(LUẬN văn THẠC sĩ) public private partnership (PPP) in the environment sector and sustainable development issues

MINISTRY OF EDUCATION AND TRAINING FOREIGN TRADE UNIVERSITY DISSERTATION PUBLIC – PRIVATE PARTNERSHIP PPP IN SOLID WASTE MANAGEMENT IN JAPAN, LESSONS FOR VIETNAM Major: Internationa

MINISTRY OF EDUCATION AND TRAINING

FOREIGN TRADE UNIVERSITY

DISSERTATION

PUBLIC – PRIVATE PARTNERSHIP (PPP) IN SOLID WASTE

MANAGEMENT IN JAPAN, LESSONS FOR VIETNAM

Major: International Trade Policy and Law

Full name: Nguyen Thi Hong Ly

Ha Noi - 2017

MINISTRY OF EDUCATION AND TRAINING FOREIGN TRADE UNIVERSITY

DISSERTATION

PUBLIC – PRIVATE PARTNERSHIP (PPP) IN SOLID WASTE

MANAGEMENT IN JAPAN, LESSONS FOR VIETNAM

Major: International Trade Policy and Law

Full Name: Nguyen Thi Hong Ly

SUPERVISOR: Dr Vu Van Ngoc

Ha Noi - 2017

DECLARATION

I hereby declare that the dissertation entitled “P ublic – Private Partnership (PPP) in solid waste management in Japan, lessons for Vietnam” was written by myself and all information in this thesis has been studied and presented in accordance with academic rules and ethical conduct that I have fully cited and referenced in appropriate manner I further declare that the dissertation has not been submitted, in whole or in part, in any previous documents for a degree

Student: Nguyen Thi Hong Ly

ACKNOWLEDGEMENT

First of all, I would like to express my indebtedness to my Professor, Dr Vu Van Ngoc for his kind direction and proper guidance Without his supervision and instruction in every step, my dissertation could not be completed positively This is also a good chance to convey my sincere gratitude and especial thanks

to all Professors and Lectures participating in the Master course of International Trade Policy and Law for their valuable lessons and useful knowledge that helped

me a lot in practical works and life

It is also my great pleasure to thank Faculty of Graduate Studies, Foreign Trade University for providing me such an opportunity to complete this Master course and for their continuous support in all my time taking part in the course Finally, my strong appreciation and attitude granted for my family, my colleagues, my bosses and friends for all of their enthusiastic support, encouragement and assistance during the period of this thesis’s preparation

TABLE OF CONTENTS

INTRODUCTION x

CHAPTER 1 1

OVERVIEW OF PPP IN SOLID WASTE MANAGEMENT 1

1 1 Definition, characteristics and types of PPP 1

1.1.1 Definition of PPP 1

1.1.2 Main characteristics of PPP 4

1.1.2.1 General characteristics of PPP 4

1.1.2.2 Advantages and Challenges of PPP 6

1.1.3 Types of PPP 9

1.2 Solid waste and role of solid waste management in the socio-economic development 12

1.2.1 Definition and overview of solid waste management 12

1.2.1.1 Definition 12

1.2.1.2 Overview of solid waste management 14

1.2.2 Role of solid waste management in the socio-economic development 16

1.2.2.1 Social aspects (Public health) 17

1.2.2.2 Economic aspects 18

1.2.2.3 Environmental protection aspects 19

1.2.3 Challenges of solid waste management in developing countries and in Vietnam 19

1.2.3.1 Technical Constraints 20

1.2.3.2 Financial Constraints 20

1.2.3.3 Institutional Constraints 21

1.2.3.4 Economic Constraints 21

1.2.3.5 Social Constraints 22

1.2.3.6 Vietnam 22

1.3 Necessity of PPP application in solid waste management 24

1.3.1 Reduction in management cost 25

1.3.2 More waste collection & treatment 25

1.3.3 Awareness raising and better public participation in environmental

protection activities 26

1.4 Factors influencing the success of a PPP project 26

1.4.1 Exogenous factors 27

1.4.1.1 Legal environment 27

1.4.1.2 Socio-economic environment 28

1.4.2 Endogenous factors 29

1.4.2.1 Market demand assessment 29

1.4.2.2 Quality of investors 29

1.4.2.3 Contract coherence 29

1.4.2.4 Management, supervision and support of investors by the public sector 30

CHAPTER 2 31

PPP IN SOLID WASTE MANAGEMENT IN JAPAN AND IN VIETNAM31 2.1 PPP in solid waste management in Japan 31

