Phu My, Ho Chi Minh City's largest bridge, is considered a successful build-operate-transfer project.
Vietnam will ensure that the public private partnership (PPP) framework will have "everything ready on the table" for investors, avoiding delays that have marked other forms of investment, a senior official says.
Deputy Minister of Planning and Investment Dang Huy Dong said at a conference last week that investment forms like BOT (build-operate-transfer) for infrastructure development were not attracting much interest from the private sector because of the time taken to get projects going.
It often takes investors four or five years to complete site clearance or licensing procedures for BOT projects, he said.
The Ministry of Planning and Investment estimates Vietnam has attracted US$7.1 billion thus far for projects under BOT and similar investment forms, mainly to the transport sector. That compares to $100-150 billion that the country really needs for infrastructure development over the next five years.
Under the PPP framework, investors will no longer have to worry about undue delays. All they will need to do is to pour in capital, either from their own sources or through bank loans, Dong said.
The partnership would meet the expectations from the private sector, he pledged at the conference held in Ho Chi Minh City.
Vu Huu Dien, director of Dragon Capital's Portfolio Management, said the partnerships would remove "hesitations" from the private sector, which has been seeking investment opportunities in the country.
Phan Hong Quan, an official of VinaCapital, said the foreign fund management firm was interested in infrastructure projects in Vietnam but worried about the feasibility of these projects when carried out under investment forms other than the more favorable PPP.
But experts also said PPP projects are not for all investors as the investment form only suits private companies and investment funds with large capital and an interest in long term investment.
At an investment conference in HCMC last month, a consultant, who wished to remain anonymous, told Thanh Nien 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."
"It needs to be considered that PPP projects are not just the design and construction of an infrastructure project, but rather the entire life of a project 20 to 30 or even 50 years," wrote Lieven Jacquemyn, Corporate Finance Regional Director of KPMG Singapore and Nasir PKM Abdul, a counsel of Lovells LLP, in a report published early this year.
Although PPP investment will not be an "immediate solution", it can "plug the funding gap between investment needs and available funding," they said.
"If the government makes the effort and the implementing agencies go through the PPP learning curve... the Vietnamese economy and the Vietnamese people will benefit, as a whole," they added.
Vietnam is in fact trying to create better conditions for PPPs to leverage private financing.
According to the World Bank, more than two years ago the government had requested it to work with ministries on developing a comprehensive PPP policy with detailed practical guidance.
The policy, scheduled for approval later this year, is expected to help the country address the problem of overstretched public budgets and limitations in private sector investments.
Southern metro and PPP
To sustain its economic growth, Ho Chi Minh City has plans for new metro railways, more seaports, a better sewerage system and many other infrastructure development projects, but it does not have the funds to implement them.
Bui Xuan Cuong, deputy director of the city's Transportation Service, said the city needed at least VND300 trillion ($15 billion) to implement infrastructure projects over the next five years. For instance, it calls for $5 billion investments in 11 urban railway projects and a total of VND32.5 trillion for eight water supply and treatment plants.
Its budget, however, can only come up with 15 percent of the capital, Cuong said.
Nguyen Thanh Tai, deputy chairman of the HCMC People's Committee, said the projects, which are vital for the city's development, will require a huge amount of capital.
The city needs funding from the private sector, including foreign investors, he told the conference.
Tai said the city will focus on PPPs to attract private investment into infrastructure projects. The PPP framework will create a new atmosphere for investment, including interest rate subsidies, quick site clearance, quality human resources and easier access to bank loans, he added.