VCN - According to Assoc. Dr. Tran Chung, Chairman of the Vietnam Association of Road System Investors (VARSI), most of the problems and difficulties investors are facing will be solved when the PPP Law is introduced.
|Removing PPP bottlenecks to attract FDI into infrastructure|
|Transport enterprises expect the PPP Law|
|Assoc. Dr. Tran Chung|
What current obstacles will be removed when the PPP Law comes into operation, in your opinion?
Investors wish to have an equal rule which demonstrates the state's commitments to investors as well as specifies the principles that investors need to follow in order for PPP projects to be implemented stably.
The PPP Law will solve many obstacles, such as the State’s commitment on guarantees and investors' risks. We all know that public-private partnership projects show the sharing of benefits and risks between the State and the private sector. Investment projects are very risky, for example, we are heavily dependent on the traffic rate of participating vehicles, which is easilyvariable, or the risk of changes in national policies. Deo Ca, for example, Van Phong area was expected to become a special economic zone, Vung Ro would become a concentrated economic zone previously, but until now neither of the overall plans have been formed, making the initial expectation of traffic rate decrease by 40 percent. Not to mention other unforeseen risks that make investors worried.
Secondly, the PPP Law will create a reliable channel for society to invest and contribute their capital because investors in the PPP form usually have 20 percent of equity and up to 60 percent of mobilized capital. In the past, the capital mainly came from banks. If there are no other channels to raise capital like investment funds, it will be a big problem for investors. The PPP Law will relieve these difficulties.
In addition, the PPP Law will make significant changes in external resources, creating a more open mechanism when raising capital. I think investors' problems will be gradually removed.
In my opinion, the PPP Law will select real investors, avoid "zero" investors, or investors based on relationships. In particular, regulations on the types of projects will be accepted, whereby all PPP projects are those that the people have the right to choose when using public services.
Will resolving the public-private partnerships in the PPP Law address the ask-give mechanism of selecting investors?
The PPP Law will provide a regulation on bidding for investor selection and make the investor selection process and project transparent. In particular, to make the price transparent, bidding must be done to select an eligible investor. We also proposed that the winning bidder must be announced so that people would know, society would supervise, and the investor would determine his responsibility to people and society simultaneously.
There are also a number of other regulations related to publicity, especially for press agencies to convey the true value of the project and respect for investors’ interests to the public. Because investors who invest in projects to contribute to society and the country have their benefits.Therefore, it is necessary to respect the investors’ interests and create the most favorable conditions for them to exploit their projects in the PPP method.
A PPP contract is a contract between the State and the investor, you already mentioned the responsibilities of the State that need to be specified in the PPP Law, how do you assess the role and requirements for investors in the performance of PPP contracts?
In essence, investors are the owners, and, in PPP contracts, they are a party and have equal rights and responsibilities. Therefore, the competent State agency and the investor are equal in terms of interests and rights to implement their investment project. This is not that the State agency is the leader and the investor is led by the State. This is an economic contract that is fair and equal under the law.
The investors’ biggest difficulty is mobilizing capital. In other countries, the construction of transport infrastructure does not depend much on bank capital but issuing Government bonds. In your opinion, should Vietnam apply this capital mobilization form for PPP projects?
Countries around the world have also gone through many stages of public-private partnership investment and they also encountered difficulties when mobilizing capital mainly from banks. Commercial banks mobilize capital in the short term, but lend it in the long term, which is ahuge risk. According to other countries’ experience, for example, many banks are joined to lend capital to share risks in the UK.In South Korea, capital is mobilized from society through funds called investment funds to develop transport infrastructure and huge capital is mobilized in society. I hope that we will have policy innovation, forming such mechanisms to mobilize a lot of capital resources. This is the necessary path for us in the future so that we can develop investment projects under the PPP method. And investors will also have an additional channel to choose funding sources to implement their PPP projects.
Thank you, sir!
Through a survey of 12 road infrastructure projects across the country from Can Tho to Quang Ninh, including ten PPP investment projects, we recognized that the first obstacle mentioned by investors was institutional. This is the biggest concern of PPP investors, especially the cost and capital management principle.
PPP management was regulated under the mode of public investment project. There are other management regulations now, but PPP projects are still like public investment in terms of prices. For example, enterprises conducting central road projects will have higher costs because of the harder terrain compared to other localities. By the time the cost goes up, they have to apply for additional costs. That is very difficult. Therefore, the PPP Law draft needs to be more transparent in managing capital, public and private investment capital needs to be split to manage easily.
Assoc. Dr. Tran Chung, Chairman of the Vietnam Association of Road System Investors (VARSI)
By Tuan Phong (recorded)/ Ha Thanh