Viet Nam

Viet Nam

Infrastructure procurement: Infrastructure investments have been a major engine of growth in Viet Nam, with investments in transport, energy, telecommunications, water, and sanitation amounting to 9-10% of GDP in recent years, a high level by international standards. However, infrastructure deficiencies still pose major constraints on further social and economic development growth in Viet Nam.

Both state budget and Official Development Assistance (ODA) are major sources of funding for infrastructure investment, however they might not be sufficient for reducing the persistent infrastructure gap identified in the country’s Socio-Economic Development Plan (SEDP). As the Vietnamese government’s resources appear insufficient to plugging this gap, PPPs are increasingly recognized as an alternative means to funding infrastructure projects. Hence “encouraging and creating favourable conditions for private investments into infrastructure” is featured as an objective in the Master Plan on Economic Restructuring for the 2013-20 period. PPP projects are explicitly encouraged in the transport, water, waste and power sectors.

PPP projects: Whilst the majority of PPP contracts used Build-Operate-Transfer (BOT) structures, other forms of concession exist, including Build-Transfer-Operate (BTO) and Build-Own-Operate (BOO) contracts. The Government recently released a list of national projects calling for foreign investment, which might be seen as a promising start to developing a pipeline of viable projects.

Overview of Public Interventions
Subsidies & Guarantees
Infrastructure Tax Incentives The Government provides tax incentives for PPP projects such as:

• Exemption from certain import and export duties
• Reduction and exemption from corporate income taxes for profits reinvested in certain sectors in Viet Nam
• Accelerated depreciation of fixed assets for projects in certain sectors and geographic areas
• Concessional 10% tax rate for the project duration
• Exemption or reduction of land use rights or land rent
• Preferential tax rates for PPP projects using the BOT, BTO and BT structure in industrial and export processing zones
• Losses could be carried forward up to 5 years
For more information, see: Law on Investment and Decree 15.
Revenue guarantees The government could provide minimum revenue guarantee but Decree 15 does not refer to minimum revenue guarantees.
Guarantees covering political risks The 2014 Investment Law and Decree 15 (2015) enable State Agency to provide guarantees on behalf of the Government on the provision of raw materials, the sale of products and services, and other contractual obligations to the project sponsors.

The Government may provide also the following guarantees:

• Currency conversion guarantee
• Exchange rate guarantee
• Guarantee against nationalisation and confiscation (Law of Investment)
• Protection of intellectual property rights
Grants/Soft Loans*
Viability Gap Funding (VGF) The Government may contribute towards the cost of PPP projects through ‘state investment capital’ in order to ease private sector finance constraints and increase commercial viability. Decree 15 (2015) stipulates that usage of ‘state investment capital’ should go towards:
• supporting construction of a facility in the case of a project with commercial operation [and/or] with the collection of user fees, but with revenue insufficient to recovering investment capital and generating profit;
• making payment to project sponsors who are providing services under a BTL, BLT or similar delivery modes;
• supporting the construction of auxiliary works and compensation, site clearance and/or resettlement.

Different to Decision 71 capping ‘State investment capital’ at 30%, Decree 15 (2015) includes no statutory limits on the Government contribution. State Capital includes money from the State budget, foreign aid funds, proceeds of Government bonds and Government-guaranteed loans.
Other Public Support
Land Acquisition Support Land is public property and foreign investors are not entitled to own land. However, investors can acquire land rights but the involved lengthy process constrains foreign investments in investment projects. A Certificate of Land Use Right (CLUR) can be issued to foreign invested organisations established under the laws of Vietnam (see for more information: Law on Land 2013).

According to Decree 15 (2015), the provincial People’s Committee is in charge of site clearance and of allocating/leasing the land.
Project Development Fund (PDF) The Project Development Facility (PDF) seeks to support government ministries and project sponsors to fund PPP project preparation activities such as pre-feasibility studies, feasibility studies and transaction advisers to structure PPP projects.

The Asian Development Bank (ADB) and Agence Française de Développement (AFD) support the PDF, contributing around USD 30 million to facilitate the development of bankable and commercially viable PPP projects.
*Trial PPP Regulations and Regulations on Public Private Partnership Investment Form, Decree No. 15/2015/ND-CP (Decree 15) on public-private partnerships (PPP)