Create a special mechanism to attract PPP investors in transportation

The Ministry of Transport is proposing to the Government a special mechanism to allow the expansion and modernization of expressways under the public-private partnership (PPP) method to attract investors to build infrastructure.

Lessons learned

The Dien Chau - Bai Vot Expressway and the Cam Lam - Vinh Hao Expressway have a total length of 129 km, and are 2 of 11 component projects of the North-South Expressway, Eastern Phase I, 2017 - 2020. These two expressways are also 2 of 3 PPP projects put into operation from the end of April 2024, contributing to making traffic and trade more convenient for people compared to National Highway 1, shortening the distance between regions, bringing the total length of expressways nationwide to 1,206 km on the North-South axis. Also from these 2 projects, the transport sector and relevant agencies have drawn many lessons on attracting investment in PPP transport projects.

Before reaching the finish line, these two projects had to go through many stages of delay and postponement, because investors could not mobilize capital, could not negotiate with banks about loans, because there was no mechanism to support capital repayment guarantee for infrastructure projects with a payback period of 15 - 25 years. Even the construction enterprises were "procrastinating", causing the Ministry of Transport to issue an "ultimatum" that if the progress was not guaranteed, the project would be withdrawn and submitted to the Government. In addition, during the implementation process, enterprises in the project were always under pressure to "take the profit and bear the loss", bearing the risk if the project did not ensure revenue after being put into operation, while banks were still tightening credit... This reality made transport enterprises not interested in PPP projects.

According to transport experts, the PPP Law, which will take effect from 2021, has mentioned a risk-sharing mechanism between the State and investors. However, to create trust for businesses, State management agencies and investors must have a commitment to a specific support mechanism. In fact, previous BOT projects had their financial plans for collecting tolls to recover capital broken due to policy changes and not being allowed to increase fees according to regulations, so not only investors, project enterprises, and lending banks are also concerned. To attract investors, the State needs to have a commitment to share risks in the signed contract in case the project's revenue declines after completion and operation...

According to Mr. Dang Tien Thang, Deputy General Director of Cam Lam - Vinh Hao Joint Stock Company, which is constructing the Cam Lam - Vinh Hao Expressway, the two most important factors are equality and companionship. During the implementation process, the competent authority needs to assign specific coordination points, working with the project enterprise to speed up procedures for adjusted and arising items (if any). Adjusted items that change compared to the signed contract also need to be clearly identified as soon as possible, which is the investor's responsibility. In addition, the State needs to give more power to investors, from the project research, design to construction stages. In other words, the State will specify the project scope, technical standards, and then accept according to the scale and technical standards. The construction solutions and technology application will be proactively decided by the investor and the project enterprise...

In the first months of 2024, the PPP transport infrastructure investment picture has new pieces, when the Dong Dang - Tra Linh and Huu Nghi - Chi Lang expressway projects were started one after another. According to Mr. Nguyen Quang Vinh, General Director of Deo Ca Group (the project's construction enterprise), along with the efforts of investors, in recent times, PPP projects have received maximum support and companionship from State management agencies. For example, at the Dong Dang - Tra Linh project, the locality has minimized small-scale investment projects to focus resources on project implementation. The project has also been allowed by the National Assembly to apply a special mechanism, which can increase the budget capital participation to a maximum of 70% of the total investment...

Mr. Nguyen Viet Huy, Deputy Director of the Vietnam Expressway Administration (Ministry of Transport) said: In the document providing comments on the draft Decree amending and supplementing a number of Decrees on PPP investment sent to the Ministry of Planning and Investment, the Ministry of Transport proposed to add provisions on financial plans to ensure harmony of interests and responsibilities between the State and investors during the exploitation process. The selection of contractors to implement sub-projects is also proposed to be adjusted in the direction of increasing the initiative of project enterprises, in accordance with the provisions of law on construction.

