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Will foreign investors shrink from the new PPP law of Vietnam?

by Asia Insider

Vietnam’s National Assembly passed the Public-Private Partnership Law designed to streamline bureaucracies that may have made it difficult for investors to enter the growing Vietnamese economy. The law goes into effect on January 1, 2021

In 2019, Vietnam registered a 7% GDP growth, making it one of Southeast Asia’s fastest-growing economies. The country has also managed to reduce its poverty rate from 70% to below 6%. Despite this economic growth, most of the development has been done in a haphazard manner and with minimal private sector involvement.

That’s why the Ministry of Planning and Investment prepared the first draft of the PPP investment law – to eliminate numerous bottlenecks in public-private partnerships, making it easier for Vietnam to share infrastructural projects’ risks with foreign and local investors and to incentivize foreign investors.

Despite the law’s attractive and desirable intent, it makes it harder for the government to disperse funds. Why? Because some projects will depend on massive government expenditure and so will take longer to complete. In addition, the law creates loopholes that could end up curtailing investments if members of the public sue a project or a project’s companies. And the law makes it impossible for an international arbiter to manage such issues.

With these glaring issues, it’s too soon to tell whether the perennial issue of Vietnam’s underdeveloped infrastructure will improve or get worse. The written agreement may not play out as smoothly as it sounds.

The new PPP Law will allow the Vietnamese Government to share financial risks with companies in public infrastructure projects.

According to the local media,  PPP Law was adopted by the National Assembly (NA) on June 18 at the legislature’s ninth session, with 92.75 percent of deputies voting in favor, Vietnam News Agency reported.

Comprising 11 chapters with 101 articles, the law regulates investment activities and private investment attraction under the PPP model to certain important and essential infrastructure sectors.

PPP is one of the investment forms that have been applied in Vietnam, especially build-operate-transfer (BOT) projects in transport infrastructure development. However, this is the first time a specific bill on PPP has been submitted to the NA.

Chairman of the NA Committee for Economic Affairs Vu Hong Thanh said the law aims to create a sufficiently strong legal corridor for relevant parties to fulfil their obligations in PPP contracts.

It also demonstrates the State’s legal commitment to domestic and foreign investors, thus encouraging investors to join the State in PPP projects, he added.

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