Infrastructure Constraints And Development In Vietnam Economics Essay

The past twenty years has seen Vietnam make strong economic progress. A critical part of this success has been a high level of investment in infrastructure as there is a strong correlation between the growth of a country’s economy and the investment in infrastructure development.

Growth of Vietnam’s GDP and Infrastructure Investment

The Government of Viet Nam’s 2006-2010 Socio-Economic Development Plan (SEDP) established the overarching goal of reducing poverty incidence by 10%-11% by 2010. The government has made substantial progress in this area, bringing down the share of the population below the poverty line from 58% in 1993 to 15% in 2008. Despite the global economic crisis, the country boasted an average annual growth rate of 6.6% during 2007- 2010.

1. Infrastructure Constraints and Development in Vietnam

Current situation

Understanding the importance of infrastructure development, over the years, Vietnam government has spent large amounts of capital investment in this area. In the period 2001-2010, the proportion of social capital for nearly 40% of GDP. Although being prioritized for funding, but the mechanism of fiscal policy in developing infrastructure remains inadequate. The state budget was scattered and ineffective; no mechanism to encourage private sector investment. This is the difficulty that many countries, including Vietnam, have resolved to work towards building a synchronous infrastructure system modernization.

Vietnam government’s current major economic policy challenge is containing inflation and stabilizing the exchange rate while promoting economic growth. In terms of fiscal policy, the budget deficit (9% of GDP in 2009) is expected to remain relatively high for 2010-2011 as the government continues to spend heavily on infrastructure and social welfare programs. In January 2010, the government raised $1 billion through an international sovereign bond issue (10-year tenor) with a spread of 333 basis points over the 10 – year benchmark United States Treasury. This was the first overseas bond since 2005. Meanwhile, the government continues to seek substantial concessional financing from international donors. Viet Nam received $2.7 billion in official development assistance (ODA) in 2008 and an estimated total of $3.3 billion in 2009. Projected ODA levels for 2010 and 2011 are estimated at $3.2 billion for each year.

Theo Diá»…n Ä‘àn kinh tế thế giá»›i, Việt Nam hiện xếp hạng cuối cùng trong chỉ số năng lá»±c cạnh tranh về chất lượng cÆ¡ sở hạ táºng so vá»›i các nÆ°á»›c lân cận. Theo tính toán, chi phí vận chuyển, hậu cáºn liên quan đến sá»­ dụng cÆ¡ sở hạ táºng chiếm 9,5% GDP ở Mỹ, 11% ở Nhật, 21% ở Trung Quốc và tá»›i 25% ở Việt Nam. Đồng thời do thiếu cÆ¡ sở hạ táºng, bến cảng phù hợp mà má»-i năm ViệtNam còn phải tiêu tốn thêm khoảng 1,7 tá»· USD chi phí hậu cáºn do các công ty trong nÆ°á»›c phải trung chuyển hàng hóa qua Hồng Kông và Singapore.

 

Nhu cáºu cÆ¡ sở hạ táºng Việt Nam là rất lá»›n; trong Ä‘ó nhu cáºu về Ä‘iện năng tiếp tục tăng trên 15% má»™t năm và sẽ cáºn khoảng 60 tá»· USD vào năm 2025. Nhu cáºu Ä‘áºu tÆ° về viá»…n thông, bến cảng, sân bay, đường bá»™, đường sắt và vận tải đường không cÅ©ng rất lá»›n. Bá»™ KH&ĐT dá»± tính Việt Nam cáºn 139 tá»· USD trong vòng 5 năm tá»›i để Ä‘áºu tÆ° vào những lÄ©nh vá»±c này. Yêu cáºu nhanh chóng cải thiện cÆ¡ sở hạ táºng cá»a Việt Nam Ä‘ã thúc đẩy ná»- lá»±c chung trong áp dụng cÆ¡ chế hợp tác nhà nÆ°á»›c – tÆ° nhân. Má»›i Ä‘ây, má»™t số dá»± thảo quy chế về thí Ä‘iểm hợp tác nhà nÆ°á»›c – tÆ° nhân Ä‘ã được xây dá»±ng và gá»­i Ä‘i để lấy ý kiến. Theo Bá»™ Kế hoạch và Đáºu tÆ°, các quy định này sẽ sá»›m được ban hàng. Vá»›i những nhà Ä‘áºu tÆ° Ä‘ang tìm kiếm phÆ°Æ¡ng thức phù hợp để gia nhập các thị trường má»›i, hợp tác nhà nÆ°á»›c – tÆ° nhân sẽ là má»™t phÆ°Æ¡ng án hấp dẫn.

Infrastructure development investment in Vietnam 1990-2010

-Transport infrastructure: in 10 years, the development of the highway network is more interested in development. The connection route between seaports, airports with national road network has been invested. Roadway density increased significantly from 0.66 km/km2 in 2000 to 0.77 km/km2 in 2010.

Vietnam Railways to improve the quality and organization of transport. National railway network has a total route length of 2654 km are 3 types of gauge: 1,000 mm size is 85%, 1435 mm gauge and integrated 6% and inner road 9%.

Vietnam’s seaport system has 49 ports distributed throughout the length of coastal. The total amount of goods through the port increased rapidly over the past 10 years from 82.4 million tons in 2000 to 254.9 million tons in 2010, average annual growth rate of 11.2% / year.

