Local infrastructure projects are set to become more attractive to private investors as the Ministry of Planning and Investment has just finished a draft public-private partnership (PPP) financing framework which will be submitted to the Government in early 2010 and is expected to be approved in September 2010.
The draft of the PPP financing framework, once approved, will hopefully attract private investors to develop Vietnam's underdeveloped infrastructure systems. These infrastructure systems have already received investment of US$60 billion from Vietnam’s State Budget from 2001-2010, equivalent to 8.4 percent of Vietnam's gross domestic product (GDP), and US$7.4 billion from official development assistance (ODA) funds.
The World Bank anticipates that the demand for infrastructure investment is getting closer to 11 per cent of Vietnam's GDP, adding that there may be a potential financing gap of about 5 per cent of GDP by 2010. Meanwhile, the private sector has not paid much attention to this area because of the investment risks: high initial costs, slow investment returns, and limited access to debt financing, as well as cost-overrun concerns.
To draw more investment from the private sector, the new PPP financing framework will let the Government share the risk with private investors in infrastructure projects. The Government could fund up to 30 per cent of required investments, or even 50 per cent for specific projects with longer operating periods, higher cost recoveries, or poverty-relief oriented.
According to the draft, the Government will decide which projects will be invested under the PPP investment form. In this draft framework, the stages of a PPP, such as preparation of a feasibility study, selecting investors through public competitive bidding and monitoring post-disbursement activities are also dealt with.