In June 2020, the National Assembly of Vietnam passed a new Law on Investment in Form of Public Private Partnership (“PPP”), which took effect from 1 January 2021 except for the ban of the build-transfer (“BT”) contract being effective from 15 August 2020 (“PPP Law”). Prior to the effective dates of the PPP Law, PPP investment was subject to Decree 63/2018 of the Government dated 4 May 2018 (“Decree 63”).
It has been reported that the Vietnamese Government will soon issue three decrees on implementation of the PPP Law, two of which will regulate the selection of investor and the financial management of a PPP project, while the third one will provide further detailed regulations on other matters (collectively, “Draft Decrees”).
In this article, we discuss the key points and the major changes of the PPP Law (including the Draft Decrees) in comparison to Decree 63.An investor may invest in a PPP project in Vietnam via one of the following seven types of project contract with a competent authority of Vietnam (collectively, “project contract”): build-operate- transfer (“BOT”) contract; buildtransfer-operate (“BTO”) contract; build-own-operate (“BOO”) contract; operate-manage (“O&M”) contract; buildtransfer-lease (“BTL”) contract; build-lease- transfer (“BLT”) contract; or mixed contract (a combination of the contracts mentioned above).
As one of the most noticeable change, the BT contract was crossed out from the permitted forms of PPP investment and those PPP investments under BT contract that have not obtained the IPA(as defined below) were directed to be stopped from 15 August 2020. The BT contract was permitted under previous decrees(including Decree 63) and was a common, preferred form of PPP investment in the country.
Under the BT contract form, the investor (through its project company) built an infrastructure project and upon completion of construction, transferred such projectto the State. In return, the State (via its competent authority) transferred certain public asset (e.g. land, headquarter, infrastructure works) to the investor for carrying out other project to generate income. The removal of the BT contract form is consistent with the recent move from the Vietnamese Government to prevent the transfer of public assets to private ownership without auction.
Under the PPP Law, the permitted sectors of PPP investment have been limited to only the following: (i) transport; (ii) power transmission lines, power plants (except for hydroelectric plants and other cases of State monopoly); (iii) irrigation; clean water supply; water drainage and waste water treatment; waste disposal; (iv) health, education and training; and (v) information technology infrastructure.
Previously, under Decree 63, the Government of Vietnam encouraged PPP investments in a wide range of sectors. In addition, the Prime Minister could approve other sectors that were not listed under Decree 63. This limited scope in the PPPLawreflectstheintention oftheVietnameseGovernmentto drive theresourcestocertainspecific sectorswhich really need the form of PPP.