Inland waterways have been managed and exploited on the total length of 15,436 km river, the channel can be exploited is 41.900km. Inland waterway transport has been successful in keeping and maintaining market share at 22% to 17% on goods and passengers.

Aviation infrastructure: Currently there are 22 airports operating. For over 10 years, many airports have been invested in renovating, upgrading and conversion purposes from military airfields to civil operators. Total air transport capacity increased from 6.8 million passengers and 119.6 thousand tons of cargo in 2000 to 31.4 million passengers and 590 thousand tons of cargo in 2010.

– Energy Infrastructure: Primary energy consumption increased from about 32 million tons of oil equivalent in 2000 to over 53 million tons in 2008. Energy System developed under the direction of diversification of supply, from place depends heavily on hydro power, coal power to new structure includes diverse energy resources of coal, petroleum, hydropower, and other forms of energy. The investment in the exploitation, transport and processing of oil, gas has significantly reduced its dependence on imported energy and accelerate the diversification of energy supplies. In 10 years, new investment and put into operation more than 13.361MW power capacity, about 86 thousand km of lines and 63,500 MVA of substation capacity transmission grids and high-voltage distribution center, bringing total installed capacity up to 21.500MW, capacity availability and the total length reached 19.713MW transmission grids and distribution of electricity to 377 thousand km. Total electricity production increased from 26.6 billion kWh in 2000 to 100 billion kWh in 2010 increased 3.76 times, ensure supply meets electricity load demand increased rapidly with an average rate of 14.5% / year.

– Telecom Infrastructure:Information Technology and Communication Infrastructure systems is built wide and modern. National information network developed rapidly, with modern coverage throughout the country, connected with broad bandwidth to countries in the region and the world.

– Water and sewerage infrastructure:

The total capacity of the irrigation infrastructure has secured directly irrigated 3.45 million hectares, creating a potential for 1.13 million ha, targets 1.4 million hectares, 0.87 million hectares of salt water prevention and rehabilitation sour alum 1.6 million hectares, water supply levels and create 5-6 billion m3 per year for living, industry, tourism, services. The irrigation has contributed to improving acidity, aluminum, salt, environmental improvement and development of specialized areas, rapid and stable development of the cultivated area, yield, production of rice and facilitate sustainable development of aquaculture. Every year the irrigation to ensure water supply 5-6 billion m3 of daily life, industry, services and other economic sectors. To date approximately 70-75% of the rural population has been granted hygienic water supply at 60 liters / day. Sea dike system in the Northern and North Central can prevent salinity and tidal frequency of 10% storms at level 9.

– Urban infrastructure:

Urban water supply in 2010 coverage rate to 70% service; all cities and towns all have investment projects in construction, renovation and expansion of water supply systems: 45% towns with centralized water supply systems scale from 500-5000 m3/day; the industrial zones has been supplied to meet daily needs and business. The amount of water for daily water about 60-70%, demand for industrial production from 20-30% and for other services about 10-15% of water production.

Urban drainage system: Length of sewer rate per capita in large urban areas reached 0.2 to 0.25 m / person, other small towns only from 0.05 to 0.08 m / person. In the industrial parks and urban areas, new drainage and wastewater treatment system were buildt. From 2010, there were 68% of operating industrial parks have wastewater treatment systems.

Daily Water supply: By the end of 2010 there were 85% of rural population use hygienic water, 50% is standard water; all kindergartens, schools, clinics and other rural public buildings have enough clean water and sanitation; minimize environmental pollution in craft villages.

The number of kindergartens, early childhood has increased 1.5 times after 10 years, In 2010 the number of national standard preschool is 15.8%, primary 36.6%, secondary 17.7% and high schools is 9.5%.The network of universities and colleges have been expanded, including many non-public schools was established and put into operation, to March 2011 there were 414 universities and colleges, up 261 schools compared to 2000.

Network of clinics from healthcare facilities to the Central Government, both public and non-public be expanded and strengthened. Health networks, although not many in number basis, but there has been a clear improvement in the size of the premises. In 10 years the total number of medical facilities rose by 300 establishments, including hospitals increase of 210 hospitals. Total number of beds increased by 54.4 thousand beds, mainly increased the number of hospital beds. By 2010 the number of beds in an extra 20.4 thousand people, higher than the average low-income countries (12 beds) and middle-income (16 beds). Network hospitals are evenly distributed throughout the country but most large hospitals, specialized hospitals focus is deep in some provinces and cities including Hanoi, Ho Chi Minh City and Da Nang.

Urban transport infrastructure has been improved, the grade III or higher have built, the main roads are relatively uniform with drainage systems, pavement, lighting and trees. The big cities like Hanoi, Ho. Ho Chi Minh City, Da Nang, Hai Phong, Can Tho has many projects to upgrade and build new outbound transport systems, gates, ring road to ensure traffic urban areas. Public transport, which have been formed and developed, many public transport lines are formed. In Hanoi and Ho Chi Minh was developed on mass transportation such as subways, bus rapid transit (BRT).

Clean Water supply: The total design capacity is 6.2 million m3/day, threefold increase in 1998 (2.1 million.m3/day), the rate of urban population with clean water supply reached 76% the ratio of loss is about 30%, the usage of clean water in urban area is 90 liters/day for one person. The rate of urban water supply reached 88.5% in Hanoi and Ho Chi Minh City reached 87%. So far, all the provincial city has an investment project with the renovation, upgrade and expand water supply systems.

