Few efficient public-private partnership (PPP) projects have been executed since the introduction of this investment format under the Investment Law two years ago. However, new signs have been seen following the National Assembly’s resolution giving HCMC a wider avenue, on a trial basis, to implement PPP projects, but impediments are still awash when scrutinizing PPP projects elsewhere.

What are PPP projects? By nature, PPP projects are public investment ones which the State uses its own budget to implement for the society’s welfare or public benefits, such as projects to develop crucial infrastructure to meet the demand of the economy at large. As most of such projects have a very low rate of return, the State has to use taxpayer money to finance their development, instead of relying on private sector capital. However, given its limited resources, such as short-term financial constraints due to the high demand for public investment, or limited capacities to develop, implement and manage such projects, the State has to rely on external resources. When private investors are engaged in PPP projects, the nature of public investment is still retained. Key properties vested in PPP projects like priority and incentives stay put, since if they are removed, investors see no allure and will not collaborate with the State to execute such projects. When joining a PPP project, the investor always pursues profits, while the State does not aim at this goal, be it a PPP project or a public investment one. Therefore, stripping investors of profitability is nonsensical and any argument that the State cedes its benefits to investors in PPP projects is illogical. Just like the mandate to issue policies on the development of education, science and technology, the development of public investment projects fall within the State’s responsibility to create infrastructure and lay the groundwork for socio-economic development. Revenue streams for the State therein, if any, should come from tax sums and other financial obligations payable by entities that gain incomes and added values via the utilization of infrastructure facilities developed by the State. Such revenues must not be the direct profit from those projects like the way investors secure their incomes. In certain cases, for the sake of economic development and to facilitate project execution, the State even has to incentivize investors with financial support and other forms of assistance during the project execution to attract the participation of investors, as provided for in the PPP regulations. The State shall not allow PPP investors to make unregulated gains or earn steep profits, especially in projects that they are allowed to operate before turning them over to the State, like build-operate-transfer (BOT) projects. However, giving assistance to investors is a form of investment in social development, and therefore, the State cannot demand equal benefits against investors. Bottlenecks An important issue in BOT projects is how to properly measure the investment cost and the rate of return of a project upon completion so that the State can weigh how to refund the investor. Take a BOT project in the transport sector for instance, if the investor is given an extended period to collect toll fee, it can reap a huge profit, which is illogical. Instead of using a State-invested public facility free of charge, users have to pay a total sum far higher than the logical contribution to the State. It is worth noting that several projects have been earlier found with irregularities relating to the appraisal and approval of the final costs, resulting in reservations or hesitations when it comes to the execution of PPP projects in general and BOT projects in particular. However, a more agreeable approach should be to mend legal loopholes, comprising (i) supplementing regulations on criteria and processes for appraising and evaluating PPP projects; (ii) supplementing regulations on mechanisms to control irregularities in the execution of PPP projects, especially the processes of project evaluation and appraisal; and (iii) enhancing transparency in the implementation of PPP projects. All conditions and incentives must be publicly announced so that all eligible bidders can partake. Once again, if all these obligations are not adhered to, suitable legal sanctions must apply. In reality, to avoid wasting revenue-earning opportunities, certain local governments often set up a State-owned business entity to assume PPP projects, or acquire stakes in participating firms. It is not a right approach in the long term, though. Apart from possible fishy incentives or tricks taken to award bidding contracts to such enterprises, such an approach fails to create a level-playing field for all enterprises and does not contribute to economic growth. Legal restrictions—in this case banning the approval of BOT projects on the premises of existing facilities—also constitute a major impediment. Apparently, it seems illogical when a new investor comes to upgrade a certain road and then collects toll fees on the road that the people have been using free of charge for years. However, banning such BOT projects also means relinquishing opportunities to upgrade infrastructure at a time when the State is wringing its hands over the shortage of resources. The solution should be to allow investors to execute such facelift projects and reimburse them with a suitable amount. The question is not whether they are allowed to collect toll fees or not, but how much they can collect and for how long. Once again, this issue relates to the appraisal of projects, evaluation of the investment cost, and the amount to be settled to the investors. The National Assembly has lately delegated powers to the HCMC government to approve the execution of BOT projects on the premises of existing public facilities. However, this mechanism is a special privilege for HCMC only, while similar projects in other provinces are still stonewalled. If pain points can be controlled, there would be no reason why private resources are not mobilized to implement PPP projects, even those to be executed on the premises of existing public facilities that are deteriorating.