Hanoi (VNA) - The Vietnamese Government is set to rein in the roleof the State in the economy and encourage private sector-led growth.
This move is due to the country’s rising public debt and State-ownedenterprises dominating the development and management of infrastructureprojects.
The information is evaluated by the Asian Development Bank (ADB) inits Public-Private Partnership (PPP) Monitor report that tracks thedevelopment of the PPP business environment across ADB member countries andprovides insights for governments on structuring a sound environment for PPPs.
This is the first edition of the report, which will be released annually.
It surveyed nine countries in the region, including Bangladesh, China,India and Indonesia, as well as Kazakhstan, Papua New Guinea, the Philippines,Thailand and Vietnam. It will be expanded to include additional countries insubsequent annual editions.
The report aims to benefit both policymakers and investors by providingin-depth information and data on the business environment for PPPs over time,enabling infrastructure developers to assess opportunities across countries andsectors. Annual updates to the report will flag important reforms that couldattract or deter investors, allowing policymakers to monitor progress in thePPP environment.
In Vietnam, the PPP regulations (Decree 15) enacted in 2015 establish a legalframework aimed to attract more private investment toward the development ofnational infrastructure.
The PPP Monitor outlines the key advances in the PPP framework, which includeenabling availability/performance-based payment schemes, removal of theprevious limit on viability gap funding of 49 per cent of total investmentcost, enabling wider scope of infrastructure projects to be procured as PPPsand establishing processes for PPP project identification, appraisal andapproval.
From 1990 to 2016, the country closed 84 PPP projects amounting to 16.2 billionUSD, with 79 percent of them in the energy sector.
However, there are no PPP projects that have been implemented under this latestframework.
The PPP Monitor finds that current challenges include foreign lenders’ securityissues, as the framework for credit enhancements and guarantee mechanismsremains unclear and the restrictions on mortgage over land-use rights in favorof foreign banks where land is conferred on a rent-free basis.
ADB President Takehiko Nakao said PPPs were crucial contributors to thedevelopment of countries in the Asia and Pacific region, but an enablingenvironment is required for these projects to succeed.
“This report will help both policymakers and investors make informed decisions,manage risk better and ensure a more stable environment for PPPs,” said Nakao.
The report reveals that India, the Philippines and Thailand have the mostdeveloped financial markets, which can provide longer-tenor loans (above10 years) in local currency to support infrastructure. These markets also havea wide array of financing options, including project bond financing.
The report finds that China has the most PPP projects that reach financialclose; but there is scope to scale up PPPs in the country by drawing on moreprivate sector companies.
Among the key trends identified in this year’s report is that energy generationis one of the most successful sectors in developing PPP frameworks. Thermal andrenewable power generation is the dominant sector for the majority of the countriessurveyed in the PPP Monitor.
The water sector is also a major area for PPP investment, with over 40 percentof PPP projects in the PRC in this sector.
Challenges remain for further PPP development, including enhanced developmentof financial facilities, further diversification of the investor base, managingthe risk of fluctuating traffic in transport projects, developing a crediblepipeline of PPP projects and expanding toward sectors beyond energy.
“There are many ways countries can overcome challenges to PPP development,”said Alexander N. Jett, PPP Specialist in the Office of Public PrivatePartnership.
He said among the solutions are greater use of credit enhancements to attractbetter financing terms, reducing restrictions on foreign ownership in PPPcontracts and introducing annuity payment systems that are based on performanceinstead of traffic volume to mitigate traffic risk.
“Strengthening the institutional capacity to screen and prioritise projects canalso help countries develop a credible pipeline of PPPs, while the developmentof sector-specific regulations for non-energy sectors would address concernsabout key bankability issues, such as foreign exchange risk,” said Jett.-VNA
This move is due to the country’s rising public debt and State-ownedenterprises dominating the development and management of infrastructureprojects.
The information is evaluated by the Asian Development Bank (ADB) inits Public-Private Partnership (PPP) Monitor report that tracks thedevelopment of the PPP business environment across ADB member countries andprovides insights for governments on structuring a sound environment for PPPs.
This is the first edition of the report, which will be released annually.
It surveyed nine countries in the region, including Bangladesh, China,India and Indonesia, as well as Kazakhstan, Papua New Guinea, the Philippines,Thailand and Vietnam. It will be expanded to include additional countries insubsequent annual editions.
The report aims to benefit both policymakers and investors by providingin-depth information and data on the business environment for PPPs over time,enabling infrastructure developers to assess opportunities across countries andsectors. Annual updates to the report will flag important reforms that couldattract or deter investors, allowing policymakers to monitor progress in thePPP environment.
In Vietnam, the PPP regulations (Decree 15) enacted in 2015 establish a legalframework aimed to attract more private investment toward the development ofnational infrastructure.
The PPP Monitor outlines the key advances in the PPP framework, which includeenabling availability/performance-based payment schemes, removal of theprevious limit on viability gap funding of 49 per cent of total investmentcost, enabling wider scope of infrastructure projects to be procured as PPPsand establishing processes for PPP project identification, appraisal andapproval.
From 1990 to 2016, the country closed 84 PPP projects amounting to 16.2 billionUSD, with 79 percent of them in the energy sector.
However, there are no PPP projects that have been implemented under this latestframework.
The PPP Monitor finds that current challenges include foreign lenders’ securityissues, as the framework for credit enhancements and guarantee mechanismsremains unclear and the restrictions on mortgage over land-use rights in favorof foreign banks where land is conferred on a rent-free basis.
ADB President Takehiko Nakao said PPPs were crucial contributors to thedevelopment of countries in the Asia and Pacific region, but an enablingenvironment is required for these projects to succeed.
“This report will help both policymakers and investors make informed decisions,manage risk better and ensure a more stable environment for PPPs,” said Nakao.
The report reveals that India, the Philippines and Thailand have the mostdeveloped financial markets, which can provide longer-tenor loans (above10 years) in local currency to support infrastructure. These markets also havea wide array of financing options, including project bond financing.
The report finds that China has the most PPP projects that reach financialclose; but there is scope to scale up PPPs in the country by drawing on moreprivate sector companies.
Among the key trends identified in this year’s report is that energy generationis one of the most successful sectors in developing PPP frameworks. Thermal andrenewable power generation is the dominant sector for the majority of the countriessurveyed in the PPP Monitor.
The water sector is also a major area for PPP investment, with over 40 percentof PPP projects in the PRC in this sector.
Challenges remain for further PPP development, including enhanced developmentof financial facilities, further diversification of the investor base, managingthe risk of fluctuating traffic in transport projects, developing a crediblepipeline of PPP projects and expanding toward sectors beyond energy.
“There are many ways countries can overcome challenges to PPP development,”said Alexander N. Jett, PPP Specialist in the Office of Public PrivatePartnership.
He said among the solutions are greater use of credit enhancements to attractbetter financing terms, reducing restrictions on foreign ownership in PPPcontracts and introducing annuity payment systems that are based on performanceinstead of traffic volume to mitigate traffic risk.
“Strengthening the institutional capacity to screen and prioritise projects canalso help countries develop a credible pipeline of PPPs, while the developmentof sector-specific regulations for non-energy sectors would address concernsabout key bankability issues, such as foreign exchange risk,” said Jett.-VNA
VNA