Drainage: to date there are eight urban wastewater treatment plants with total capacity reached about 315,000 m3/day/night, more than 30 cities are building or preparing to build wastewater treatment plant.

Electricity supply infrastructure, telecom infrastructure: The cable system transmission and distribution, information networks has been underground, significant improvement in the urban cities such as Hanoi, Ho Chi Minh City.

Conclusion

The infrastructure requirements for sustainable development in Vietnam are seriously lacking and that means that the country’s infrastructure stock needs to be upgraded. The inadequate and poorly performing infrastructure is a major challenge to Vientma’s economic development and growth, and constitutes a major impediment to the achievement of the country’s Millennium Development Goals (MDGs). The country’s infrastructure needs are broad based and current infrastructure investment levels are far below those required.

Infrastructure shortages are proving a key constraint in sustaining and expanding Vietnam’s economic growth and ensuring that all Vietnamese are able to share in its benefits. To meet this challenge, Vietnam Government is committed to raising investment in infrastructure.

2. PPPs Infrastructure National level actions:

Traditionaly, the provision of public infrastructure has been the responsibility of the state and has been financed through taxes and loans via the budget allocation.

Economic Policy and Business climate Context for Public Private Partnership

Vietnam has made huge strides in the last 15 years in terms of GDP growth. Indeed, the World Bank Group (WBG) reported that annual per capita GDP growth has averaged around 6% for over a decade. Further, WBG highlight that since 1990, poverty measured at the US$1 per day threshold hasfallen from 51% of Vietnam’s 89 million population to around 8%. It is not surprising that during the same period, the vietnam government has invested heavily in economy building infrastructure such as power generation, transport system, telecoms and waste,water. The state’s burget and Official Development Assistance (ODA) will not be able to keep up with the pace at which Vietnam’s economy is growing. Being aware of this, Vietnam has an objective the use of the PPP programme to be implemented under the PPP Regulations to attract private sector investment to deliver public infrastructure which together with the private projects which are the focus of the existing BOT regime to sustain the nation’s economic development.

According to research by the United Nations development program (UNDP), the investment rate in the infrastructure in developed countries is about 3-5% GDP while the total investment rare for Vietnam’s infrastructurein recent years remains at 10%, much higher than the international standard and the countries in the region. Specifically, the proportion of which in China is only about 3%, Indian 9%, Malaysia approximately 5%, Lao 4.7%, Philippines 3.6%, Cambodia 2.3%.

Computing the Investment-demand in infrastructure system of Vietnam in next 10 years to 2020 is about 150 – 180 billion USD; including electricity needs $ 40 billion, transport need $ 53 billion (3 billion for railways and subways, seaports need $ 25 billion). On average, each year the amount of capital is 15 – 16 $ billion

According to the calculations of the Ministry of Planning and Investment, with the ability to raise capital as at present (2011), the state-funded sources such as state budget, SOEs, ODA, government bonds would only meet 50% of demand for investment. This means 50% of the investment capital must be raised from other economic sectors, including domestic and foreign source.

Acorrding to Evaluating the environment for public-private partnerships in Asia-Pacific

The 2011 Infrascope which was written by the Economist Intelligence Unit and commissioned by Asian Development Bank, with a score below 30 in the 100-point scale to assess the environment for Public-Private partnership in the Asia Pacific region in 2011, Vietnam, Mongolia and Papua New Ginea located in the nascent group. This ranking results was implemented by Economist Intelligence unit (EIU) for Asian Development Bank. The report also pointed out that Vietnam government shows strong interest in developing PPP projects, as evidenced by a new pilot decree and there is a general lack of experience as regards PPPs, and an underdeveloped regulatory and institutional framework.

Overall ranking:

Category score: VIETNAM

– Legal & regulatory framework (weighted 25%): rank 15 – point 18.8

– Institutional framework (weighted 20%): rank 16 – point 16.7

– Operational maturity (weighted 15%): rank 13 – point 25.5

– Investment climate (weighted15%): rank 12 – point 46.4

– Financial facilities (weighted15%): rank 13 – point 33.3

– Sub-national adjustment (weighted 10%): rank 12 – point 25.5

Regulatory reform has swept across the region in recent years, with several countries instituting new acts, updating frameworks, or currently considering amendments. Vietnam have recently instituted new PPP regulations in 2011.

Legal and regulatory framework

Institutional framework

Operational maturity

Investment climate

Financial facilities

Sub-national adjustment

PPPs development strategy for infrastructure in Vietnam

With the aim to improve the efficiency of infrastructure investment and reduce the inefficient investment projects, Vietnam understand that the involvement of private sector is essential. The private enterprises will promote more efficient use of capital, creativity, risk-sharing, as well as the effectiveness of the project management activities, construction works.

Therefore, Vietnam government has policies to encourage other economic sectors, such as private sector participation in the form of public private partnership. The central government began to take actions in favour of Public Private Partnership (PPP) projects in the late 1990s and has enacted numerous laws and regulationsto promote private sector participation in infrastructure investment. The concept of public private partnership model in Vietnam is usually associated with BOT (build – operate – transfer) or BT (build – transfer), BTO (Build-Transfer – operation), BOO (build-own-operate), in fact there are many forms of public private partnership projects with many different levels of shared responsibility and risk such as service contracts, management contract, lease, franchise.