Amendment of Decree guiding the implementation of the PPP Law

In reality, the implementation of PPP projects and the implementation of Decrees on investment under the PPP method have so far raised many difficulties. Decree No. 35/2021/ND-CP guiding the implementation of the PPP Law stipulates that the minimum total investment scale that a project must meet for a PPP project is larger than the reality and the investment attraction needs of the locality, leading to difficulties in attracting investors to participate in PPP projects. On the other hand, Decree 35 also stipulates that the contracting agency shall only pay a maximum of 50% of the value of the completed volume for projects using public investment capital in PPP projects, causing difficulties for investors in arranging capital to implement the entire PPP project.

Cam Lam - Vinh Hao Expressway. *Photo: VNA*

Or Decree No. 28/2021/ND-CP stipulates the financial management mechanism of PPP projects, including: Criteria for evaluating the financial plan of PPP projects in each category are not complete, leading to confusion in assessing financial feasibility; regulations on the proportion of State capital participating in PPP projects are not consistent and consistent with the provisions of the PPP Law; sources of payment for PPP projects are not specifically regulated... Therefore, it is necessary to amend and supplement a number of Decrees detailing the current PPP Law.

In Official Dispatch No. 2966/VPCP-CN, Deputy Prime Minister Tran Hong Ha agreed with the proposal of the Ministry of Planning and Investment to amend and supplement a number of Decrees detailing and guiding the implementation of the Law on Investment under the public-private partnership (PPP) model. The Deputy 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 PPP, and submit it to the Government in September 2024.

The Ministry of Finance shall preside over the drafting of a Decree amending and supplementing a number of articles of Decree No. 28/2021/ND-CP dated March 26, 2021 of the Government stipulating the financial management mechanism of investment projects under the public-private partnership method and Decree No. 69/2019/ND-CP dated August 15, 2019 of the Government stipulating the use of public assets to pay investors when implementing construction investment projects under the form of Build-Transfer (BT) contracts according to the assigned functions and tasks prescribed in Clause 1, Article 91 of the PPP Law, to be submitted to the Government in September 2024.

The Ministry of Planning and Investment and the Ministry of Finance shall study and absorb the opinions of the Ministries of Transport, Industry and Trade, Construction, Justice, Home Affairs, Foreign Affairs, Natural Resources and Environment, and relevant agencies in the process of drafting the above Decrees and unify the contents of amendments and supplements, ensuring consistency, comprehensiveness, and thoroughly resolving the problems of projects in the form of transitional BT contracts that are being implemented unfinished.

According to statistics from the Ministry of Planning and Investment, since the PPP Law and the Decrees detailing this Law took effect until the end of 2022, the country has had 24 new PPP projects implemented under the PPP Law (10 projects have been approved, 14 projects are preparing for investment) and 295 PPP projects (of which 160 projects apply the BT contract type) are being implemented under the transitional provisions of this Law. Most of the new PPP projects implemented under the provisions of the PPP Law are national key projects.

Assoc. Prof. Dr. Tran Chung, Chairman of the Association of Road Traffic Construction Investors:

Information transparency, policy consistency: Investing in transport projects is a long-term investment, so it also has many potential risks. Although expressway projects have many advantages for toll collection, attracting social capital to these projects requires the establishment of feasible projects, pre-feasibility must be accurately forecasted, based on assumptions from the economic situation, bank interest rates, revenue to toll collection... to serve as a basis for businesses to decide to invest. Therefore, information transparency and policy consistency will create initiative and equality for investors, ensuring the rights of businesses.

National Assembly delegate of Thai Binh province, Mr. Phan Duc Hieu: Increase the proportion of State capital to attract investment in special transport PPP projects:

It is necessary to increase the State capital contribution rate in PPP projects to 80%, because this is the capital that the State can participate in and create room for localities to negotiate with investors. Each locality has its own plan depending on its circumstances and the State capital contribution rate may be below the maximum allowed rate.

According to News/VNA

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