2.1.1 Overview of PPP in Japan 31

2.1.1.1 History of PPP 31

2.1.1.2 Differences between PPP projects and conventional projects 33

2.1.1.3 Classification of PPP 34

2.1.1.4 Project scheme of PPP 37

2.1.2 Legal and institutional framework of PPP in Japan 38

2.1.2.1 Outline of PPP Law 38

2.1.2.2 Implementation progress of PPP projects in Japan 42

2.1.3 Overview of solid waste management in Japan 43

2.1.3.1 Legal system of waste management in Japan 43

2.1.3.2 Institutional framework 45

2.1.3.3 Municipal Solid Waste Management in Japan 47

2.1.4 PPP in solid waste management in Japan 50

2.1.4.1 Types of PPP applicable in solid waste management 50

2.1.4.2 Procedures of PPP in solid waste management in Japan 51

2.1.4.3 Case studies 58

2.2 PPP in solid waste management in Vietnam 64

2.2.1 General socio-economic and legal background of Vietnam in application of PPP in solid waste management 64

2.2.1.1 Socio-economic environment 64

2.2.1.2 Legal and institutional environment 67

2.2.1.3 Overview of PPP application in Vietnam 74

2.2.2 Current status of PPP in solid waste management in Vietnam 78

2.2.2.1 Necessity for PPP application in solid waste management in Vietnam 78

2.2.2.2 Status of PPP implementation in solid waste management in Vietnam 81

2.2.2.3 Existing solid waste management related PPP Projects 88

CHAPTER 3 93

LESSONS LEARNT FROM JAPAN AND RECOMMENDATION FOR VIETNAM 93

3.1 Lessons learnt from Japan 93

3.1.1 Enhance and complete the legal framework for PPP application in solid waste management 93

3.1.2 Improve investment conditions with better transparency 95

3.1.3 Develop and strengthen the capacity of independent management authorities especially in solid waste management 97

3.1.4 Goodwill cooperation between public and private sectors 99

3.2 Recommendations for Vietnam 100

REFERENCES 107

LIST OF FIGURES

Figure 1: Process of operating and managing solid waste 14

Figure 2: Differences between PFI and PPP 33

Figure 3: Comparison of Public Works under Conventional Delivery Method and PFI 34

Figure 4: Three types of PPP Project in Japan 36

Figure 5: General Project Scheme of PPP 37

Figure 6: Organization of PFI governmental authorities 42

Figure 7: Implementation progress of PFI projects in Japan (as of 09/2013) 43

Figure 8: Concept of sound material-cycle society of Japan 44

Figure 9: Legal system for Establishing a "Sound Material-Cycle Society" 45

Figure 10: Outline of Waste Management and Public Cleansing Law 46

Figure 11 Municipal Waste Treatment Methods in Japan 49

Figure 12: Procedures for contractor selection 55

Figure 13: Organizational arrangement Ohdate BOO incineration 59

Figure 14: Organizational arrangement Narumi BTO incineration plant 62

Figure 15: State Budget for environmental protection activities (Unit: billion VND) 65

Figure 16: State Budget Deficit comparing to GDP 66

Figure 17: Procedures of PPP in Solid Waste Treatment Project 87

LIST OF TABLES

Table 1: History of Law and Guidelines of PFI 32Table 2: PFI Procedure of Solid Waste Treatment Facilities Development in Japan 52Table 3: Example of Risk Allocation in a Solid Waste Treatment Facilities Project 100Table 4: Results of Corruption Perceptions Index (CPI) in Vietnam 67Table 5: PPP-related Laws and Decrees in Vietnam 68Table 6: PPP-Related Decision and Circulars in Viet Nam 69