Vietnam is currently taking steps in the development of PPP infrastructure investment. PPP investment market in Vietnam is more promising for investors, private investment funds around the world. Measures to promote public-private partnerships have been taking in Vietnam. These have included the development of PPP legislation and regulations, issuance of guidelines on PPP policy and procedures, establishment of PPP units or cells, development of model concession agreements, that more adequately match the needs of the infrastructure sectors.

With the policy framework to the study of international practice, and meet the criteria of transparency, equality between investors, the Vietnamese government set expectations for the successful implementation of investment policy model”public private Partnership”, thereby attracting private sector as a reference not only capital but also the level of technology and management experience of the region to contribute to the development of infrastructureand public services. The role of the private sector in public private partnership is not just a matter of providing funds for the public sector, no less important contribution of the private sector belong to the initiative to solve the problem of the project as well as the strength of technology, engineering, and the ability to manage and operate the project to achieve the goal of improving operational efficiency and increase service quality. What about the role of government is to build a framework of transparency, clarity and fairness, besides ensuring a consistent process is long-term commitment to the PPP also increase interest leads to the private sector.

Government issued PPP  regulation Decision 71/2010/QD-TTg with effect from 15/01/2011, which allows the pilot to investors in the form of public private partnership (PPP).

In the PPP Regulations, investment in the ‘public-private partnership’ form is defined as “the State and investor jointly implement projects on development of infrastructure or provision of public services on the basis of project contracts”. Such ‘project contracts’ being defined as “a contract signed between a competent state agency and an investor under which the State franchises investment in and operation of a work or provision of a public service to the investor within a specified period of time. Based on the characteristics of each project, a project contract stipulates commitments on the responsibilities, obligations and powers”.

Under the PPP Regulations, the Ministry of Planning & Investment (MPI) has a central co-ordinating role to implement the programme and has established a PPP Task Force to facilitate this. The VG have referred to a “learn by doing” approach for MPI who have the output of preparing and delivering a framework for the PPP programme. The PPP Regulations expressly refer to the well-known EU principles of “competitiveness, fairness, transparency, economic efficiency and conformity with Vietnamese law and international practices”. However, there is no mention of implementing regulations or guidance.

The VG has received financial support for feasibility and other studies from the World Bank and has retained JICA and other consultant advisers to advise it on the structural building blocks for the PPP programme

“Sẽ hoàn thiện cÆ¡ chế hợp tác công- tÆ°”

Ngày 9/11/2010, TTCP Ä‘ã ban hành Quyết định số 71/2010/QĐ-TTg vè việc ban hành Quy ché thí Ä‘iểm ĐT theo hình thức PPP. Iệc lá»±a chọn NĐT thá»±c hịn dá»± án sẽ được thá»±c hiện thông qua đấu tháºu cạnh tranh nhằm tối Ä‘a hóa lợi ích và tạ cÆ¡ há»™i công bằng cho cả NĐT trong nÆ°á»›c và NĐT nÆ°á»›c ngoài tham dá»±. Đây là thông lệ phỏ iến trên thé giá»›i và được cá»™ng đồng DN và nhiều NĐT quan tâm.

Trong thời gian tá»›i, khung chính sách PPP sẽ dáºn được hoàn thiện theo thông lệ quốc té, Ä‘áp ứng các tiêu chí vè hiệu quả kinh tế, minh bạch, tối Ä‘a hóa lợi ích, cạnh tranh bình đẳng giữa các NĐT, phân định và quản lý tốt rá»i ro, vì lợi ích cá»™ng đồng…

Điểm quan trọng trong khung chính sách PPP là xác định Ä‘áºy Ä‘á» hÆ¡n các hình thức và cÆ¡ chế nhà nÆ°á»›c ham gia trong các dá»± án PPP nhằm tăng tính hả thi và hiệu quả kinh tế cho các dá»± án. Tren cÆ¡ sở Ä‘ó khuýn khích NĐT tham gia ĐT.

Chính sách này nhằm mục tiêu huy Ä‘á»™ng và định hÆ°á»›ng khu vá»±c tÆ° nhân sá»­ dụng nguồn vốn thÆ°Æ¡ng mại và các nguofn vốn khác do NĐT huy Ä‘á»™ng cho các dá»± án PPP; qua Ä‘ó nâng cao hiệu quả ĐT, kiểm soát nợ công trong hạn mức an toàn và mở rá»™ng mô hình hợp tác PPP sang nhiều dá»± án và lÄ©nh vá»±c khác cá»a nền kinh tế.

Theo quy chế thí Ä‘iểm, Bá»™ KH&ĐT Ä‘ang nghiên cứu trienr khai thí Ä‘iểm má»™t số dá»± án theo mô hình này và tren cÆ¡ sở Ä‘ó, trong quá trình triển khai sẽ cùng tham khảo ý kiesn cá»a các nhà tài trợ, các tổ chức quốc tế, sẽ hoàn thiện cÆ¡ chế hợp tác công – tÆ°…

Public Private Partnership Infrastructure Projects

Viet Nam is one of the best performing economies in the world over the last decade. Viet Nam has become increasingly integrated with the world economy. Exports have been the main drivers for growth, and foreign investments have been buoyant in recent years. Growth is driven by the rising importance of the private sector. Back to the mid of 1980s’ when Vietnam change from a centrally planned to a market-oriented economy, the country faces a dilemma in terms of satisfying growing demands for infrastruture combined with serious constraints in public funding and the Private sector provises a critical way of filling this gap. The nation’s infrastructure network has fallen into disrepair and require large infusions of investment capital in order to remain serviceable. In addition, the public infrastructure in most urban areas are inadequate to serve their businesses and citizens. As a result of what some have termed a “crisis” in Vietnam infrastructure, public and private sector leaders are calling for alternative approaches to repair and build facilities.

