July 23, 2019 19:17

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Why do businesses hesitate when implementing PPP projects?

10:07 | 13/07/2019

VCN – In order to meet the growing demand for infrastructure development, investment in the form of public private partnerships (PPP) has been applied in Vietnam and has proved effective. However, in the implementation of PPP, one of the issues faced by businesses is the resolution of disputes between investors and the State of Vietnam and the guarantee of foreign currency.

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PPP is an effective solution to attract private investment in infrastructure development. Photo: Internet

What is the solution to disputes in PPP?

According to Mr. Hoang Quang Phong, Vice President of the Vietnam Chamber of Commerce and Industry (VCCI), Vietnam is expected to have rapid economic growth, thereforethe demand for infrastructure development will need more resources and PPP is evaluated as a source of attracting investment from society into infrastructure development.

According to Mr. Hoang Quang Phong, in order to meet the growing demand for infrastructure development, investment under the PPP model has been applied in Vietnam and has been confirmed as an effective solution to attract private investment. In relation to the data from the Government when reviewing the implementation of PPP projects, by January 2019, 336 PPP projects have signed contracts (including 140 BOT projects and 188 BT projects and 8 other projects).

Therefore, the implementation of contracts under PPP in the context that the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) has set the highly-protected behavior standardswith foreign investors,ensuring an effective and equitable mechanism to resolve the disputes between investors and the State of Vietnam is an important factor to affirm credibility with investors.Not only promoting investment attraction, this mechanism is also one of the key measures to prevent corruption.

"In particular, priority should be given to dealing with PPP disputes in the form of commercial arbitration and commercial mediation. This is an effective option, reducing the possibility of PPP disputes being pushed into investment lawsuits under the investment protection agreements (BITs) or new-generation Free Trade Agreements (FTAs),”said Mr. Phong.

Separate the management and investment roles of the State

However, according to the assessment, the enterprises are facing more risks when participating in PPP projects, because the implementation of PPP projects is often time-consuming so they cannot avoid the risks, especially policy ones.

Commenting on this issue, Mr. Ho Minh Hoang, Chairman of the Board of Deo Ca Group said that private enterprises participating in PPP projects were facing a lot of difficulties and risks including unclear separation of the state’s role in PPP projects. Therefore, it is necessary to separate management and investment functions of the State in the law to create a clear mechanism for PPP projects to be deployed smoothly.Mr. Hoang proposed an independent appraisal agency to avoid the State’s excessive intervention in PPP projects, creating space for businesses’ operation.

According to Mr. Phan Xuan Duong, Deputy General Director of Vinh Tan 3 Energy Joint Stock Company, the development of a PPP Law is a good opportunity to attract foreign investors and solve problems,but if the relevance to international practice is not considered, after a few years, the efficiency of attracting PPP investment will not be as expected.

At the same time, for making a contract form, it is recommended to put the principle of developing the content of the project contract from the beginning. The contract covers the views of state agencies with investors, how the project structure utilizes public and private advantages, and it has the principle of promoting private innovation. Specifically, it is necessary to introduce a risk-sharing mechanism to attract high quality investors.

In addition to the above difficulties, some foreign enterprises also believe that the guarantee of foreign currency is also a problem.

By Xuan Thao/ Ha Thanh