CHAIRMAN'S INSIGHT

Will PPP finally get off the ground?

Infrastructure development has long been impeded by the lack of suitable regulations and risk sharing measures to facilitate Public Private Partnerships (“PPP”). There are huge investments required in sectors that would benefit from PPP such as power generation, water treatment and supply, ports, airports, schools and public transport. However, in spite of various decrees and supporting regulations investors have shied away from PPP and other forms of PPP such as BOT and BTO. Although there have been some projects implemented under BTO in particular highway projects, with different degrees of success.

 

The Government has just approved a new decree 63/2018/ND-CP which will come into effect in June 2018, governing PPP projects. The expectations are that the new decree which replaces Decree15/2015 ND-CP will have a positive effect on PPP and BOT projects. This will also be a forerunner on a new law on PPP to be submitted to the National Assembly in November 2019 for approval in May 2020.

 

One of the major changes is the equity contribution of the investor now reduced to 10 or 20% of the total investment depending on the total project investment cost. Other improvements include mechanisms fr state funding, funding for auxiliary infrastructure and carrying out site clearance. In addition the sectors or projects eligible to be developed under PPP have been expanded to include parks, car parks, technology business incubators. Significantly there are also revised provisions concerning Government guarantees.

 

However, of significance are the lack of provisions for risk sharing on exchange rates and revenue guarantees which have been of major concern to foreign investors. These issues cannot be addressed other than in the proposed new law which is 2 years away.

 

It thus remains to be seen whether foreign investors will be satisfied with the new decree or whether we have to wait for the proposed new PPP law for any significant improvement in the appetite of foreign investors.

Executive Chairman
Kenneth Atkinson Contact
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