Vietnam to Change PPP Laws
Apr. 1 – The Vietnamese government has proposed amending its public private partnership (PPP) laws in order to encourage international investment in Vietnam. Under the current rules, PPP projects must fall under one of seven categories in order to qualify for funding, and projects that deal with transport infrastructure have been heavily focused.
The amendment proposes an expansion of the current PPP laws to cover new sectors including agriculture, offices, culture and the construction of markets. Other changes will result in an additional number of incentives for investors as the state is now set to cover a greater number of the costs related to project preparation and management.
The new regulations will update Vietnam’s existing detailed PPP regulations, which were issued in 2010, and will give Vietnam’s Ministry of Planning and Investment (MPI) a more central role in coordinating and implementing its national PPP program. It will also give the MPI greater control by allowing it to set certain universal terms to be included in all PPP contracts and projects.
In addition, Vietnam’s Prime Minister will be given the discretion to decide how large a stake the state takes in particular projects. Currently, state participation in PPP projects is limited to a maximum of 30 percent.
Under the current system, the state typically pays for the costs associated with project planning and feasibility study reports. However, the amendment proposes to have the state cover only the costs that arise from project preparation and management, with the investor having to reimburse the state for the cost of the reports and studies. In addition, the amendment allows for private sector investors to be reimbursed if their project proposals are rejected.
The PPP arrangement allows public services or private business ventures to be funded and co-operated through a partnership between the public sector and one or more private sector companies. Through this arrangement, the government can contract out the design, building and operation of a facility to a private sector company. A typical PPP arrangement lasts about 25 to 30 years.
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.
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