LIST OF ABRREVIATIONS

AFD Agence française de développement

ASEAN Association of Southeast Asian Nations

AUSAID Australian Agency for International Development BCC Business Cooperation Contract

BOT Build - Operate - Transfer

BTO Build - Transfer - Operate

CBO Community – based Organizations

CPI Corruption Perceptions Index

DBFO Design - Build - Finance – Operate

DFID The Department for International Development

EIA Environmental Impact Assessment

FDI Foreign Direct Investment

IDB Inter-American Development Bank

IPSI Institute for Strategic Studies and Industrial Policy JBIC Japan Bank for International Cooperation

JICA Japan International Cooperation Agency

MARD Ministry of Agriculture and Rural Development MIC Ministry of Information and Communications MOC Ministry of Construction

MONRE Ministry of Natural Resources and Environment

MOT Ministry of Transportation

MPI Ministry of Planning and Investment

NGO Non-Governmental Organizations

ODA Official Development Assistance

OECD Organization for Economic Cooperation and Development

PFI Private Finance Initiative

PPP Public – Private Partnerships

USAID United States Agency for International Development VEPF Vietnam Environmental Protection Fund

INTRODUCTION

1 The rationale of the thesis

Public private partnership (PPP) is a new investment form between public sector and private sector in the development of public services including environmental section Though ODA loan accounted for more than 50% of capital investment for environmental protection activities, this is not a sustainable financial source, especially when Vietnam is moving toward a high-income country in the near future From 2010 up to now, Vietnamese Government has made many PPP law initiative and reform which shows the political goodwill to promote PPP investment form in Vietnam PPP model is one of the effective means to address the capital shortage issue, to provide and to develop public services, especially in environmental sector Japan is a developed country and applied PPP in a quite long time ago; it will be good opportunity for the author to research on PPP in solid waste management in Japan in order to draw some lessons for Vietnam In principal, the necessity and urgency of the thesis is developed based on the following main aspects:

Firstly, from the view of scientific aspect, urgency and significance of PPP

study derives from the needs of PPP theoretically standardize into Vietnamese language due to PPP originally comes from western countries; moreover, it’s necessary to finalize and unify the concept of PPP, to develop comprehensive system of PPP in Vietnam (such as establishment of PPP economics subject; development of PPP policies in Vietnam etc )

Secondly, from the view of reality, PPP study will find out effective solutions

to overcome the separation issue between private and public sector, ensuring the combination of both sectors into effective single unit of social-economic system; making public sector become more dynamic; improving equality between private and public sectors in the implementation of national strategies and policies; contributing to efficiently improvement of economic and social development

Thirdly, from the view of institutional-policy, PPP is really a new concept,

not many existing legal framework and policies dealing with this issue, therefore it

is needed to study PPP in order to overcome shortcomings and gaps of our institutional-policy system Through studying PPP, social awareness on PPP will established, lacked institutional – policies will be supplemented and backward policies will be updated following the new changes of social & economic situation

Application of PPP model in enhancing environmental quality is the key importance trend of worldwide countries nowadays In Vietnam, not many researches, reports on PPP model especially in solid waste management are public and studied, therefore the author hope this thesis can partly contribute and suggest policies to be undertaken for Vietnam in order to encourage and promote PPP application for solid waste management projects in Vietnam

 The report “Assessment of Public–Private Partnerships in Viet Nam, Constraints and Opportunities” published by ADB, July 2012 This report includes

3 main purposes: (i) review overall environment and business context for PPP in Vietnam, project development support and financing issues; (ii) identify PPP challenges and opportunities in Vietnam; (iii) identify potential areas and activities that ADB and/or AFD would further support and/or cooperate Through this report,

a broad overview of PPP situation and issues in Vietnam was provided The methodology to develop this report consists of desktop review, focused meetings and interviews, and analysis of Public–Private Partnership Decree 108 Details The report presents some key findings as: (i) few PPP transactions; (ii) recognition that PPP is vital to address huge infrastructure financing gap; (iii) rationale for PPP and

