Vietnam needs
about 16 billion dollar a year to develop infrastructure, while the state
budget can only provide a half of the amount. The public-private partnership
(PPP) model will bring capital to the projects.

PPP will help reduce public debts

Deputy
Minister of Planning and Investment Dang Huy Dong once said that Vietnam must seek
50-60 percent of the total capital needed to develop infrastructure in Vietnam in the
next 10 years from the private sector, from both domestic and foreign sources.

In principle,
Vietnam
can seek capital from traditional sources by issuing government bonds,
borrowing commercial capital from foreign sources or from ODA (official
development assistance). However, these will make the public debts increase.
Moreover, Vietnam
now belongs to the group of countries with medium income, and therefore
preferential loans have been cut gradually.

In such a
context, encouraging private investors to join infrastructure development seems
to be wise solution. Vietnam’s
neighboring countries, including China,
Thailand and the Philippines
all have been successful with this model.

The
regulations on the trial implementation of PPP model in infrastructure
development has taken valid since January 15, 2011, under which, the State’s capital
to be poured into the projects will not be higher than 30 percent of the total
investment capital of the projects. Sources said that a ministerial taskforce
has been established to oversee the selection of the projects to be developed
under the PPP mode, expected to kick off in a couple of weeks.

Alderman
Michael Bear, Lord Mayor of the City of London,
an expert in PPP projects in the UK, pointed out that the biggest
advantage of PPP investment is that private investors will bear the risks to
run of the projects, because they have skills to run the projects smoothly
before handing over the projects to the government.

Mr Bear said
that the most important thing is finding and recognizing bankable projects.

Managing
Director of the Asian Development Bank ADB Rajat Nag said that ADB advocates
the PPP mode in infrastructure development. However, he said, it is necessary
to think carefully to select the projects important to society.

A fair game

Though
agreeing that PPP is the optimal solution for the infrastructure development in
Vietnam, Pham Chi Lan, a
well known economist, noted that if Vietnam cannot follow a strict
process in capital calling and bidding, it may churn out bad products.

Lan said that
the supreme principle of enterprises is optimizing profit, therefore, the State
needs to apply a proper mechanism on supervising the PPP projects and on allocating
responsibilities to private enterprises. If no such a mechanism is applied, it may
happen that bridges and roads will be arisen, but the projects will cause
pollution to nearby residential quarters.

In the last
few years that the private sector has joined infrastructure development
projects many problems have arisen. Thanks to good relations with local
authorities , the private sector can get land plots with high commercial
values, but the infrastructure projects do not have high social significance.

In the past,
when Vietnam
began apply the BOT (build-operation-transfer) mode in infrastructure
development, foreign investors all showed their enthusiasm in making
investments. However, later on,  due to
many problems, they withdrew.

“Transparency
must be the supreme principle,” Lan said.

However, PPP
seems not to be the game for all private enterprises. Small and medium
enterprises will not be attracted to the PPP model because the profitability
rate will not be high, and it will take a long time to earn back investment
capital.

Dang Thanh Tam, Chair and Chief Executive Officer of Kinh Bac Urban Development
Corporation, said that PPP projects are stable and attractive to the investors
with large capital. “After 30 years, they still can “pick up” money from the
projects,” he said.

Lan Huong