BOT projects need careful consideration
The Government's website (baochinhphu.vn) recently published an interview with Dr Tran Chung, President of the Association of Private Investors in Road Transport, on strong and weak points of BOT projects in Vietnam.
|VETC worker monitor vehicles driving through Can Tho – Phung Hiep BOT tollgate. — VNA/VNS Photo (Illustrative image)|
As an expert on public transport projects in Vietnam, what do you think of the public-private partnership draft law?
In recent years, the public-private partnership (PPP) model has been applied rather widely in the transport field, particularly in build-operate-transfer (BOT) projects. In this model, private investors use their own money to build and operate the project after its completion for a certain period of time. Then the project is transferred to the Government.
The BOT model has opened up an opportunity for the private sector to mobilise capital resources from different economic sectors to invest in road construction projects and operate them for some time before transferring them to the Government.
Meanwhile, PPPs have opened opportunities and conditions to mobilise capital resources from the private sector in the development of the country’s infrastructure and socio-economic development as a whole.
However, in reality, according to reports from the State Inspectors and the State Audit, there remains many obstacles in the Government’s policies and institution.
Some of the most prominent issues are selection of the investors, project announcement, rules on the management of investment capital, the same management format is applied to both PPP and public projects, and many others.
In project implementation, quite a few problems have arisen, particularly financial issues like credit, service charges and others. These problems need to be settled as soon as possible.
What are the differences in investment between the BOT and PPP projects?
Resolution No.473 of the National Assembly Standing Committee states clearly that BOT projects are only applied to new roads and it is up to road users to decide whether they want to use them or not. In other the words, BOT is a type of contract with a special financial mechanism allowing road users to decide whether they want to use it or not. If they want to use it, they have to pay the fee.
However, at present, many national/provincial roads need to be repaired or upgraded while the State budget is limited.
That’s why I support the Government’s decision to include in the Law on Public Private Partnership which covers different formats, like that of the PPP, build-transfer and lease and build-service and lease. Of course, in these contract forms, the Government will settle financial issues for investors in several ways (the financial settlement may be prolonged for many years) and road users don’t have to pay fees.
Recently, some BOT investors have complained that risk sharing has not been included in the contracts. Don’t you think a risk sharing mechanism should be written in the contracts to protect all signatories?
In a market economy, a legal value is the primary issue that any contract has to abide by.
So, in my opinion, before signing the contract, both Vietnamese agencies and the investors have not foreseen risks that may occur nor found solutions to solve them. In reality, no lawsuit on such an issue has been reported. So the upcoming Law on Public Private Partnership should think of the establishment of the Viet Nam International Arbitration Centre (VIAC). And VIAC will be the place for settle mishaps in BOT projects or PPP projects.
Do you have any suggestions for the development of the Law on Public-Private-Partnership?
The PPP law should be promulgated as soon as possible.
It should cover various areas, including capital investment management, financial settlement and others.
The law should also differentiate the concepts between projects using the State budget with the PPP project.
What is the role of localities in transport projects that run through their territory?
Local authorities have the responsibility in land settlement for the road to run through their local territory as well as to give their comments or suggestions to ensure the rights of all Vietnamese people using the road.
In addition, the local government should be involved in the supervision process in the project throughout its life cycle.