Vietnam is calling foreign investors to get involved in public-private partnership (PPP) projects, expected to improve the country’s infrastructure network. But more work should be done to ensure PPP’s success, KPMG Vietnam’s Tax Partner and head of infrastructure Do Thi Thu Ha tells VIR.
|Do Thi Thu Ha|
Many Asian countries consider PPP as one of the best ways to develop their infrastructure and Vietnam is no exception. But unlike other countries such as Singapore, Malaysia and the Philippines, Vietnam is in the very first stage of PPP development. What are the key factors to ensure the success of PPP development here?
Given KPMG’s experience in advising on the implementation of PPPs for jurisdictions as diverse as Australia, Thailand and Singapore, in our view, for PPP to be successfully implemented in a nascent jurisdiction such as Vietnam, the following factors are essential. There needs to be strong will and support for the implementation of PPPs across all levels of government. Furthermore, there needs to be institutional support in the form of a PPP unit that has the responsibility for setting consistent and tested policies and to ensure that procurement processes are adhered to. It is vital that there be sufficient investment in capacity development for relevant line agencies and ministries to ensure that there is sufficient knowledge of PPP amongst procurement officials so that PPPs can be successfully implemented. It is important that there be sufficient due diligence conducted in the selection of pilot projects which should be supported by detailed feasibility studies. A commitment to ensuring that there is a robust pipeline of projects suitable for PPP to encourage the participation of the private sector and clear and consistent procurement processes preferably enshrined in a robust legislative framework.
The Vietnamese government recently issued regulations for piloting PPP projects. Is it the right way to push PPP ahead?
The much anticipated legal framework for PPP, namely Decision 71/2010/Qd-TTg which regulates the conduct of pilot PPP projects certainly indicates the government’s intention in pursuing PPP as a procurement model for national infrastructure. While there are still some issues that will be fleshed out, this represents a very good start. As stated above, we need to stress that the pilot projects must be selected carefully as these will lay the foundation for Vietnam’s PPP policies. It is important that in a nascent PPP environment that there be a degree of flexibility to ensure that relevant laws and regulations are periodically reviewed and refined so that lessons learnt from the pilot projects can be incorporated. We note that this has been addressed in Article 52 of the regulations issued with Decision 71/2010/Qd-TTg. We note that the decision will need to be supplemented by further regulations to clarify issues such as the level of equity contribution and the nature of government guarantees.
To implement a PPP project, the government has to be a stakeholder. Can the Vietnamese government be a stakeholder in a wide range of PPP projects at the same time given the limited state budget?
Under Decision 71/2010/Qd-TTg, this is not explicitly required on the part of the government. However, the decision does contemplate some form of state contribution. The definition thereof in Article 2 specifically prohibits it being contributed as equity.
The decision states that the state contribution is capped at 30 per cent of the total project investment and is to be determined on a case-by-case basis by the prime minister on the advice of the Ministry of Planning and Investment. The injection of state contribution is essentially used to assist in the feasibility of a project. Ultimately, PPP is merely one of a handful of procurement models that can be employed to deliver public infrastructure. It is not a panacea that can be used to implement projects that are not otherwise affordable to the government. In the feasibility study that should underpin any prospective PPP project, the government must ensure that over the long term, a PPP delivery model for a project provides the requisite level of value for money and is affordable.
As KPMG has provided PPP training for Vietnamese government officials, will there be more?
One of the critical factors that will ensure a conducive environment for the implementation of PPPs is ensuring that there is adequate investment in capacity development. KPMG as a firm has been very proud to be afforded the opportunity to share the firm’s experience with the Vietnamese authorities, including the Ministry of Transport, via recent training workshops and seminars. Given KPMG’s international experience in advising various governments in the implementation of PPP policies and the implementation of PPP projects, we are able to share from our experiences and learning from jurisdictions as diverse as the United Kingdom, Australia, South Africa, Singapore and Thailand.
We thus anticipate that our co-operation with the Vietnamese authorities would be on the ongoing basis and we are very keen to support the government in relation to PPP initiatives.