Types of PPP projects in Vietnam:

Æ’-BOT BOT projects: Private contractors to build the infrastructure exploit in a projects: Private contractors to build the infrastructure, exploit in a specific period of time, and then, transfer to the State

– BT projects: Private contractors to build the infrastructure and transfer to the State

– Transferring the right to use/exploit infrastructure projects: Private contractors to use/exploit the infrastructure and pay the state a specific amount of money during a specific period in the contract.

Æ’ – Land- for-infrastructure projects: the State assign a specific area of land to the private contractors with the value of land use right equal to that of BT infrastructure projects

– People participation projects: usually for small projects at the local (commune) levels to meet the requirement of local infrastructure development

Ở Việt Nam, theo thống kê cá»a Ngân hàng Thế giá»›i, trong giai Ä‘oạn 1990-2011 Ä‘ã có 66 dá»± án hạ táºng được thá»±c hiện vá»›i sá»± tham gia cá»a khu vá»±c tÆ° nhân. CÅ©ng giống nhÆ° các nÆ°á»›c khác, mô hình BOT và BOO chiếm tá»· pháºn chá» yếu. Hai lÄ©nh vá»±c chiếm tá»· pháºn lá»›n nhất là Ä‘iện và viá»…n thông. Ngoài ra, có thể kể đến nhiều dá»± án hợp tác công – tÆ° khác Ä‘ã và Ä‘ang được triển khai từ thập niên 1990 đến nay nhÆ°: BOT cáºu Cỏ May, BOT cáºu Phú Mỹ, Ä‘iện Phú Mỹ, và rất nhiều nhà máy Ä‘iện nhỏ và vừa khác Ä‘ang được thá»±c hiện theo phÆ°Æ¡ng thức BOO.

Riêng năm 2010, theo thống kê cá»a cục Ä‘áºu tÆ° nÆ°á»›c ngoài, tổng số dá»± án cấp má»›i được Ä‘áºu tÆ° trá»±c tiếp từ nÆ°á»›c ngoài là 969 dá»± án, trong Ä‘ó theo mô hình Ä‘áºu tÆ° BOT, BT, BTO có 6 dá»± án chiếm 1% trên tổng số dá»± án cấp má»›i. NhÆ°ng số lượng dá»± án cấp má»›i chiếm 55% so vá»›i số dá»± án Ä‘áºu tÆ° theo hình thức BOT,BTO,BT là 11 dá»± án, chiếm % cao nhất trong số tất cả các hình thức Ä‘áºu tÆ°, so vá»›i năm 2009 không có dá»± án má»›i nào Ä‘áºu tÆ° theo hình thức BOT,BT,BTO Ä‘ó là má»™t sá»± khởi sắc tốt.

Về hình thức 100% vốn nÆ°á»›c ngoài chỉ chiếm 8% trên tổng số dá»± án, số dá»± án cấp má»›i chỉ có 799 dá»± án trong khi tổng số dá»± án đăng ký là 9.599 ( tính hết ngày 21/12/2010), còn về hình thức liên doanh chỉ chiếm 7% trên tổng số dá»± án cấp má»›i đăng ký, hình thức cổ pháºn và hợp đồng hợp tác vốn Ä‘áºu tÆ° chiếm láºn lượt là 4% và 1% trên tổng số dá»± án cấp má»›i. Ta thấy rằng hình thức Ä‘áºu tÆ° theo hợp đồng BOT, BT, BTO Ä‘ang phát triển theo chiều hÆ°á»›ng tích cá»±c. Vậy dÆ°á»›i sá»± giám sát và há»- trợ cá»a nhà nÆ°á»›c, hình thức Ä‘áºu tÆ° theo mô hình PPP Ä‘ã bắt Ä‘áºu có sá»± tiến triển so vá»›i các hình thức Ä‘áºu tÆ° khác

Hochi minh city : Before the decree was issued, about 100 projects under PPP, which were either BOT or BT (Build – Transfer), were not successful because there was an insufficient legal foundation, which easily discouraged investors.

Many seminar participants said the private sector should partner with the State in developing infrastructure, as the State budget for basic development was limited and funds from Official Development Assistance had decreased.

Investment demand, especially for the transport sector, is very high in HCM City and the country in general.

Between 2011 and 2025, the city needs about VND880 trillion (US$42 billion) for infrastructure development, while the entire country needs US$160 billion for building transport system from the 2010 – 2020 period.

Nguyen Trong Hoa, head of the HCM City Institute for Development Studies, said it was necessary to develop measures to attract investment funds from other sources, as the State budget and ODA funds were shrinking.

An expert at the institute, Hoang Thi Kim Chi, agreed, saying that the Government should develop a comprehensive legal framework as well as clear and appropriate policies to encourage investors.

