Vietnam is one of the fastest-growing Southeast Asian economies in recent years. Unlike some other countries, Vietnam has continued to grow even during the pandemic. This is evident from the 3% GDP growth in 2020 and 2021. This growth can be attributed to factors such as political stability, economic openness, and regulatory flexibility, which are key elements in attracting foreign investment and making it a crucial mechanism for Vietnam’s economic and social development. Foreign investment can be channeled through various means, one of which is public-private collaboration, the focus of this article. It briefly analyzes the sectors, opportunities, and guarantees that make such collaboration possible.
Similar to regulations on companies (Law No. 59/2020/QH14; Decree No. 01/2021/ND-CP) and investment (Law No. 61/2020/QH14; Decree No. 31/2021/ND-CP), the Vietnamese government has taken steps to liberalize the economy regarding public-private collaboration (“Public Private Partnership”). It has adopted a new regulatory framework, starting with a law, No. 64/2020/QH14, followed by a decree, No. 35/2021/ND-CP, replacing the previous decree No. 63/2018/ND-CP.
What are the key aspects of this new public-private collaboration regulation? How does it differ from the previous one? What should a foreign investor consider when engaging in such operations? One key aspect is the sectors where public-private collaboration is allowed, the specific fields within each sector for collaboration, and the required capital for a project to be eligible. As outlined in the previous decree No. 63, there are six sectors: transportation; networks and power plants; water supply and treatment; health; education and training; and information technology and telecommunications infrastructure.
Moving from sectors to fields, within transportation, for example, it includes land, sea, and air transport; for networks and power plants, it involves renewable energy, coal or gas power plants, nuclear energy, and power lines; water supply and treatment covers irrigation systems, drinking water supply, and waste treatment; health sector includes medical examination and treatment facilities; education sector involves infrastructure, equipment, and facilities; while information technology and telecommunications sector includes digital economy, IT modernization, network security, and IT infrastructure for “Smart Cities”.
Each public-private collaboration project requires a minimum capital ranging from 100 billion VND (in health and education) to 1.5 trillion VND (in transportation and networks/power plants). Projects can be subject to different selection methods (open or competitive bidding, direct allocation) and concluded with standardized contracts such as BOT (Build-Operate-Transfer), BOO (Build-Own-Operate), O&M (Operate-Maintain), or BTL (Build-Transfer-Lease).
In addition to standard guarantees and bonds included in the bid (0.5% – 1.5% of the total project amount) or execution contract (1.0% – 3.0% of the amount), there are three important considerations for public-private collaboration: the right for an investor to raise a claim if they disagree with the selection process; resolution of disputes under Vietnamese law; and the advantage of having a local partner for participation in the process, which is common practice in Vietnam and other countries in the region.
Antonio Viñal
Lawyer
AVCO Legal
madrid@avco.legal
