Finding a way back for the BT contract

BT projects are assessed to still have certain contributions to completing the infrastructure system.

BT investment form returns

The return of the BT contract method in the Draft Law 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 (PPP) method and the Law on Bidding does not mean a recurrence of the existing problems that caused this form of investment to be stopped in 2021.

“The PPP Law has stopped implementing BT projects due to shortcomings and unsuccessful projects of the previous phase. However, if we change the approach, thoroughly improve the implementation mechanism, and overcome the shortcomings of the previous phase, BT is still a good way to mobilize resources from the private sector,” said Ms. Nguyen Thi Linh Giang, Chief of the PPP Office, Bidding Management Department (Ministry of Planning and Investment) shared the views of the Drafting Committee at the Workshop to collect opinions on the Draft Law.

It should be reiterated that, according to the PPP Law, from 2021 onwards, BT contracts will not apply to new investment projects. The reasons given at that time were that some projects did not have appropriate investment objectives and were unnecessary; the value of BT projects was determined inaccurately, most projects had higher investment rates than projects using public investment capital; the selection of investors was mainly carried out through non-competitive bidding; supervision was neglected, leading to unsatisfactory project quality...

Trước đó, trước năm 2014, hình thức BT được áp dụng cả hai hình thức thanh toán bằng tiền và bằng quỹ đất theo Nghị định 108/2009/NĐ-CP. Kể từ năm 2014, Goverment dừng thực hiện hình thức thanh toán bằng tiền. Từ năm 2018, hình thức thanh toán bằng quỹ đất theo cơ chế ngang giá được luật hoá tại Luật Quản lý và sử dụng tài sản công.

Looking back at this period, many ministries, sectors and localities with BT projects believe that these projects still have certain contributions to the completion of the infrastructure system in localities, mobilizing resources from the private sector, helping to reduce pressure on public investment capital. In addition, the reciprocal projects with investment payments also contribute significantly to the improvement of infrastructure in housing, services, the formation of new urban areas, new residential areas, etc.

Đây cũng là cơ sở để Congress cho phép 3 địa phương được thí điểm triển khai loại hợp đồng BT, gồm TP.HCM, TP. Ha Noi , and Nghe AnHowever, the application method is not yet unified, depending on the specific conditions of each locality. Ho Chi Minh City applies the BT mechanism of payment in cash (using the city budget). Nghe An applies the BT mechanism of payment in cash (using the state budget or money collected from public asset auctions, land use rights auctions). Hanoi applies the BT mechanism of payment in cash (city budget) or payment by land fund.

There is still the problem of payment by cash or land.

Up to this point, the payment mechanism in cash or in land is still being considered. In the Draft Law that the Ministry of Planning and Investment is currently soliciting opinions on, there are still 2 options proposed.

Option 1 stipulates applying the BT contract to pay investors in cash. Option 2 is to apply both cash and land payment mechanisms.

Ms. Linh Giang said that the difference compared to the previous phase is that the implementation conditions are strict, but the total investment of the project is determined based on the technical design, similar to public investment projects. This method will avoid inflating the value of the project. The selection of investors must go through bidding, not designated bidding...

With option 1, the payment source must be arranged in the medium-term and annual public investment plan to have a basis for payment or be paid directly to the BT project investor from the proceeds from the public asset auction. However, this model still has risks, if payment is delayed, the interest incurred will lead to an increase in the value of the project. This is the problem that has occurred in practice in many BT projects in the previous phase.

On the other hand, regarding the payment model using revenue from public asset auctions, the Drafting Committee believes that it will be necessary to consider and amend the State Budget Law (to allow the application of the mechanism of money collected from auctions being paid directly to BT project investors, without having to be paid to the state budget) and amend the Property Auction Law (to allow BT project investors to enjoy incentives when participating in auctions).

Option 2 allows the application of BT contracts to pay investors in cash (as in Option 1) and in land funds. This option creates a legal basis to mobilize additional resources from land for development investment and partly overcomes the shortcomings in determining the value of BT works and the value of land funds for payment at the time of project preparation, bidding, and contract signing.

However, this option has not yet resolved the situation where the actual land fund value at the time of land allocation is many times higher than the land fund value expected in the contract; although allowing a mechanism to offset the difference, there is still no basis for allocating the entire expected land fund to the investor as committed in the contract.

Regarding this option, during the consultation process, there was a proposal not to use public assets to pay for BT projects, but only to use land funds managed by the State according to the provisions of Article 217 of the 2024 Land Law to pay investors.

In addition, it is proposed to add a type of BT contract that does not require payment, applicable to cases where investors propose to invest in construction of works and transfer them to the State for management and use without requiring payment for construction investment costs...

Obviously, the choice of mechanism will require much consideration, to achieve the goal of overcoming the shortcomings of this model, while perfecting regulations to meet new practical requirements.

As planned, the Draft Law 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 (PPP) model and the Law on Bidding will be completed and submitted to the National Assembly in the upcoming October session.