For more open public-private partnership

The Ministry of Finance is drafting a Government Decree on the financial management mechanism for investment projects under the form of public-private partnership (PPP) and the payment and settlement mechanism for investment contracts under the form of build-transfer (BT).

Removing the shortcomings

The issuance of this Decree aims to replace Decree 28/2021/ND-CP (Decree 28), which contains many shortcomings after more than 3 years of application; at the same time, it unifies the implementation of new regulations related to the fields of investment, securities, and budget revenue and expenditure that have been amended and supplemented in important laws such as Law No. 56/2024/QH15, Law No. 57/2024/QH15 and Law No. 58/2024/QH15.

According to the Ministry of Finance, the main content of the new Decree focuses on clarifying issues related to the settlement of investment capital for infrastructure projects, handling of transferred assets, use of State capital in PPP projects, issuance of PPP project bonds and the mechanism for sharing increased and decreased revenue. In particular, with regulations related to the payment and settlement mechanism for PPP projects applying the BT contract type, when this Decree is issued, investment projects in the form of BT will officially have specific legal status to resume after more than 3 years of interruption.

Comparing the newly amended and supplemented regulations in the Draft Decree with the existing regulations in Decree 28, it can be seen that many shortcomings in the financial mechanisms and plans for PPP projects have been resolved. Regulations on capital mobilization for projects are also more specific and open. Meanwhile, regulations on risk sharing principles between the State and the private sector are also fairer and more reasonable.

Specifically, the regulations on cash flow of PPP projects are defined as after-tax cash flow, discounted at the weighted average rate of interest rates of mobilized project capital sources and the rate of return on equity. This new regulation will resolve the difficulties in determining tax obligations and cash flow to calculate financial indicators of BOT projects in the past.

In addition, regulations on financial plans, payment, and settlement of investment preparation costs from the stage of preparing and appraising pre-feasibility study reports to signing PPP contracts also help projects have a basis for preparing, appraising, and approving pre-feasibility study reports, speeding up the implementation progress of infrastructure projects.

In particular, the provisions on the principles of sharing the increase and decrease in revenue in PPP projects are updated in a timely manner by the Draft Decree with legal changes in Law No. 57/2024/QH15, allowing the application of the mechanism of the State sharing 50% when actual revenue is higher than 125% and lower than 75% of the revenue in the financial plan. This, together with detailed regulations on the procedures for arranging budget reserves to pay for the project's reduced revenue, will remove the shortcomings that the previous Decree 28 encountered when the State Budget Law did not have a mechanism to pay these amounts.

Ben Nghe tidal sluice is part of the project to solve flooding caused by high tides in Ho Chi Minh City area.

Expectations of resuming many large infrastructure projects

According to the Ministry of Planning and Investment, in more than 3 years of implementing the 2020 PPP Law, more than 40 new projects have been deployed or are preparing for investment under this method nationwide. These are all key national or regional projects with a total investment of about 380,000 billion VND, requiring the use of about 190,000 billion VND of state capital.

Law No. 57/2024/QH15 adds many new regulations to the PPP Law 2020, including regulations on encouraging PPP investment in all public investment sectors; abolishing the limit on minimum investment capital scale as well as allowing the continued application of BT contracts, which will be a driving force for the private sector to boldly participate in the development of transport infrastructure projects.

At the Decree level, the Government's early issuance of a supplementary document to replace Decree 28 is highly anticipated by investors and businesses in the construction and real estate sectors. They expect this to be a breakthrough to resume large unfinished investment projects.

Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association, said that since January 15, regulations on restarting and transferring BT projects under Article 3 of Law No. 57/2024/QH15 have come into effect. However, in reality, no locality has “resumed” investment procedures for BT projects, leading to a situation where many projects have been “frozen”.

According to Mr. Chau, the Ministry of Finance is speeding up the completion of the Decree replacing Decree 28, while the Government is also finalizing the draft Decree amending and supplementing Decree No. 35/2021/ND-CP. These will be the legal developments that the business community is most looking forward to in the coming months to restart dozens of large-scale projects.

In Ho Chi Minh City alone, up to now, dozens of large BT projects such as: Thu Thiem 2 Bridge project, roads in Thu Thiem new urban area, Mai Chi Tho - Nam Rach Chiec parallel road, flood prevention project, Phan Dinh Phung Sports Center... are all waiting for legal completion to resume investment activities.

Meanwhile, some projects such as: Phu My bridge connecting road, D3 road (connecting to Saigon - Hiep Phuoc port), Tham Luong - Ben Cat canal wastewater treatment plant, Pham Van Dong road... although completed and put into use, have not yet completed the settlement of land funds for investors participating in BT contracts.

The Government Office issued Document No. 996/VPCP-CN conveying the direction of Prime Minister Pham Minh Chinh on the draft Decree amending and supplementing a number of articles of Decree No. 35/2021/ND-CP dated March 29, 2021 detailing and guiding the implementation of the Law on Investment under the public-private partnership model.

Law No. 57/2024/Q15 amending and supplementing a number of articles of the Law on Planning, the Law on Investment, the Law on Investment under the public-private partnership model and the Law on Bidding was passed by the 15th National Assembly at the 8th Session, effective from January 15, 2025, except for the provisions on the implementation of BT contracts (effective from July 1, 2025).

In Decision No. 1610/QD-TTg dated December 19, 2024, the Prime Minister assigned the Ministry of Planning and Investment to preside over the drafting of a Decree amending and supplementing a number of articles of Decree No. 35/2021/ND-CP dated March 29, 2021 of the Government detailing and guiding the implementation of the Law on Investment under the public-private partnership method, including: (1) PPP project appraisal council; (2) PPP project process; (3) Investor selection process, (4) Methods and criteria for evaluating bidding documents; (5) Termination of PPP project contract; (6) Transitional cases.

To carry out the assigned tasks, the Ministry of Planning and Investment has completed the draft and submitted it to the Government for consideration and promulgation of the Decree amending and supplementing a number of articles of Decree No. 35/2021/ND-CP.

After reviewing the draft Decree, Prime Minister Pham Minh Chinh suggested that the appraisal process should be shortened to no more than 2 weeks. The appraisal council should be reduced to only professionals and relevant agencies. In addition, there should be strong decentralization and responsibility assigned to localities.

Source: https://thoibaonganhang.vn/de-hop-tac-cong-tu-coi-mo-hon-160488.html