Public capital, private capital or PPP?

The Ministry of Finance said that transport and urban infrastructure alone will need about 245 billion USD in the next 5 years, a very large amount of capital compared to the budget's capacity.

At this point, the question is no longer whether the State or private sector invests, but what coordination mechanism is needed to mobilize resources effectively, transparently and sustainably.

In this picture, the PPP model (a model of investment cooperation between the state and the private sector to implement infrastructure projects or provide public services) returns with a different role. In the Philippines, the NAIA International Airport renovation project has mobilized about 123 billion pesos (equivalent to 55 trillion VND) from the private sector, helping to increase capacity to 62 million passengers per year and improve the operational capacity of the entire airport system.

Vietnam has its own example: the e-GP project – a BOT contract between the Ministry of Planning and Investment and FPT IS – will completely replace the old bidding platform from 2022. The State retains the planning and supervision. The private sector operates the service, responsible for quality and progress.

This is a demonstration that the PPP model can operate in both high-tech and essential public service sectors.

At the Public-Private Partnership (PPP) Dialogue in Vietnam on November 25, Deputy Minister of Finance Tran Quoc Phuong said that Vietnam has identified three priority areas for public-private cooperation in the coming time. The first area is still transportation - an area that has always played a pivotal role in national development.

We cannot continue to let key projects be delayed because of the limitations of public spending. The PPP model is here not only to share risks and mobilize private capital, but to ensure that transport infrastructure is one step ahead, instead of chasing emerging needs.

Transport and urban infrastructure alone in Vietnam will need about 245 billion USD in the next 5 years, a huge amount of capital compared to the budget's capacity. Photo: Hoang Ha

In big cities, the story takes on a new meaning: the transit-oriented urban development (TOD) model.

International experts, especially from Korea, reiterate the lesson very clearly: land value around metro lines can be used to invest back into the public transport system, creating a positive financial cycle.

When Vietnam is discussing the North-South high-speed railway, Hanoi and Ho Chi Minh City metro, TOD is no longer a planning idea, but a mandatory component in project financial design.

To build urban railways or high-speed railways sustainably, we must solve the capital question before talking about technology.

The third area is innovation and digital infrastructure. Vietnam has begun to design strong incentive policies: PPP investors in the science and technology sector do not have to share increased revenue in the first three years and are supported when revenue falls short of the financial plan.

These policy signals show that PPP thinking has gone beyond the traditional scope of roads, seaports or airports. It is being extended to areas where the private sector has the technology, resources and innovative capacity.

But what is more remarkable in recent discussions is the frank recognition that for PPPs to operate effectively, legality alone is not enough. The problems lie in project design, in the ability to mobilize credit, in the risk guarantee mechanism and in the need to separate PPP credit from commercial credit.

“The determination to reform institutions needs to be translated into projects that are truly viable in the market,” said ADB Country Director for Vietnam Shantanu Chakraborty at the Public-Private Partnership (PPP) Dialogue.

A PPP project can only be viable if it is both financially viable and meets international credit standards. If capital cannot flow, the idea will remain on paper.

Vietnam is not the first country to do PPP. The journey to build a legal framework has lasted more than 15 years, from Decree 108/2009, Decision 71/2010, Decree 15/2015, 63/2018, to the Law on Investment under the Public-Private Partnership method in 2020 and the adjustments that are being prepared.

That shows that the State has gone from experimenting to building a stable system, capable of creating confidence for investors.

At a time when Vietnam is facing the largest infrastructure projects in its history – from high-speed railways to metro lines, seaports, airports, data and digital infrastructure – PPP is more than just an investment method.

It is a mechanism for the State to play a constructive role, while enterprises bring in the implementation capacity. That coordination is the way many countries have used to shorten the infrastructure gap and improve competitiveness.

If development is considered a journey towards modern national standards, then using the PPP model properly will be the State leading, businesses participating, and society and people benefiting from a more developed, synchronous and sustainable infrastructure.

Vietnamnet.vn

Source: https://vietnamnet.vn/von-cong-von-tu-hay-la-ppp-2468727.html