partnership Investment, the law on enterprises and securities to raise capital for the implementation of PPP projects; shall be prohibited from the private issuance of convertible bonds and warrant-linked bonds.
– The issuance of bonds as per Clause 1 of this Article must satisfy the following conditions:
+ The amount of capital raised through the bond issue shall not exceed the value of the loan amount determined in the PPP contract;
+ Funds raised through the bond issuance cannot be used for any other purpose than the project implementation under PPP project contracts or for the purpose of restructuring of corporate debts;
+ PPP project enterprises must open an escrow account to receive money from bond purchases. Disbursement of funds acquired from issuance of bonds shall be subject to point b of this clause.
– If a PPP project enterprise has already operated for less than 1 year, when issuing bonds as prescribed in Clause 1 of this Article, it shall be exempt from the requirement concerning submission of the financial statement of the year preceding the year of issuance which is audited according to regulations of the law on enterprises.
– The Government shall elaborate on this Article.
Please see more:
- Instructions for exclusive registration of company logos in Vietnam
- Service of changing the legal representative of Vietnamese enterprises
Services of Lawyer X
Prestigious professional services: Firstly, the team of consultants and consultants for many years in the field of civil status, and customer support.
On-time: Certainly, with the motto “Get your lawyer right at your fingertips”, we ensure the service always performs on time. The rights and interests of customers always come first.
Cost: Besides, Lawyer X’s service costs are highly competitive; depending on the nature of the particular case. So, we want our guests to have the best possible service experience. Therefore, costs which guaranteed to be the most suitable and economical for customers.
Confidentiality of client information: Finally, all personal information of clients Lawyer X will be 100% confidential.
If you need any further information, please contact LSX Law firm: at +84846175333 or Email: [email protected]
Frequently asked questions
Yes! State capital may be used for Supporting the building of construction works and infrastructure systems as part of a PPP project.
Yes! State capital may be used for paying PPP project enterprises for their provision of public products and services.
Investors must make equity contribution according to the schedule agreed upon in the PPP contract.
Conclusion: So the above is Regulations on PPP project funding in Vietnam. Hopefully with this article can help you in life, please always follow and read our good articles on the website: lsxlawfirm.com
