Implementing the PPP Law: what are investors' expectations?

	Infrastructure development at the centre of PPP decree direction
	Good bidding mechanism, ensuring transparency will attract investors
	Ownership, risk-sharing must be clarified in PPP law: experts

Many people said that it is necessary to have more capital mobilization options to facilitate the implementation of PPP projects. Photo: S.T

Clarify revenue fraud

According to experts, there are many concerns about the draft Decree detailing and guiding the implementation of the PPP Law that will take effect on January 1, 2021.

According to Phan Vinh Quang, Country Director of USAID’s Learning Evaluation Analysis Project (LEAP III), the draft has basically followed the content of the law. The PPP Law offers a number of incentives and support from the Government, and the draft needs to add specific criteria and procedures for application. Clear procedures should be put in place to guide the competent state agencies and investors to perform all tasks during PPP project implementation in accordance with the PPP Law.

The procedures must be specific, clear and workable. More importantly, they should not create administrative obstacles for both authorities and investors. Additionally, investment opportunities for PPP projects should be promoted by announcing potential projects to investors through a centralized portal system so that they can easily access and update information.

“Regarding regulations on market exploration, in Article 23 of the draft, the feasibility study report does not require market exploration. However, market exploration is very important to determine if private investors are interested in the project or not and if PPP projects are likely to be successful. If the market is not explored, the state authority may pay attention to unattractive projects, and thus qualified investors cannot be chosen. Furthermore, market-driven outputs will boost the commercial viability and bank-guaranteed ability of the project, so this must be a part of the project preparation process,” said Quang.

According to the draft, revenue fraud is defined as fraudulent behavior of revenue collected from users in contracts applying the fee collection mechanism from users or cheating the volume of public products or services provided in contracts that apply the state payment mechanism in order to gain illicit profits. Identification of revenue fraud should only apply to projects with a revenue sharing mechanism. For other cases, the revenue belongs to the project enterprise, so it is not reasonable to investigate the actual revenue.

Investors expect equality

From the perspective of representing PPP investors in transport infrastructure, Tran Chung, Chairman of the Vietnam Association of Road Traffic Investors (VARSI), said when signing a project contract, the state refused to ensure equality with investors. Commitment to finance the project between the state and the bank is still struggling, leading to projects with no capital for implementation. There should be more capital mobilization options to facilitate the implementation of PPP projects.

According to Tran Chung, among the issues assigned to the Government by the National Assembly to guide the PPP Law, the field and scale of total investment in PPP projects, the establishment of a PPP project appraisal committee or termination of the PPP project contract; sharing mechanism to increase and decrease revenue; PPP project process; and preferential mechanisms for investors committing to use domestic contractors, goods, materials, and equipment are being paid special attention by domestic and foreign investors.

These are also important issues that need to be concretized and guided so that the PPP Law can ensure feasibility when it comes into effect at the beginning of next year.

As an enterprise participating in many BOT projects, Dang Xuan Chinh, Head of Legal Department, Deo Ca Group Investment Joint Stock Company, said in fact, when implementing a BOT traffic project, there are many difficulties and problems from the stage of investor selection, project implementation, exploitation and operation because the policy mechanism has not been regulated synchronously or has not been guided in detail.

According to the representative of Deo Ca Group, regarding the contents of the draft Decree detailing and guiding the implementation of a number of articles of the PPP Law, for policy selection applied to consider and implement regulations on investment policy adjustments, PPP projects, to amend PPP project contracts; or apply the revenue reduction sharing mechanism specified in the Investment Law according to the investment mode, we recommend to choose the second option specified in the draft. Determining the "delay" behavior of investors and project enterprises should specify the delay time in the draft Decree or specify in the project contract and consider whether investors can speed up construction to compensate the progress or not.

“Accordingly, is it necessary to specify the time from the due date, the time for taking corrective measures or the time just passed the date specified in the contract is considered delayed and the contracting agency has the right to terminate the contract. This delay must be determined by the parties due to subjective reasons of the investor or the project enterprise, which will serve as a basis to determine that it is a violation of the investor or the project enterprise,” said Chinh.

From the perspective of a legal consultant, Lawyer Le Net, LNT & Partners Law Firm said that in terms of revenue sharing, according to Article 82 of the PPP Law, project enterprises are given risk sharing in some cases, such as project revenue not reaching 75% of the expected revenue in a fiscal year. Therefore, in Appendix IV - Guidance on drafting contracts, the draft decree should additionally state the project enterprise is obliged to minimize losses before requiring public authorities to share risks, and if the actual revenue is too low compared to the expected revenue for three consecutive years, the contracting agency has the right to terminate the contract. In addition, the contract should clearly specify the payment process due to risk sharing, documents that the project enterprise needs to prepare, approval time and authority of the signing agency, if the project's reserve fund cannot afford to pay.