appropriate risk sharing arrangements; (iv) strong champion at the MPI; (v) an evolving PPP framework Although the report is a detailed assessment of PPP status

of Vietnam at the time of 2012, it is considered as the view from ADB, a donor which was seeking chances to cooperate and support Vietnam in carry out PPP projects effectively The report did not mention on solid waste management sector and the legal framework was not up to date as currently the Decree 15/2015/NĐ-CP

is applied to all PPP-related projects

 The book “Public – private partnership (PPP): International Experience and Institutional Framework in Vietnam” published in 2013 in Vietnamese

language which included in the list of macroeconomic researches that have been carried out under the framework of project “Support for enhancing capacity in advising, examining, and overseeing macroeconomic policies” implemented by Economic Committee of National Assembly (ECNA) and funded by UNDP The book covers four (4) main contents: (i) introducing the nature and characteristics of PPP model and requirements for the management of PPP projects; (ii) reviewing the practical application of PPP model in a number of countries (in specific projects) and lessons learned for Vietnam; (iii) assessment of institutional environment and the application of PPP in Vietnam, especially the shortcomings and the amendments

to the Decree No 108/2009 / ND-CP and Decision 71; (iv) recommendations are made to improve the institutional framework for PPPs in Viet Nam The outcome of this book is to answer for the question “How to design the PPP institutional framework in Vietnam to attract potential investors to invest in Vietnam’s infrastructure under the current legal environment and capability of Vietnam” This book provides PPP case studies (projects) in several countries such as: United Kingdom, Australia, German, Korea, China, India and Thailand except Japan and mainly in transportation sectors (tunnel, bridge etc ), not in solid waste sector

 The report “National Public – Private Partnership Frameworks in ASEAN member countries” published by Economic Research Institute for ASEAN and East

Asia (ERIA) in 2015 This report describes the current PPP frameworks of 10 ASEAN countries including Vietnam There are two main parts under this report;

one is country profile that describes country status of institutional and/or regulatory frameworks together with recent highlighted issues, as an introduction to PPP in the individual country; the second is comparative table which compiles a summary illustrating cross-country differences in key components such as government support, law on land acquisition, and treatment of unsolicited proposals Besides, the report also presents two PPP case studies in Lao PDR (hydro power plant) and

in Philippines (Mactan–Cebu International Airport) with summary analysis of aspects such as scope of project, concession agreement, financing issue etc…Through this report, the reader may aware of PPP overview situation in Vietnam comparing to the other countries in region All 10 ASEAN countries have started to apply the PPP model in recent years; therefore, in most of countries, the national legal or institutional frameworks are still at a transitional stage In this report, the description about PPP in Vietnam is just summary and comparable to other countries, not mention detail on specific sector or case studies in Vietnam or Japan

 The article “The Japanese private finance initiative and its application in the municipal solid waste management sector” written by Torsten Kleiss and Hidefumi

Imura published in International Journal of Project Management in 2006 was one of the very few documents that describe the possibility of PFI application in solid waste management in Japan Under this article, the summary of legislative and administrative framework of the Japanese PFI model and its application in the municipal solid waste management sector was presented through analysing two case studies of solid waste treatment plant The conclusion in this paper indicates that application of PPP helps to reduce total cost in solid waste management project thanks to life-cycle integration, output specifications and capitalisation of scale economies On the other hand, the paper also points out the necessity of improvement of the inconsistencies between the existing fiscal system and the legislative PFI framework to increase the benefits from the PFI procurement strategy Even this paper mentioned the application of PFI in solid waste management, it did not analyze detailed the legal basis of PFI, of solid waste

management in Japan This paper just provided two case studies and gave the

findings based on these case studies

 The Master Dissertation “Risk Management and Governance for PFI Project: Technology Policy Lessons from the Case of Japan” written by Takuji

Matsumoto, Massachusetts Institute of Technology in 2012 The thesis analyze experience of Japanese PFIs and propose policy recommendations for better PFI

implementation in Japan through five Chapters as below:

• Chapter 1 introduces PPP policy in Japan, describing some failure case studies then draw lessons learned from those cases

