On June 14, 2023, Vietnam International Arbitration Center (VIAC) in collaboration with Vietnam Confederation of Commerce and Industry (VCCI) and the United States Agency for International Development (USAID) held a Seminar to discuss and comment about the “Report on the review of public-private partnership model contracts” and the “Report on mobilizing new financing for infrastructure Projects in Vietnam” within the framework of the Project “Technical assistance to improve capacity, enhancing adaptability and sustainable development”.
The Seminar was attended by Dr. Vu Tien Loc - Chairman of VIAC, Member of the National Assembly; Mr. Pham Vinh Quang - AEO project team leader, USAID representative; PhD., Lawyer. Le Dinh Vinh - Director of Vietthink Law Firm, Arbitrator of VIAC; Associate Professors Doctor Tran Chung – Chairman of the Vietnam Association of Road Systems Investors (VARSI), and legal experts from Ministries, Branches and other organizations.
PhD., Lawyer. Le Dinh Vinh, as Independent Expert invited by USAID, Leader of expert authors of the Report on reviewing the current legislation of PPP project as well as the model contracts of BOT, BLT and O&M in the fields of transport infrastructure, drainage and waste treatment in Vietnam (“Report”), has presented the result of the Report at the Seminar.
Mr. Phan Vinh Quang – Team, Leader of the AEO Project, USAID also presented the Report on mobilizing new financing for infrastructure Projects in Vietnam.
Image: Seminar on comment for PPP model contract and new financing for infrastructure Projects in Vietnam on June 14, 2023
Report reviewing the Model BOT, BLT and O&M Contracts in Vietnam
The 2020 Public-Private Partnership Law ("PPP Law"), enacted by the National Assembly on 18 June 2020 and in force as from 01 January 2021, has unified the current regulations governing PPP, institutionalized the guiding orientations of the Party leaders, State and Government on the development of the national infrastructure system and mobilized private resources through PPP investment; formed a synchronous, stable and open legal framework for private sector to invest in infrastructure projects such as: transport infrastructure, energy, urban infrastructure, wastewater and waste treatment, public services… Simultaneously, this legal framework fosters transparency and equitable competition in selecting investors to execute PPP projects, progressively conforming to international and regional norms. However, law enforcement for PPP projects has lately encountered several obstacles, and inadequacies, such as:
(i) Still contradictions and lacks of synchronization among the provisions of the 2020 PPP Law and other specialized laws, leading to different interpretations and applications among the competent authorities.
(ii) The guiding document and other related regulations are scattered among various documents, leading to difficulties for the Contracting Agencies, Investors and the project enterprises to conduct legal research for PPP Contract’s signing and implementation.
(iii) Many provisions on project formulating and approving; investor selection; requirement of investor capacity; technology standards applied to the project; standards and methods of evaluating bids; PPP projects implementation; investment guarantee... when applied to each specific field with specific characteristics are still encounter numerous obstacles that require further guidance from state authorities.
The Prime Minister issued Directive No. 30/CT-TTg dated 23 November 2021, directing the Ministries of Transport (MOT), Ministry of Construction (MOC), Ministry of Natural Resources and Environment (MONRE) to issue Circulars guiding PPP investment projects in the fields under their management (including the Model BOT, BLT and O&M project contracts). But so far, apart from the Ministry of Transport which has issued the Model BOT, the remaining ministries have not yet issued the Model BLT and O&M Contracts.
The lack of specific regulations for the 2020 PPP Law’s and the lack of PPP model contracts are causing difficulties for ministries, departments and local authorities in the research, preparation and implementation of PPP projects; reduce the attractiveness of PPP projects as well as make investors not feel secure when choosing this method because of the lack of clarity on investor competence criteria, technology standards applied to projects, method, criteria for evaluating bids for investor selection, mechanism for sharing increase and decrease in project revenue.
In the above background, at the request of USAID and VCCI, PhD., Lawyer Le Dinh Vinh and the author team have researched and drafted the Report which aim to review, evaluate the current PPP legislation and the drafts of model contracts in BOT, BLT and O&M projects regarding transport infrastructure, solid waste and waste-water treatment. This Report is conducted based on a review of the legal system and PPP practices in Vietnam and other countries in region and global. On that basis, the Report is to make proposals and recommendations on supplementing, detailing model provisions of the Model BOT Contract during the process of drafting, negotiating and signing of BOT Contracts; simultaneously give recommendations on requirements to draft the Model BLT Contract and Model O&M Contract in the future.
As presented by PhD., Lawyer Le Dinh Vinh at the Seminar, the Report consists of 3 main parts: Part one, evaluating the entire legal framework governing the PPP Project Contract; Part 2, giving legal opinions on the Model BOT Contract in the transport sector, thereby making recommendations for application and improvement of the law and the BOT Contract modeal; and Part 3, the authors give legal opinions and recommendations on guidelines for building model of BLT and O&M Contract in the upcoming period.
