General

PPP Law in Infrastructure Projects (Part 2): Incentives and Guarantees

Trường Lăng

May 7, 2022

General

PPP Law in Infrastructure Projects (Part 2): Incentives and Guarantees

Trường Lăng

May 7, 2022

View previous part

General incentives

Broadly speaking, investment incentives under the PPP Law include tax incentives, rights to mortgage project assets, rights to use land, rights relating to the purchase of foreign currency and foreign currency balancing, rights to utilize public services, and rights relating to ownership of assets.

Government guarantees

The significant deviation from Decree 63 is that the PPP Law does not expressly include the grant of a government guarantee to investors to a PPP project to guarantee the performance or payment obligations of State counterparties (e.g., to supply fuel or to purchase electricity from BOT or renewables power plants). The Ministry of Planning and Investment is currently drafting a decree for implementing the Investment Law which give the Prime Minister the authority to issue government guarantees for important projects.

Foreign currency availability guarantee

Although modified from Decree 63 and subject to certain regulatory criteria, the PPP Law continues to allow foreign currency guarantees and the Government will decide whether to apply policies ensuring the availability of foreign currency of up to 30 percent of the revenue in Vietnam dong (after payment of operating costs in Vietnam dong) of projects approved by the National Assembly and Prime Minister.  This is effectively the same as what has been achieved in recent BOT power projects in Vietnam, although it remains to be seen whether the PPP Law or its implementing regulations will change how this 30-percent rule is applied.

service main

Revenue sharing and support schemes

The PPP Law marks the first time a law in Vietnam allows the State to commit to revenue sharing and revenue support mechanisms with private investors.  This could offer a major boost to PPP projects where the project is taking market or usership risk (e.g., toll road or rail projects).

When actual annual project revenues reach more than 125 percent of the projected revenue in the base case financial plan set out in the PPP contract (the Financial Plan), the investors and project company will share with the State half of the project revenues over and above the 125-percent level.  Such revenue sharing will be applied after the project company has adjusted the price, the usership or tolling fee and the term of the PPP contract, and the State Audit Office has audited the revenue amount subject to the revenue sharing mechanism. 

When actual annual project revenues fall below 75 percent of projected revenue in the Financial Plan, subject to certain regulatory conditions, the State shall support the project by making up half of the revenue shortfall below the 75-percent level. 

If applied, the revenue support mechanism shall be set out and approved under the AIP at the outset.  While it is not clear how the project company will be entitled to adjust the price, fees and PPP contract term unilaterally, the concept of revenue support mechanisms should be seen as a significant positive step.

Process for PPP Projects

The PPP Law sets out the following steps, including detailed guidance in relation to each, for the implementation of a PPP project: (shown on the slides)

Note that for PPP projects applying high technologies (per the list of high technologies prioritized for investment and development under the regulations on high technologies) or new technologies, the implementation process varies slightly in that the investor would be selected before formulation, evaluation and approval of the feasibility study report, and approval of the PPP project.

Related posts

Doing Business

Socio-Economic Situation in Vietnam Q3 2023

Table of Contents Economic Performance IndicatorsGDP Growth and Key Sector ContributionsInflation Concerns and Economic RealitiesGrowth in Vietnam’s Labor ForceExpanding Labor ForceStable Unemployment and Underemployment RatesPositive ...
Read more
Doing Business

Q3 2023 FDI Report: Vietnam’s Growth

Table of Contents FDI Performance in Q3 2023Investment Sectors, Locations and PartnersDiverse Sector AllureLeading Investment DestinationsKey Investment PartnersFDI Evaluation and OutlookFDI Performance and TrendsFDI’s Impact ...
Read more
Doing Business

M&A wave in the Pharma and Medicine Industry in Vietnam

Table of Contents M&A Trends in Vietnam’s Pharma and Medicine IndustryThe M&A Process in the Pharma and Medicine IndustryInitial Considerations and Strategic PlanningDue DiligenceNegotiation and ...
Read more
Doing Business

Modern Online Retailing: Elevating the Airline Experience

Table of Contents Digital Transformation in Booking and Pre-flight ExperienceStreamlining the Check-in and Security ProcessOnboard Comfort and In-flight ServicesPreparing for Landing and BeyondFinal Thoughts In ...
Read more

Download our Latest Ebook about Real Estate and Property!

Real estate holds a pivotal position in the development of a country, not only via the spillover impacts on other economic sectors such as construction, manufacturing, tourism, finance and banking etc. but also affecting the social dynamic by mobilizing the residency and infrastructure system. Foreign direct investment in real estate (RFDI) in Vietnam has a long running history and is unique in that it is largely dominated by the private sector compared to other industries which usually still have a rather large Government involvement. International capital has consistently been selecting real estate as the destination of choice, given that RDI has always been in the top 2 and 3 for volume inflow over the last 10 years, even throughout extremely turbulent periods such as COVID-19, per the General Statistics Office of Vietnam’s (GSO) data. Find out more in this ebook edition.

Tải cuốn ebook mới nhất về nền kinh tế số Việt Nam!

The digital economy of Vietnam has been fueled and accelerated by the global digital trends and the pandemic Covid-19. The movement of digital transformation is underway in every corner of Vietnamese life, strongly influencing the way people do things. Digital economy is the future of the Vietnam economy. Realizing the potential of the digital economy, the Vietnam government has issued policies, guidelines and created legal frameworks to support and further enhance this economy. In this ebook edition, the digital economy is looked at from different angles. Perspectives from the key elements comprising Vietnam digital economy are examined and discovered.

Our Happy Clients