• Chapter 2 clarifies general description of PFI in Japan which has been improved from the failure of previous stage Besides, this chapter points out the potential expansion of PFI market in Japan through introducing new PFI law and

considers the idea of further activation

• Chapter 3 brings in some actual and successful PFI case studies in Japan and

in UK and points out effective use of private sector’s advantages Besides, the chapter provides three failed case studies and explains the reasons of failures from the view of risk management

• Chapter 4 presents an overview of risk management of PFI projects in Japan, analyzes detailed the issues of risk management in Japanese PFI based on the lessons learned from the failed case studies in chapter 3

• Chapter 5 analyzes the problems that may occur at the decision-making step

of PFI projects especially the limitations and issues of Value for Money (VFM) indicator which is normally used for PFI project decision

Although this master dissertation provides an overview of PFI situation and recommendations for better PFI implementation, it did not present detailed PFI in solid waste management sector and some experiences related to PFI implementation

in this field

 The book “The public – private partnership Law review”, third edition,

published in March 2017, reproduced with permission from Law Business Research Ltd, edited by Bruno Werneck and Mario Saadi The book summarize PPP implementation in 23 countries all over the world including developed and developing countries, also includes Japan countries For each country, the following

contents are presented: (i) Overview; (ii) The year in review; (iii) General framework (Types of public-private partnership, The authorities, General requirements for public-private partnership contracts); (iv) Bidding and award procedure (Expression of interest, Call for proposals, Evaluation and grant); (v) The contract (Payment, State guarantees, Distribution of risks, Adjustment and revision, Ownership of underlying assets, Early termination); (vi) Finance; (vii) Recent Decisions; (viii) Outlook With all above eight contents, the overall PPP

implementation in Japan is summarized as: total 527 PPP projects approximately to

¥4.9 trillion as of 31 March 2016 were implemented in Japan As Japanese government always show a proactive and encouraging support for PPPs activities, PFI Act concessions and other PPP projects will keep growing, expanding and more diversified

With reference to the above-mentioned reports and documents, most of them presented overall one side of the issues (PPP in Japan or Vietnam or PPP in

general) Among them, only the article “The Japanese private finance initiative and its application in the municipal solid waste management sector” analyzed PFI

application in solid waste management in Japan However, the analysis had limitations and did not fully evaluate the situation of the PPP in solid waste management in Japan, and the relevant content was very briefly

In general, most of the documents focused on the overall of PPP status in Japan

or Vietnam and did not cover detailed analysis of possible application on solid waste management sector or present the lessons learnt for Vietnam to take advantages or overcome challenges This is one of the reasons which the author would like to select the topic “Public-private partnership (PPP) in solid waste management in Japan, lessons for Vietnam” as the master dissertation

3 The objectives of the thesis

- Studying and analyzing theoretical and practical basis on public private partnership related issues, on socialization and diversification of resources for solid waste management;

- Studying and evaluating experiences on public private partnership mechanism for solid waste management in Japan and drawing lessons for Vietnam;

- Developing and recommending mechanisms as well as policies to encourage and promote public private partnership application for solid waste

management projects in Vietnam

4 Subjects and scope of thesis

4.1 Research Subjects:

- Direction, mechanism, policies and current legal framework of PPP in the field of solid waste management in Japan (focus on solid waste management treatment facilities);

- Direction, mechanism, policies and current legal framework of PPP and resources socialization and diversification for solid waste management in Vietnam

4.2 Research scopes

- Conceptual:

• Literature review on PPP for solid waste management

• PPP projects in Japan and Vietnam for solid waste management

- Geographic scope: Japan and Vietnam

- Timing: issues are reviewed and analyzed during the period from 2005 to

2016 and propose recommendations/solutions for the upcoming years

4.3 Research stages

5 Methodologies

The thesis is developed on the basis of synthesis and analysis methodologies which utilize secondary information for data analysis The secondary information is compiled from internet, books, researches, journals, reports etc… and own analysis

of the author

6 The structure of dissertation

Except the introduction, conclusion and references, the dissertation is divided into 4 chapters as below:

