New directive to ease public-private investment projects

Increasing PPP project efficiency

Decree 63/2018/ND-CP (Decree 63), signed by the Prime Minister on May 4, replaces Decree 15, which was in effect from April 10, 2015. It sets out the fields, conditions, order and procedures for leveraging private sector investment.

A Ministry of Planning and Investment representative said the PPP model for both domestic and foreign private investors had changed the appearance of localities throughout the country and significantly improved national infrastructure, especially transport and electric infrastructure. However, PPP regulations had proven inadequate in terms of investment process and complicated formalities.

For example, implementation of Build-Operate-Transfer (BOT) projects in the past shows that an investment capital ratio of 15 percent stipulated in Decree 15 did not prove investors’ financial ability to complete projects. Therefore, in revising Decree 15, lawmakers decided to raise the cap to 20 percent.

The new directive creates more flexibility for investors in high-tech projects and reduces time and costs. Under this new procedure, investors will be selected after a pre-feasibility study and project approval. As a result, investors will be responsible for preparing the feasibility studies, instead of the ministries or provincial people’s committees.

Deputy Minister of Planning and Investment Vu Dai Thang said Decree 63 provides better regulations on PPP formalities and varies sources of state investment, sets more stringent regulations on BT (build-transfer) projects, abolishes procedures for PPP project registration certificates, supplements regulations on high-tech PPP projects, increases authorization of state organizations in PPP implementation and management, and strengthens PPP information transparency.

Under the previous decree, the state’s contribution capital was limited to the budget’s capital resources and official development assistance (ODA) loans to provide corresponding capital for PPP projects. However, the terms did not take into account state revenues from such services as education and healthcare. The new decree includes the use of revenue from public services as matching capital for PPP projects, diversifying state contributions, especially in public service projects, and increasing their attractiveness to the private sector.

These improved regulations are expected to increase investor trust by creating a transparent investment environment, Thang said.

Decree 63 has a charter of regulations on the implementation of BT projects, in which infrastructure projects are allowed to select investors after their designs and total cost estimates are approved. This regulation will help prevent price hikes.