Regulations on investor equity ratio in PPP projects

The Government has just issued Decree 63/2018/ND-CP on investment in the form of public-private partnership (PPP).

This Decree provides for the fields, conditions, order and procedures for implementing investment in the form of public-private partnership.

Lĩnh vực giao thông vận tải được Nhà nước khuyến khích thực hiện đầu tư theo hình thức PPP.

The transport sector is encouraged by the State to invest in the form of PPP.

In particular, the Decree stipulates the equity and mobilized capital of investors implementing investment projects in the form of public-private partnership.

Specifically, the investor is responsible for contributing equity capital and mobilizing other legal sources of capital to implement the project according to the signed project contract.

The investor's equity ratio is determined according to the following principles: For projects with a total investment capital of up to VND 1,500 billion, the investor's equity ratio must not be lower than 20% of the total investment capital; for projects with a total investment capital of over VND 1,500 billion, the investor's equity ratio is determined according to the following principles: For capital up to VND 1,500 billion, the equity ratio must not be lower than 20%; for capital from over VND 1,500 billion, the equity ratio must not be lower than 10%.

The State's participation in the PPP project (the State's capital contribution is used to support the construction of the project to ensure the financial feasibility of the project; the State's capital contribution is arranged from public investment capital sources according to the provisions of the law on public investment or public assets according to the provisions of the law on management and use of public assets; the State's capital contribution is arranged from public investment capital sources not applicable to BT projects; capital to support the construction of auxiliary works, compensation, site clearance and resettlement is arranged from public investment capital sources) is not included in the total investment capital to determine the equity ratio.

For Build-Transfer contracts (BT contracts), investors must meet additional requirements on equity (if any) according to the provisions of the law on investment, construction, housing, real estate business and relevant laws to implement other projects.

Authority to decide on investment policy

The Decree clearly stipulates the authority to decide on investment policies in the form of public-private partnerships. Specifically, the National Assembly decides on investment policies for important national projects (1). The Prime Minister decides on investment policies for the following projects: Group A projects using central budget capital from 30% or more or less than 30% but over 300 billion VND of the total investment capital of the project; Group A projects apply BT contracts (2).

Ministers, Heads of ministerial-level agencies and Government agencies decide on investment policies for projects not falling under the above cases (1) and (2) of their ministries and branches.

Provincial People's Councils decide on investment policies for the following projects: Group A projects not falling under the cases specified in (2) above; Group B projects using public investment capital; Group B projects applying BT contract type (3).

The People's Committee at the provincial level decides on investment policies for projects not falling under the cases specified in (1), (2), (3) above in its locality.

The Decree takes effect from June 19, 2018.