- Chapter 1: Overview of PPP in solid waste management

- Chapter 2: PPP in solid waste management in Japan and in Vietnam

- Chapter 3: Lessons learnt from Japan and recommendation for Vietnam

Development of thesis outline (Problem Statement)

Objective Identification (Research objective) Literature Review Japanese experiences

Data analysis

Secondary information

(Internet, books, researches,

journals, reports etc…)

Secondary information (Internet, books, researches, journals, Lessons learnt &

Recommendations

CHAPTER 1 OVERVIEW OF PPP IN SOLID WASTE MANAGEMENT

1 1 Definition, characteristics and types of PPP

1.1.1 Definition of PPP

Public Private Partnership (PPP), though not a new concept, has not been defined unitedly, fully, accurately and clearly in nature; in reality, depending on the context, history, culture, policy, legislation and development of each nation, the model, method and content of public private partnership is developed and approached differently Later in this chapter, some worldwide common concepts on PPP are going to be presented for a broad overview on PPP

In the Public-Private Partnerships Reference Guide version 2.0, 2014 of World Bank (WB), the Asian Development Bank (ADB) and the Inter-American

Development Bank (IDB), PPP is considered broadly as “A long-term contract between a private party and a government entity, for providing a public asset or service, in which the private party bears significant risk and management responsibility, and remuneration is linked to performance” (PPP Reference guide

2014, P.14) By the definition, contracts providing new services/assets as well as existing services/assets could all be PPP contracts These include the types of PPP

in which the private party is paid fully by the users and/or paid partly or fully by the Government Depending on different contracts, the private party will take on different tasks (e.g design, construction, finance, operation, maintenance), and in all circumstances take responsibility for project management, outputs and large proportion of risks This definition includes contracts in many sectors and for many services, as long as there is a public interest in the provision of the service, and the project involves long-life assets tied with the long term of the PPP contract

Similar like World Bank, in Public Private Partnership Handbook, 2008, Asian

Development Bank (ADB) provided very common definition “PPP describes a range of possible relationships among public and private entities in the context of infrastructure and other services” (ADB PPP Handbook, 2008, P.1) PPP indicates

a framework with the participation of the private sector but recognizes and establishes the role of the Government, ensuring the fulfilment of social obligations and successful reforms of the State sector and public investment A close public private partnership defines properly the responsibilities, obligations and risks borne

by the state partner and the private partner The state partner is governmental organizations, including ministries and local governments or state businesses The private partner is possibly local or foreign partners, and might be entrepreneurs or investors specialized in project-relevant finance or techniques The public private partnership may involve non-governmental organizations (NGO) and/or community-based organizations (CBO) representing the organizations and individuals directly subject to the project

Organization for Economic Cooperation and Development (OECD) shows

their own definition “Public-Private Partnerships (PPPs) are long term agreements between the government and a private partner whereby the private partner delivers and funds public services using a capital asset, sharing the associated risks PPPs may deliver public services both with regards to infrastructure assets (such as bridges, roads) and social assets (such as hospitals, utilities, prisons)”1 This definition on PPP by OECD bears high resemblance to the definition by WB, but is

of more details

Due to the differences in culture, history, economic context, institutional & legal framework, the concept of PPP within ASEAN member countries is rather specific comparing to WB and ADB According to ASEAN Public Private

Partnership Guidelines, 2014, “A public-private partnership (PPP) is a specialized procurement method employed by government for the delivery of public goods and infrastructure services” (ASEAN PPP guidelines, 2014, P.1) As such, its major

difference from the normal procurement method is that PPP contracts are long-term agreements whereby the private sector engages and shares risks, including the responsibilities for the project life-cycle cost

1

http://www.oecd.org/gov/budgeting/oecd-principles-for-public-governance-of-public-private-partnerships.htm

To Japan, PPP is a concept derived from a specific partnership method between the state and private sectors called Private Finance Initiative (PFI) PFI has been long formed in Japan and recently defined in White Paper on Land,

