To make public-private partnerships more open.

The Ministry of Finance is drafting a Government Decree on the financial management mechanism for investment projects under the public-private partnership (PPP) model and the settlement and payment mechanism for investment contracts under the build-transfer (BT) model.

Addressing shortcomings

The issuance of this Decree aims to replace Decree 28/2021/ND-CP (Decree 28), which has contained many shortcomings after more than 3 years of application; and at the same time, to unify the implementation of new regulations related to investment, securities, and budget revenue and expenditure that have been amended and supplemented in important laws such as: Law No. 56/2024/QH15, Law No. 57/2024/QH15 and Law No. 58/2024/QH15.

According to the Ministry of Finance, the main content of the new Decree focuses on clarifying issues related to the settlement of public investment capital for infrastructure projects, handling of transferred assets, the use of state capital in PPP projects, the issuance of PPP project bonds, and the mechanism for sharing increases and decreases in revenue. In particular, with regulations related to the payment and settlement mechanism for PPP projects using BT contracts, the issuance of this Decree will officially provide specific legal framework for BT investment projects to resume after more than three years of interruption.

Comparing the newly amended regulations in the Draft Decree with the existing regulations in Decree 28, it is evident that many shortcomings regarding the mechanisms and financial plans for PPP projects have been addressed. Regulations on capital mobilization for projects are also more specific and open. Meanwhile, regulations on the principles of risk sharing between the State and the private sector are fairer and more reasonable.

Specifically, the regulations on cash flow for PPP projects define cash flow as after-tax cash flow, discounted using the weighted average of interest rates on the project's mobilized capital sources and the return on equity. This new regulation will address the difficulties in determining tax obligations and cash flow for calculating the financial indicators of BOT projects in the past.

In addition, regulations on financial plans, payments, and settlement of investment preparation costs from the pre-feasibility study report preparation and appraisal phase to the signing of PPP contracts also provide a basis for projects to prepare, appraise, and approve pre-feasibility study reports, thereby accelerating the implementation of infrastructure projects.

In particular, the regulations on the principle of sharing revenue increases and decreases in PPP projects, as updated in the draft Decree, are quite timely in reflecting the legal changes in Law No. 57/2024/QH15. This allows for the application of a mechanism where the State shares 50% when actual revenue is higher than 125% and lower than 75% of the revenue projected in the financial plan. This, along with detailed regulations on the procedures for allocating budget reserves to cover the revenue shortfall of the project, will address the shortcomings of the previous Decree 28, which lacked a mechanism for paying these amounts under the State Budget Law.

The Ben Nghe tidal barrier is part of the project to address flooding caused by tidal surges in Ho Chi Minh City.

Expectations are high for the resumption of many major infrastructure projects.

According to the Ministry of Planning and Investment , in the more than three years since the implementation of the 2020 PPP Law, over 40 new projects have been launched or are being prepared for investment under this method nationwide. These are all key national or regional projects with a total investment of approximately VND 380,000 billion, requiring approximately VND 190,000 billion of state capital.

The addition of many new provisions to the 2020 PPP Law by Law No. 57/2024/QH15, including regulations on encouraging PPP investment in all public investment sectors; abolishing the minimum investment capital scale limit; and allowing the continued application of BT contracts, will be a driving force for the private sector to boldly participate in the development of transportation infrastructure projects.

At the Decree level, the Government's early issuance of supplementary and replacement documents for Decree 28 is highly anticipated by investors and businesses in the construction and real estate sectors. They expect this to be a breakthrough to resume large-scale projects that are currently unfinished.

Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association, stated that since January 15th, regulations on restarting and transitioning BT projects under Article 3 of Law No. 57/2024/QH15 have been in effect. However, in reality, no locality has yet resumed the investment and construction procedures for BT projects, leading to a situation where many projects are stalled.

According to Mr. Chau, the Ministry of Finance's acceleration in finalizing the Decree replacing Decree 28, and the Government's ongoing work on the draft Decree amending and supplementing Decree No. 35/2021/ND-CP, are the legal developments most anticipated by the business community in the coming months to restart dozens of large-scale projects.

In Ho Chi Minh City alone, dozens of large-scale Build-Transfer (BT) projects, such as the Thu Thiem 2 Bridge project, roads within the Thu Thiem New Urban Area, the Mai Chi Tho - Nam Rach Chiec parallel road, flood control projects, and the Phan Dinh Phung Sports Center, are currently awaiting legal completion to resume investment activities.

Meanwhile, some projects such as the Phu My Bridge access road, D3 road (connecting to Saigon - Hiep Phuoc port), Tham Luong - Ben Cat canal wastewater treatment plant, Pham Van Dong road, etc., although completed and put into use, have not yet completed the final settlement using land funds for investors participating in BT contracts.

The Government Office issued document No. 996/VPCP-CN conveying the directives of Prime Minister Pham Minh Chinh regarding the draft Decree amending and supplementing a number of articles of Decree No. 35/2021/ND-CP dated March 29, 2021, detailing and guiding the implementation of the Law on Investment under the Public-Private Partnership method.

Law No. 57/2024/Q15 amending and supplementing a number of articles of the Law on Planning, the Law on Investment, the Law on Investment under the Public-Private Partnership method and the Law on Bidding was passed by the 15th National Assembly at its 8th session, and came into effect on January 15, 2025, except for the provisions on the implementation of BT contracts (effective from July 1, 2025).

In Decision No. 1610/QD-TTg dated December 19, 2024, the Prime Minister assigned the Ministry of Planning and Investment to preside over the drafting of a Decree amending and supplementing a number of articles of Decree No. 35/2021/ND-CP dated March 29, 2021 of the Government detailing and guiding the implementation of the Law on Investment in the form of public-private partnership, including: (1) PPP project appraisal council; (2) PPP project process; (3) Investor selection process; (4) Method and standards for evaluating bid documents; (5) Termination of PPP project contracts; (6) Transitional cases.

In fulfilling its assigned task, the Ministry of Planning and Investment has finalized the draft and submitted it to the Government for consideration and promulgation of a Decree amending and supplementing a number of articles of Decree No. 35/2021/ND-CP.

After reviewing the draft Decree, Prime Minister Pham Minh Chinh suggested that the appraisal process should be shortened, not exceeding two weeks. The appraisal council should be streamlined, comprising only experts and relevant agencies. Furthermore, strong decentralization and delegation of authority are needed, giving responsibility to local governments.

Source: https://thoibaonganhang.vn/de-hop-tac-cong-tu-coi-mo-hon-160488.html