Experts discuss the promise of Vietnam as government pins hopes on public-private partnerships
Delegates listen at the Vietnamese Investment Summit 2010, which ended on Wednesday in Ho Chi Minh City
"Development" is a ubiquitous theme in conversations all over Vietnam, among all sectors of its population. It is a country in dramatic flux, with a rapidly expanding middle-class, a hardworking and ambitious population of workers, artisans, farmers, and small business owners, and an ethos that values family cohesion and sacrifice; individual discipline; and education. Those factors have contributed to making Vietnam one of the biggest economic success stories in Asia, but so has the government's commitment to maintaining social order and political stability.
The Vietnamese Investment Summit 2010, which ended on Wednesday in Ho Chi Minh City, focused on the country's economic strengths"”providing potential investors and business people with a forum for discussion, and with rich networking possibilities. But it also did not neglect to sound a warning on the risks and weaknesses of the young economy.
Sharing the costs
Freedom of motion"”the ability of people to find a location of their choice"”is an essential element of future development, and will benefit the private investors as well as the general population greatly, said Dang Huy Dong, Deputy Minister of Planning and Investment.
To improve its infrastructure, Vietnam will need to invest an estimated US$120 billion in highways, railways, and seaports. Such an enormous capital outlay will have to come from official develoment assistance and tax revenue, but also from private investment, Dong said. He added that Hanoi will begin experimenting with the new PPP (Public-Private Partnership) program, an effort to generate private investment in public infrastructure projects.
Such a program is not without precedent"” successful attempts have been made to implement PPP in the past. Recently, Finance Ministry officials worked with American Energy Services to construct a power plant in the North. However, PPP has yet to be implemented on a large scale. "We need good government capacity to be put in place," Dong noted.
Phu My Bridge, Ho Chi Minh City's largest bridge, opened to all vehicles in March. Its investor, Phu My Bridge BOT Joint Stock Company (PMC), is considered a successful model of Public-Private Partnership in infrastructure construction in Vietnam.
To this end, finance ministry officials will launch a pilot program to test the mechanics of public-private cooperation in small-scale projects and areas, forging connections with local leaders and documenting the results. It is hoped that these early steps will help to chart the path towards a sounder, more comprehensive national policy.
In the aftermath of the global economic crisis that began in the autumn of 2008, a focus on infrastructure is a prudent way to diversify investments. A well-prepared, public-private collaboration on upgrading or creating good highways, electricity systems, a reliable water supply, hospitals, and schools will ultimately bolster private business, Dong said.
However, some delegates to the summit remained skeptical about the promise of PPP, and the plausibility of government cooperation. One consultant, who wished to remain anonymous, stated his belief that the government would fail to raise enough capital to underwrite such a program on an effective scale. "For PPP to work," he said, "fees and tolls would have to be implemented, and taxes would have to be increased. Costs would have to be adjusted realistically, and people would have to pay realistic prices for the services that were provided. Such changes have yet to be made, and it is unlikely they will be.
Despite such concerns, the PPP program will be launched in weeks, possibly within 2 months, Dong said. "There are conflicting views regarding the policy," he acknowledged, "and we need to get a consensus on it." He also addressed concerns about transparency, promising that "Everything will be done through transparent procedures throughout the PPP process."
In the past, government infrastructure projects have frequently forced the relocation of local residents without proper compensation, or adequate planning. Aware of previous relocation program failures, Dong assured the summit that "the government will be accountable for compensation and delays. The government will put aside a sum of money for business and property projects."
Breakneck-paced urbanization will shift the focus of luxury development and retailing from city centers to suburban areas, Alex Loh, Chief Representative of SP Setia Bhd, Vietnam, told the summit. Exorbitant land prices in city centers mainly in HCMC and Hanoi and improved infrastructure have inspired developers to start building townships and private communities that will cater primarily to wealthy urbanities.
Locations like Binh Duong Province, roughly 40 minutes south of HCMC's District 1, with wide roads and a good power supply, are a legacy of the industrial parks that have been in existence for the last 15 years, and they will be the sites for many of these new suburban centers. Developers foresee suburban shopping malls, with 1,500 parking spaces, and 60,000 square meters of retail space, in places like Binh Duong. They will satisfy the needs of the Vietnamese consumer for luxury shops, restaurants, services, and entertainment, ultimately dominating the mid-high end retail market in the near future.