Several public projects have been carried out under PPP in HCM City, including Binh An, BOO Thu Duc, Kenh Dong and Can Gio water treatment plants. The Phu My Bridge, Dau Giay – Phan Thiet Freeway and HCM City – Trung Luong Freeway projects were all public-private partnerships. – VNS

Table1: Total Projects by Primary Sector and Subsector (US$ million) 1990-2011

Sector

Sub-Sector

Number of Projects

Total Investment

Energy

Electricity

49

3,475

Natural Gas

1

1,300

Total Energy

50

4,775

Telecom

Telecom

4

2,280

Total Telecom

4

2,280

Transport

Airports

1

15

Roads

1

133

Seaports

7

1,087

Total Transport

9

1,235

Water and sewerage

Treatment plant

3

305

Total Water and sewerage

3

305

Total

66

8,594

Table2: Total Investment in Projects by Type and Primary Sector (US$ million) 1990-2011

Sector

Concession

Divestiture

Greenfield project

Management and lease contract

Total

Energy

205

340

4,316

4,861

Telecom

456

1,824

2,280

Transport

1,235

1,235

Water and sewerage

305

305

Total

661

340

7,680

8,681

Most infrastructure projects with private participation fit in one of above four categories. But the boundaries between these categories are not always clear, and some projects have features of more than one category. In these cases projects have been classified in the category that better reflects the risk borne by the private sector.

PPP projects:

Power

There have been some successes in the power sector: The Phu My 2-2 and Phu My 3 projects are the leading examples of what can be done. 1500MW of power were financed entirely by the private sector. These plants become the property of the government after 12 years and at no cost to the State budget. But the Phu My 2-2 and Phu My 3 projects were isolated. No follow-on project has been licensed, despite the best efforts of numerous developers (though some are rumored to be closed) and despite the collabora-tive work of IFC and the MOIT to develop the Nghi Son 2 project for bid. 5.3 In addition, Hiep Phuoc, Bourbon Tay Ninh and Formosa are examples of successful ‘captive’ power production schemes, allowing private companies to generate their own electricity for use in their factories or industrial zones and to sell excess output to EVN.

Ports

There have also recently been some successes in the private sector with ports, for example at Cai Mep and Hiep Phuoc. The public sector has had to provide roads and will have to provide dredging support, but there is little formal public-private cooperation, just ad hoc cooperation that is not sufficient for the future of infrastructure development as a whole.

Telecoms

There were several BCCS in the 1990s but little infrastructure investment except by SOES.

Water

There has been a water supply project – the Thu Duc project – which has had some state support increased income through the sale of water to customers. In addition, there is one example of a small-scale water supply business which has entered into water supply contracts in a vulnerable remote area. In addition to the income for delivery of treated water, the private company has developed additional income from seli1ng treated water to private customers.

Roads

There have been some private sector road projects, but the land issues are more and more insurmountable absent clear regulations.

Municipal Solid Waste Treatment:

This is clearly a high priority for government, but delays in licensing and confusion about which government body has responsibility have hampered developments by private companies. There is one model of solid waste separation and recycling which does appear to have the potential to be expanded nationally. A People’s Committee contract to supply and pay for acceptance of waste guarantees the contractor a basic income; this is supplemented by additional private income from selling recovered materials. This combi-nation of public and private income makes this a more attractive investment for the private sector.

Airports

Various BOT efforts are underway, but there are no known successes to date.

Summary of legal documents related to Public Private Partnership investment:

PPP projects in Vietnam are priorities in the fields of infrastructure development such as roads, bridges, tunnels, ferries, roads, waste collection and treatment system, power, water and soft infrastructure in health, education, information technology. In order to attract private investment through public private partnership, the government has used the incentives andensure investment through tax incentives, the right to purchase foreign currency or guarantee foreign currency balance, the right to ensure the provision of public services. Vietnam is not completely new to the PPPs idea. Vietnam introduced the concept of Build-Operate-Transfer (“BOT”) investment projects when it amended its Foreign Investment Law in 1992. A year later, the BOT Regulations were enacted by Government Decree. Many BOT projects were implemented and mainly in transportation sector. Unfortunately, not all of these were equally successful so the implementation have decelerated since. It can be noticed that both government, practitioners and private companies lack knowledge on how to procure PPPs projects hence they have become reluctant to do so. There is still little evidence of private participation in the infrastructure sectors in Vietnam.

Related to the PPP form of investment or the investment form of BOT, BTO and BT in the field of road traffic, including highways, the current government has issued a number of the following documents:

– Law on Investment

The decree of the Government’s investment in BOT, BTO and BT:

– Decree No. 108/2009/NĐ-CP dated 27/11/2009 on investment in the form of Build – Operate – Transfer, Build – Transfer – Sales, Construction Contract – transfer. This Decree provides domains, conditions, order and procedures for investment, investment incentives, rights and obligations of the parties of Build – Operate – Transfer, Build – Transfer Affairs – Business, Construction contracts – Transfer.

– Decree No. 24/2011/ND-CP dated 05/4/2011 to amend some articles of Decree No. 108/2009/NĐ-CP November 27, 2009 on investment in the form of Build – Operate – Transfer, Build – Transfer – operate, Construction- Transfer contract. This Decree is an improvement to the existing regulation for BOT, BTO and BT contract. It explains the type of the infrastructure that can be implemented under those three types of contract as follow:

a)      Roads, road bridges, road tunnels and ferry landings;

b)      Railways, railway bridges and railway tunnels;

c)       Airports, seaports and river ports;

d)      Clean water supply systems; sewage systems; and wastewater and waste collecting and handling systems;

e)      Ä‘) Power plants and power transmission lines;

f)       Infrastructure works of heath service, education, training, career training, culture, sport and offices of State agencies;

g)      Other infrastructure works as decided by the Prime Minister.