Infrastructure, Transport and Tourism in Japan, 2014, P.72 as “Public Private Partnership is the concept that captures a wide range of private sector participation

in some form of public service provision It is the method of using the private sector’s capital and know-how to improve efficiency in developing public facilities and raise the standards of public services Some of the primary methods are, the PFI method, the designated manager system, and the comprehensive work consignment to private sector” As such, public private partnerships are construed

as part of the reform of the public sector in order to resolve financial shortage, maximize benefits, and better provide public services at the lowest cost The key content of public private partnerships is to share risks and responsibilities between the State and the private sector, in which risks are incurred primarily by the latter The State is also responsible for supporting the private sector financially in order to guarantee the project feasibility and eliminate difficulties for the private sector The partnership mechanism has changed and transformed from using laws to using contracts

Philippines is considered as one of the South-eastern nations which has introduced quite successfully the public private partnership model recently The

country offered their definition on PPP in line with the world tendency, Private Partnerships (PPPs) are contractual arrangements entered into by the government with the private sector Under a PPP scheme, the private sector can build, operate and maintain public infrastructure facilities and provide services traditionally delivered by government Examples of these are roads, airports, bridges, hospitals, schools, prisons, railways, and water and sanitation projects” 2

“Public-As such, legal realities have shown that PPP are defined in a vast variety of ways depending on different perceptions on PPP Most generally, PPP is construed

as a legal agreement executing an investment method to mobilize capital from the

private sector for financing and trading infrastructure projects which are inherently under the responsibility of the State This reduces the burden of over-spending in state budgets and creates a useful mechanism in private investment to serve public benefits It can be said that developing a correct and complete definition on PPP is not an easy work There is a wide range of approaches to PPP in the aspect of economy, finance, legislation and society, and each of them may bring about different legal consequences

In Vietnam, the definition on PPP is stipulated in Article 2 Regulation on pilot investment in the public private partnership form enclosed with Decision No 71/2010/QD-TTg dated 9 November 2010 of the Prime Minister Accordingly, PPP means the state and the investor jointly implement projects on infrastructure development and public services based on the project contract The project contract

is signed by and between the competent state agency and the investor, whereby the state franchises to the investor the right to invest, run the works or provide public services in a certain period of time Based on specific features of each project, the contract regulates commitments on responsibilities, obligations and rights of the investor and the competent state agency, and the relation between the state and the investor

With the definition mentioned-above, the State of Vietnam perceived PPP as

an investment process of investors (with emphasis on the investors ‘construction, operation, and ir-refundable transfer of the infrastructure to the State of Vietnam) and the related partners relationship In addition, franchise and project financing are the two recognized significantly important components in PPP and integral in the definition on PPP

1.1.2 Main characteristics of PPP

1.1.2.1 General characteristics of PPP

PPP generally has four main characteristics as follows: (i) long-term process; (ii) asset-forming financing, responsibilities by life-cycle and ownership; (iii) performance-based benefits; and (iv) risk allocation among the parties involved

(i) Long-term process

PPP indicates a framework with the participation of the private sector but recognizes and establishes the role of the Government, ensuring the fulfillment of social obligations and successful reforms of the State sector and public investment

As a long-term model (mainly lasting 20 to 30 years), it is best suited to the fields of infrastructure, environment and some other areas of long-term stability

(ii) Asset-forming financing, responsibilities by life-cycle and ownership

Asset-forming financing or project financing, partly or wholly by the public sector or the private sector, sometimes requires complex mechanisms with the involvement of many different stakeholders, where the asset ownership is often transferred to the public sector at the end of the mechanism The private sector is in charge of asset maintenance during the useful life-cycle of the asset, thus they are motivated to form such assets that minimize the periodic maintenance costs throughout the assets' life-cycle

(iii) Performance-based benefits

Effective public private partnerships note that the public sector and the private sector have their own certain relative advantages over the other to perform specific tasks The contributions of the Government to public private partnerships may take the form of investment capital (acquired through taxation), asset transfer, or other commitments or in-kind contributions The Government also makes contribution in social responsibility, environmental awareness, local knowledge and political mobilization The role of the private sector in these partnerships is to utilize their expertise in commerce, management, administration and creativity to operate business activities in an effective manner The focus here is to determine the detailed specification and provide services for the procurement of asset rather than the asset itself, thus good public-private partnership mechanism often stipulates that payment condition is whether the operation unit manages to satisfy a range of standards on performance during the provision of services One of the most

important benefits of public-private partnerships is the efficiency and risks mostly allocated to the private sector, not just the access to their capital

