Good bidding mechanism, ensuring transparency will attract investors

VCN – This is the opinion of Prof. Nguyen Mai (photo), Chairman of the Association of Foreign Investment Enterprises in an interview with Customs Newspaper about the issue of attracting foreign investment into the public-private partnership (PPP) projects.

good bidding mechanism ensuring transparency will attract investors
Prof. Nguyen Mai, Chairman of Association of Foreign Investment Enterprises

The PPP Law will be discussed at the 9th Session of the XIV National Assembly. Do you have any comments on the enactment of the PPP bill in the context that Vietnam is in urgent need of attracting investment, especially foreign investment in key projects?

PPP is not a new issue. Since 1994, we have approved the first PPP project of Sao Mai – Ben Dinh port project (Vung Tau) in the form of Build-Operate-Transfer (BOT), which has a total investment of US$650 million.However, in the wake of the regional economic crisis, Singaporean investors were unable to carry out this project.

By 2011, the Ministry of Planning and Investment has begun sending officials to the UK to study PPP investment. Up to now, it can be affirmed that success in PPP in Vietnam is not significant, there are many obstacles in the field of transportation.

The Association of Foreign Investment Enterprises has also submitted a document to the Government and the National Assembly, saying that the promulgation of the PPP Law is very necessary, but it is advisable to study the practical situation of the implementation of PPP investment projects in Vietnam. For more than 20 years, a suitable PPP Law has attracted huge investment resources from the private sector, especially foreign investors. PPP investment as well as any other form of investment is not only the experience of the world but also has its own characteristics and adaptability to each country.

Is the PPP Law currently attractive to foreign investors? What do foreign investors really care about in the PPP Law?

Currently, there are three issues that foreign investors as well as domestic investors are interested in.

First of all, it is the guarantee issue. PPP investment is the distribution of benefits between investors and the Government. With PPP investment, no investor will invest 100% of the capital. Besides, the capital amount invested by the investor, the State may contribute by the state budget or loans, capital from the issuance of projected bonds. As far as I know, the arrangement between investors, the Government and banks faces many difficulties. Banks always care about protecting, recovering capital, not allowing overdue debts. But in PPP investment, the calculation of capital recovery is much harder, so if the two parties are not in good faith, they must always submit to the Prime Minister; when in trouble, this is very troublesome. If we do not have a clear legal mechanism, it is very difficult to solve.

Secondly, in terms of benefit sharing of the project, the draft mentions two possibilities: more profit or loss than the contract option. In the National Assembly, there is a view that this is a market mechanism – profit and loss. This expression is not wrong. But, given the evidence in the field of transport, I think it is difficult to accurately predict the flow of vehicles traveling a certain distance at a given time, because it depends on many factors. In my opinion, there should be a provision in the PPP contract, in case of failure to comply with the estimate; it should be handled according to the principle of benefit sharing. As far as the benefit-sharing threshold is concerned, we need to calculate it appropriately, not just losing a few percent of risk-sharing. This needs to be public and transparent.

Thirdly, the issue that foreign investors are currently interested in is the bidding mechanism. We do not currently have foreign investors involved in the transport sector. One of the reasons is the story “lining up”, the bidding council in the process of bid evaluation and decision making. We recommended that an organization be mobilized by leading experts with professional qualifications, experience in road work to consider PPP projects, and then set up an independent council to bid on the projects. If doing it, it will create a good bidding mechanism, ensure transparency, new foreign investors will join in.

In your opinion, what are foreign investors concerned about in the formulation, enactment and implementation of the PPP Law?

A concern of foreign investors is that the upcoming PPP Law, after being passed by the National Assembly, will assign the Government to issue a decree, then the Government will assign the ministry or sector to issue a circular. Currently, there is a situation that the National Assembly is making a general law, the Government’s decree resolves a number of issues and has to wait for the circular promulgated before the Law will officially take effect. However, many cases of circulars are not appropriate or consistent with the decree because the legislators are not the Government or the National Assembly but the ministries.There are some things the ministries do not include in the law, they will be included in decree or circular. This is what investors fear the most. Therefore, I do not understand why since 2011 we have started to allow PPP investment pilots, but so far over10 years, we do not have a full review to institutionalize in a detailedway, publicity, transparency, clarity and confidence for domestic investors and especially foreign investors. If we can overcome this, it will attract more foreign investors to PPP projects.

The draft PPP Law is hardening five investment sectors. Many foreign-invested enterprises recommend that the field of investment should be open because new fields can arise. Whatdo you think about this issue?

Regarding the field of investment, I think it is advisable to consistently implement the state policy to do projects related to national defense and security.The remaining project which private enterprises can do, or foreign investors can do, let them do it; to focus its limited resources on what needs the role of the state. I was very surprised that the Minister of Industry and Trade recently proposed to involve the private sector in power transmission. There are two comments on this issue. Firstly, power transmission is national security, so the private sector is not done. Another idea is that power transmission is not national security. Currently, this issue has been decided that, in the first phase, the 500KV high-voltage power transmission axis, the state makes, can do in the form of BT, and transmit electricity from this 500KV line to households for use,and industrial zones for private use.

It is argued that future PPP projects, especially in the field of renewable energy, may need access to the sea. It is essential that the State guarantees access to the sea surface to attract international investors for projects. However, this is a relatively sensitive issue. What is your view on this issue?

Renewable energy projects, including wind power or solar power, need a large area of ​​land. In the world, the importance of renewable energy technologies on the water is important, the benefit of not wasting land, especially when using agricultural land to produce food for power projects. However, asthe sea surface is related to national security, I think that to solve this problem; we need to choose a partner. Not only energy projects, but we cannot overlook national security. Regarding the energy sector, as I mentioned, we are facing the situation, one side requires very fast energy development, so we develop coal power, one side thinks we need to grow fast on recycled energy. Currently, 6,000 MW of renewable energy has been put into use, while hundreds of thousands of MW are waiting to be put into use. Whether or not the recent price cut has caused foreign investors to invest in renewable energy is unclear, but it is clear that there have been no new projects in June 2019 in this area.

By Thu Hien/Bui Diep

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