What Are the Forms of Public Private Partnership (PPP) in Vietnam?

 Public Investment Law No. 49/2014 / QH13 issued on June 18th, 2014, effective January 1st, 2015 and Decree No. 15/2015 / ND-CP on investment in the form of public-private partnership issued February 14th, 2015, effective April 10th, 2015 has been expected to help overcome one of the biggest obstacles in the attraction of investment in private sector, from both domestic and foreign investment in public-private partnership (PPP) projects.

The key matter is that the new laws would share the risks that investors face in terms of capital, fees structures and fees amount determination. It is important that the regulation has been changed that only requires the minimum of owner’s equity of not less than 15% of the total investment of the regular project; and not lower than 10%, if the project investment is over 15 trillion VND.The investors may transfer part or all rights and obligations under the project contract to the lender or other investors if the transfer does not affect the objectives, scope, technical standards, progress of the project, and must meet the conditions for investment and business in accordance with provisions the law on investment and other conditions agreed in the project contract signed with the competent state agency.

Investment in PPP has now been expanded to vast areas requiring significant investment including transportation infrastructure, power plant, water, health, the environment management, education, vocational training, culture, sports and science and technology projects, economic zones, industrial zones.

The investment contracts in the form of public-private partnership are defined in Vietnam as following.

BOT Contract

“Build – Operate – Transfer contract” (referred to as BOT contract) means a type of contract to build an infrastructure project between a competent state agency and an investor; after completing the construction, the investor shall be entitled to operate it for a specified period of time; eventually, the investor shall transfer it to the Vietnam competent state agency.

BTO Contract

“Build – Transfer – Operate contract” (referred to as BTO contract) means a type of contract to build an infrastructure project between a competent state agency and an investor; after completing the construction, the investor shall transfer it to the competent agency, and shall be entitled to operate it for an agreed period of time.

BT Contract

“Build – Transfer contract” (referred to as BT contract) means a type of contract to build an infrastructure project between a regulatory agency and an investor; after completing the construction, the investor shall transfer it to the competent agency, and then the investor will be allotted a land parcel used for carrying out another project.

BOO Contract

“Build – Own – Operate contract” (referred to as BOO contract) is a type of contract to build an infrastructure project between a competent agency and an investor; after completing the construction, the investor shall take ownership of this project and have the right to operate it for a specified period of time.

BTL Contract

The Build – Transfer – Lease contract (referred to as BTL contract) means a type of contract to build an infrastructure project between a competent agency and an investor; after completing the construction, the investor shall transfer it to the regulatory agency and shall be entitled to provide services on the basis of operation of such project for a specified period of time; the competent agency shall lease and make payment for the investor’s services.

BLT Contract

“Build – Lease – Transfer contract” (referred to as BLT contract) means a type of contract to build an infrastructure project between a competent agency and an investor; after completing the construction, the investor shall have the right to provide services on the basis of operation of such projector a specified period of time; the competent agency shall lease and make payment for the investor’s services according to the regulation; when the lease term expires, such project shall be transferred to the competent agency.

O&M Contract

“Operation & Management contract” (hereinafter referred to as O&M contract) means a type of contract to operate the project between a competent agency and an investor for a specified period of time.

The law on Public Private Partnership in Vietnam creates an important legal basis in the management of public investment. However, this is only the beginning of an inevitable trend that attract resources from private sectors. The laws has been evolving and there will be changes in the coming time which ANT Lawyers will monitor and provide relevant update.

Read More

Decree 63 on Investment in the Form of Public-Private Partnership

 Investment in the form of Public-Private Partnership is an investment form that is carried out on the basis of a project contract between a competent state agency and an investor or project enterprise for the construction or renovation, operation, infrastructure management and public service delivery.

This is a form of investment that can mobilize both private and domestic capital. However, the effectiveness of these model has not been achieved especially in recent years while ODA funding has been narrowed down.

The Decree No. 63/2018/ND-CP dated on May 4, 2018, the decree on investment in the form of public-private partnerships has been promulgated, as effective on June 19, 2018, replacing Decree 15/2015/ND-CP.

This decree is expected to provide detailed, specific and separate basis for this type of investment. The PPP models mentioned in the decree include: Project contract; Build-Operate-Transfer contracts (BOT); Build-Transfer-Operate contracts (BTO); Build-Transfer contracts (BT); Build-Own-Operate Contracts (BOO); Build-Transfer- Lease Service Contacts (BTL); Build – Lease Service– Transfer Contracts (BLT); Operate – Management Contract (O & M) and Mixed Contract.

Decree 63/2018/ND-CP created an open payment mechanism for investors in construction-transfer contracts. Accordingly, investors who execute investment projects under BT contracts shall be paid by the State with land (use of land use right value) or by other modes of payment such as working office project, infrastructure assets in accordance with the law on management and use of public assets,payment by business right transfer, right of exploitation of works, services according to specialized law.

In addition to expanding the payment method, investors under the BT contract do not have to follow the order and procedures for deciding the investment policy and deposit in accordance with the law for implementation of other projects. However, investors must meet additional requirements on equity (if any) in accordance with the law on investment, construction, housing, real estate business and relevant laws to implement the others project.

Regarding owner and capital raised by investors, the Decree has stricter regulations than before to ensure that the project implementation process is stable. Accordingly, for projects with total investment capital of up to VND 1,500 billion, investors’ equity ratio must not be lower than 20% of total investment capital; for the project that has a total investment capital of over VND 1,500 billion, it is determined on the principle that the owner’s equity must not be lower than 20% of the charter capital of up to VND 1,500 billion, and forthe capital of over VND 1,500 billion, the owner’s capital must not be lower than 10%.

We will continue to conduct Vietnamese media search and legal Vietnamese research to update client on public private partnership investment into Vietnam.

Read More