– PPP  regulation Decision No. 71/2010/Qd-TTg about  Promulgating the Regulation on Pilot Investment in The  Public-Private Partnership Form. This Decision regulates  the Pilot Investment in PPP form start from the project  preparation until the project transfer from private to the  government; it is also explain about the task of each ministries and government bodies. According to this Decision, the Ministry of Planning and Investment (MPI) will oversee the feasibility evaluation and implementation of projects, aided by “authorised state agencies”, such as government ministries and People’s Committees. For the government guarantee, actually the Government of Vietnam will not provide in general. But for special case project, the private-owned company can propose for government guarantee to the State Agency where the project is belong to, and the State Agency will deliver the proposal to Ministry of Planning and Investment to be approved by the Prime Minister. The government support is exist in the form of land acquisition responsibilities. Decision No. 71/2010/Qd-TTg prescribe the conditions, procedures and rules that apply for some pilot projects for development investment in the form of public – private partnerships in infrastructure sector, providing public services ( Roads, bridges, tunnels, ferries; railways, bridges, railways, underground railways transport urban airports, seaports, river ports; water supply system; House power; Health (hospital) environment (waste treatment plant).

2.2.3. Decision 229/QD-TTg on 08/2/2010 by the Prime Minister issued a number of mechanisms and policies to support investment in the highway project Trung Luong – My Thuan.

According to this decision, the Prime Minister Corporation BIDV Expressway Development (BEDC) is the BOT enterprise project execution speed motorway Trung Luong – My Thuan in the form of BOT and some mechanisms and policies to support investment: i) The clearance, ii) The implementation of mobilizing capital project iii) The contractor selection, iv) Regarding Exploitation and services along v) the Other institutional support for this project. And a series of individual decisions by the Prime Minister as: Decision 1621/QD-TTg on 29/11/2007 by the Prime Minister on a number of mechanisms, policies pilot project investment highways Car Ha Noi – Hai Phong, 229/QD-TTg on 08/2/2010 Decision of the Prime Minister issued a number of mechanisms and policies to support investment in highway projects Trung Luong – My Thuan

Whilst the current economic growth has been underpinned by the high level of infrastructure investment, there are still ample opportunities for improvement when Vietnam compares itself to countries like Singapore, Malaysia, Thailand and China. Vietnam will need to increase the levels of infrastructure investment to leap-frog up the “quality of infrastructure” curve to increase its overall national competitiveness.

3. The role of Private Sector in Public Private partnership in VN

New research from the Vietnam Chamber of Commerce and Industry (VCCI) finds that the private sector plays an important role in driving forward economic reform in Vietnam’s provinces.

Development Strategy Context for Public-Private Partnership in Viet Nam:

The Government of Viet Nam’s 2006-2010 Socio-Economic Development Plan (SEDP) established the overarching goal of reducing poverty incidence by 10%-11% by 2010. The government has made substantial progress in this area, bringing down the share of the population below the poverty line from 58% in 1993 to 15% in 2008. Despite the global economic crisis, the country boasted an average annual growth rate of 6.6% during 2007-2009. Gross domestic product (GDP) growth is expected to accelerate to 6.5% in 2010. The SEDP stresses the important role of business development, a level playing field for all businesses, increased competitiveness, and increased private sector investment in generating economic opportunities and employment. The ongoing efforts under the National Public Administrative Reform Project (Project 30) is a high-profile initiative by the government to reduce regulatory costs and risks for businesses and citizens through a comprehensive reform of administrative procedures. The government is now formulating the SEDP for 2011-2015. Continued strong emphasis on private sector investment and associated opportunities for PPP is anticipated.

2. Constraints to Public-Private Partnerships

Environment

Vietnam has limited experience with infrastructure PPPs.financing is an issue; while the underdeveloped capital market also limits opportunities for long-term infrastructure financing.

Public:

In Vietnam today, the private investors prefer BOT model. Because BOT extensive, fairly complete legal basis, requirements for lower private capital, government guaranteed loans. PPP the only Decision 71 the , the legal is uncertain, vulnerable to high risk. The obstacles to PPP investment approach is the high cost of contracting complicated and clearance delays, poor initial infrastructure. In addition to market risk, inadequate legal framework, lack of trust, business environment, a lack of transparency, poor contract remedies, the macroeconomic risks increased costs, lack of policy stabilityThe country has had limited success in attracting private sector participation.

While there is a desire by governments to engage the private sector in infrastructure development, there are constraints that can be indentified:

– Inadequate advocacy to create greater acceptance of PPPs by stakeholders.

– Weakness in enabling policy and regulatory framework

– Lack of capacity to manage the PPP process over the life-cycle of the project;

-Lack of capacity of the private sector to fully meet the challenge of investing in a very large number of projects.

– Due to inconsistency of the concept and incomplete legal framework, policies and legislation to create the application of the PPP infrastructure project, the partnership from Private investors can not contract with the State of equality, support mechanisms, or the level of incentives.

Private:

Experiences

One thing should be noted by Government of Vietnam is about the trap in the PPP regulatory framework development. One good example come from Indonesia, where there is a lot of spectacular concept of PPP regulation but still there is a big difficulty of the concept implementation. The public sector is being busy for making the best regulation framework but forget the actual needs of private sectors for investing their money which is the bankability of the project. The regulation framework in Indonesia for PPP is already established almost 5 years ago, but still the project realization is very low.  This is because the project offered is not attractive for the investor. So beside to make the best regulation, public sector needs to make project pipeline more attractive and bankable, so the private will participate in the development.

