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Official Gazette

Friday, December 13, 2019

Draft law suggests two mechanisms to ensure feasibility of PPP projects

Updated: 14:37’ - 01/12/2019
The Government has submitted to the National Assembly the latest draft law on public-private partnership (PPP), proposing two mechanisms to ensure the feasibility of PPP projects.

A section of La Son-Tuy Loan expressway running through Nam Dong district, Thua Thien-Hue province __Photo: VNA

The first mechanism, foreign-currency balance guarantee, would apply to projects subject to investment policy decision by the National Assembly or Prime Minister in some special circumstances. It is when a project enterprise needs foreign currencies for current transactions, capital transactions or other transactions or for transfer of capital, profits or proceeds from liquidation of investments abroad in accordance with the law on foreign exchange management but cannot acquire the sufficient foreign-currency amount though having tried to exercise its right to buy foreign currencies from credit institutions licensed to conduct foreign-exchange activities. Then the Government will consider issuing a resolution providing the project enterprise with foreign-currency balance guarantee. The guarantee limit will be decided on the basis of balancing resources in each period but must not exceed 30 percent of the project’s Vietnam-dong revenues after subtracting its Vietnam-dong expenditures.

The second one, state-investor risk sharing, will be conducted by either changing the set prices of the products or charge rates of the services provided by PPP projects or adjusting the duration of project contracts. Specifically, in case the actual revenue of a PPP project exceeds the expected revenue as stated in the project contract, prices of the products or charge rates of the services provided by the project will be reduced or the duration of the project contract will be shortened. On the contrary, if the actual revenue is lower than the projected revenue, the product prices or service charge rates will be raised.  

Particularly for a number of key projects subject to investment policy decision by the National Assembly or Prime Minister, if the above-said measures have been taken but such a project still fails to earn sufficient turnover to maintain production and business activities, the Government may, on the basis of available resources, consider applying the risk-sharing mechanism under which the Government commits to share with the investor at most 50 percent of the revenue deficit and the investor commits to share with the Government at least 50 percent of the revenue surplus.

Worthy of note, under the draft, enterprises implementing PPP projects would be allowed to issue corporate bonds to raise capital but may not issue public stocks to implement their projects.

The draft law also introduces two options on management and use of public investment capital poured into a PPP project to support the construction of infrastructure works or systems. The first option is to form a component project using public investment capital in the PPP project. As per the second option, payments will be made to the project enterprise for each work item according to its proportion to the projects, value, and progress under the conditions stated in the project contract.- (VLLF)

 

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