PhD., Lawyer Le Dinh Vinh presented the results of the Report
The Report raises and analyzes on the general principles of PPP project contract, concepts, types of PPP project contract and content of PPP project contract, in which PPP project contract must meet the basic principles of civil law such as: principle of equality; Freedom, voluntary commitment, agreement; Goodwill, honesty; Respect the interests of the State, the public interest, the lawful rights and interests of others; etc. On the other hand, because the PPP project is characterized by the participation of 03 entities: the State, the Investor / Project Enterprise and the users (the community), it is necessary to ensure the following principles: (i) The principle of equality between State and PPP project investors and enterprises; (ii) The principles of ensuring harmonization of interests between the State, investors, users and the community; and (iii) The principle that enterprises and investors are entitled to reserve and enjoy more favorable regulations. These principles should be incorporated into the guiding principles in the negotiation, signing and implementation of PPP project contracts, and should be concretized by specific regulations, guidelines and directions for each project to ensure the practicality of the principle.
According to the authors, the new points in the definition of a PPP project contract is more clearly defined the subject of the contract, clarifying the nature of the contractual relationship of the PPP contract which is the concessions of the State to PPP investors and enterprises to implement PPP projects. Since it is a concession relationship, the State will not divestments or give up its ownership and management rights for PPP projects. Instead, the State will set certain binding standards and requirements on commitment to quality and service for private suppliers.
In the opinion of the authors, in accordance with Clause 2, Article 47 of the PPP Law 2020, the provisions expressed in the Model Contract should only serve as a guide or a starting point for the parties in the process of negotiating and signing the Project contract, the detailed content must still be agreed upon by the parties in accordance with the specific nature of each project; and should harmonize and focus on the following points:
- For legal issues where there are specific rules of conduct for PPP projects, it is not necessary to include or refer to the model contract;
- For provisions of the same matter are providing in various legal documents, it is recommended to systematize and re-describe into corresponding clauses in the model contract, minimizing too many citations of relevant laws in the model contract;
- For the legal issues that are only prescribed in principle, these issues must be specified in the model contract for each type of PPP project contract.
From the assessment of principles in the development and implementation of the PPP contract above, the authors have reviewed the Model BOT Contract, thereby making recommendations on supplementing and detailing provisions in the Model BOT Contract; at the same give instruction and requirements for the drafting and issuance of guiding documents and Model BLT Contract as well as Model O&M Contract...
The detailed Report on the review of PPP model contracts will be published in the near future.
Experts participating in the Seminar highly appreciated the Report results and recommendations of the authors in the Report, and gave comments to supplement and complete the Report: Assoc. Prof., PhD. Tran Chung - President of VARSI, PhD., Lawyer Le Net - Vice President of SCL VN, Mr. Nguyen Minh Duc - Deputy Head of VCCI's Legal Department, PhD. Dang Hoang Mai – Hanoi University of Civil Engineering, PhD. Nguyen Thi Hoa – Ho Chi Minh City Law University, Assoc., PhD. Do Tien Sy - University of Science and Technology, Ho Chi Minh National University, Assoc., PhD. Nguyen Ba Binh and LLM. Nguyen Mai Linh – Hanoi Law University and Representative of Ministry of Natural Resources and Environment, Ministry of Planning and Investment.
Report on mobilizing new financing for infrastructure Projects in Vietnam
Mr. Phan Vinh Quang – The leader of AEO project of USAID, has presented the results of the Report on mobilizing new financing for infrastructure Projects in Vietnam at the seminar. The Report consists of two main parts: Part One, investment in new assets with revenues from existing government assets; Part Two, raising funds from Institutional Investors.
The Report analyzes the need for infrastructure investment in Vietnam is massive, needing 600 billion USD to ensure the development goal by 2024. The key point is the ability to finance from the State budget which is heavily constrained in the post-Covid 19 period. The expert team propose a solution that Vietnam Government needs a new method to finance infrastructure needs and invest in new project from existing projects revenues without increasing public debt and without affecting other recurrent expenditures. The proposed implementation methods such as concessions, leasing, construction bonds, securitization of future revenues.
From this point of view, the authors also suggest ways to raise capital from institutional investors, including Infrastructure Investment Fund; Insurance company; Retirement fund; Commercial banks, the authors believe that these are the most optimal capital mobilization methods in the current period of Vietnam. Along with that are the difficulties that Vietnam is facing in mobilizing equity and debt instruments, small bond market and limited commodities, etc. The recommendations presented by the authors are closely related to the legal status of PPP in general and model BOT, BLT and O&M contract in particular such as completing the legal framework for private capital investment; apply O&M contracts to collect prepaid tolls for expressway projects invested with State capital; create sustainable investment opportunities and tools; improve capital market to attract Institutional Investors.
Mr. Phan Vinh Quang, AEO Project Team Leader, USAID, presented the Report on mobilizing new financing for infrastructure Projects in Vietnam.
The Seminar ended on the same day, the authors of the two reports have absorbed many useful comments from experts at the Seminar to finalize the official report and publish it in the near future. The Report is expected to be an important reference source in the process of Ministries continuing to develop and complete the legal framework for public-private partnership investment and also developing PPP model contract, especially the model contract for BOT, BLT and O&M projects.
Vietthink News.