Tuy nhiên, theo ông Tony Foster, Nhóm công tác cÆ¡ sở hạ táºng, Diá»…n Ä‘àn DNVN, có 5 lý do chính khiến Ä‘áºu tÆ° cá»a tÆ° nhân vào cÆ¡ sở hạ táºng ở Việt Nam chÆ°a được hiện thá»±c hoá vá»›i tốc Ä‘á»™ nhÆ° ở Trung Quốc và các nÆ°á»›c khác, Ä‘ó là luật pháp chÆ°a hoàn thành, các hạn chế về tài chính, yếu tố rá»i ro, gánh nặng tài chính, hạn chế về khả năng chi trả.

 

Cho đến nay má»›i chỉ có khá ít Ä‘áºu tÆ° tÆ° nhân ở Việt Nam hợp tác dạng này do khuôn khổ pháp lý và thá»±c hiện còn ở giai Ä‘oạn Ä‘áºu. Tuy Ä‘áºu tÆ° tÆ° nhân có má»™t số Æ°u Ä‘iểm so vá»›i hình thức Ä‘áºu tÆ° nhà nÆ°á»›c thông thường nhÆ°ng tính phức tạp trong lÄ©nh vá»±c này luôn dẫn đến má»™t số trở ngại về thá»±c thi, pháp lý và tài chính dù ở bất cứ thị trường nào.

 

Sá»± tham gia cá»a tÆ° nhân, gồm các nhà Ä‘áºu tÆ° nÆ°á»›c ngoài, vào các lÄ©nh vá»±c cÆ¡ sở hạ táºng Việt Nam dÆ°á»›i hình thức các dá»± án xây dá»±ng-kinh doanh-chuyển giao (BOT), xây dá»±ng-chuyển giao-kinh doanh (BTO) và xây dá»±ng-chuyển giao (BT) Ä‘ã được công nhận theo má»™t khuôn khổ pháp lý cÆ¡ bản từ năm 1993. Tháng 8/1998, Nghị định 62 được ban hành má»›i, sau Ä‘ó được sá»­a đổi bằng Nghị định 02 vào tháng 8/1999. Thành quả cuối cùng cá»a những ná»- lá»±c này là 2 dá»± án duy nhất: Phú Mỹ 2-2 và Phú Mỹ 3.

Bên cạnh việc hoàn chỉnh khung pháp lý, theo phân tích cá»a bà Đá»- Thị Thu Hà, Phó Tổng Giám đốc phụ trách lÄ©nh vá»±c phát triển hạ táºng cá»a Công ty KPMG Việt Nam, có 3 rá»i ro chính đối vá»›i nhà Ä‘áºu tÆ° tiếp cận vốn vay từ ngân hàng quốc tế cho dá»± án PPP tại Việt Nam. TrÆ°á»›c hết là về tiền tệ, Việt Nam còn thiếu công cụ phòng ngừa rá»i ro hối Ä‘oái dài hạn nên các ngân hàng nÆ°á»›c ngoài mong đợi Chính phá» Việt Nam chia sẻ má»™t pháºn rá»i ro. Quy chế trên chÆ°a quy định rõ về vấn đề này. Tiếp đến là rá»i ro trong xây dá»±ng khiến các ngân hàng nÆ°á»›c ngoài thường muốn làm việc vá»›i tập Ä‘oàn xây dá»±ng quốc tế danh tiếng. Rá»i ro về tài chính và luật pháp cÅ©ng là vấn đề các ngân hàng quan tâm trÆ°á»›c khi quyết định cho vay

Demand for future:

According to Vietnam’s Ministry of Planning and Investment, the country needs an approximate US$16 billion (*S$19.9 billion) a year to finance their infrastructure projects over the next 10 years(2011-2020). The state budget can afford to provide just 50 per cent of this amount.

Insufficient infrastructure has long been identified as a bottleneck to Vietnam’s socio-economic development. According the Global Competitiveness Report 2010-2011 by the World Economic Forum, Vietnam ranks 123th place out of 139 countries in terms of the quality of the country’s overall infrastructure.

http://www.iesingapore.gov.sg/wps/wcm/connect/28c7e4004693019fb674feb9d444f4b8/Vietnam_Infrastructure_Ranking.jpg?MOD=AJPERES

3. Conclusion

Why PPP projects are important in Vietnam?

Flexible and effective way to mobilize capital for infrastructure system

Recognizing needs of infrastructure development

z Mobilizing relevant capital/human resources for financing

infrastructures

Æ’ Managing the investment process and improving quality of

infrastructure projects

Æ’ Redd i h b d f b d i ll ucing the burden for government budget, especially on

maintaining and operating infrastructure projects

Æ’ Encouraging public participation in investing and managing

infrastructure projectsPPPs model in Vietnam is in the first stage of imlimentation for infrastructure development but has contributed to solve the problem of low efficiency of public investment. The most positive impact of public private partnership PPP is an opportunity, capital mobilization conditions of private sector investment in infrastructure, reducing the burden on the state budget, promote activities of the private sector in contributing and copreration with public sector in infrastructure projects for the development of the Vietnamese economy and society.