(iv) Risk allocation among the parties involved

The partnership structure should be established to allocate risks to the partner who has more capability to solve such risks in the best way and thereby reduce costs and improve performance Risks generally incurred by the public sector in turnkey contracts or traditional construction contracts are currently allocated among the public partner and the private partner However, public-private partnerships (PPP) do not mean that the private sector must bear all or a large proportion of risks related to the project The exact allocation of risks is determined in each specific case, depending on the accessibility, risk control and handling of the public partner

or the private partner The most significant principle of risk allocation in private partnerships is risks are divided, quantified and allocated to the party with the best risk management capability

public-1.1.2.2 Advantages and Challenges of PPP

(i) Advantages

Basically, the benefit of introducing PPP is to utilize the advantages and the strength of the State and the private sector, which is beneficial for both the State, the private sector and the users of the services and products generated by public-private partnerships, particularly:

will relieve the burden of seeking, arranging and allocating the investment capital from the state budget to infrastructures Therefore, the State can carry out many more investment projects or increase the scale of infrastructure investment projects

mechanism, the private sector has obtained more long-term and possibly less risky investment opportunities, and commitments and sharing from the State, thereby achieving the stability and growth, promoting the development of the

local industry as well as more jobs for laborers At the same time, the private sector can generate additional revenue from the other third party by using their

residual capacity or ceding redundant assets/equipment

mechanism is that risks will be allocated to the party who can best deal with risks

at the lowest cost In many cases, the State is responsible for handling risks related to the community, environment or loan guarantees made by the State In contrast, the private sector is more preeminent in dealing with risks related to the

management and use of capital

construction in one same contract, PPP mechanism enables the designers and the builders to establish a closer and deeper tier This combination is primarily to make the design more creative, more cost-saving, while help to reduce the construction time for sooner use of the service, thereby reducing costs Second, most PPP contracts require operation and maintenance services over the course

of the project life-cycle, which is assigned to the private sector Therefore, the private sector will have motivation and solutions (in terms of technology, management, use of resources ) to reduce the operation and maintenance costs during the life-cycle of the facility Meanwhile, the State hardly guarantees this due to budget restrictions

shown by many researches and international experiences is PPP projects are often of better quality than the projects of traditional investment forms The reason is that PPP mechanism makes best use of the biggest advantages of each party, namely "policies and management capabilities" of the State and "technical elements such as design, construction, operation and management" of the private sector

Public-private partnerships require the government to think and act in new ways, with

new skills and new approaches, thereby accelerating the reform of the business environment and the overall economy For example, public-private partnerships can be a tool to increase the competitiveness or reform the procurement and supply of public services, rather than just a means to utilize the resources of the private sector through leverage effects Moreover, when applying the public-private partnership form, the government is able to enhance the overall capacity and procurement processes in the public sector Through the successful restructuring and implementation of public-private partnerships, the government can improve the strategic planning, negotiation and project management, maintain financial disciplines and develop the capacity to manage complicated long-term contracts

(ii) Challenges

Aside from obvious benefits and advantages over other forms, the PPP mechanism contains considerable challenges, requiring the parties to be mindful during the application, specifically:

rate of the loans granted the private sector compared with the rate incurred by the State in previous traditional models Besides, costs for bidding process and contract negotiations and remuneration for legal consulting firms can raise the cost of introduction of PPP mechanism From the perspective of the consumers who directly use the products produced by the PPP mechanism, when setting out the charge for a service provided by the State (a road, a bridge, etc.), in many cases the State has failed to count administrative costs, depreciation cost, or simply subsidies Meanwhile, the charges imposed in PPP mechanism are required to cover the entire relevant costs and estimated profits gained from the investments of the private partner This will lead to the fact that the users will have to pay higher fees than using the services offered by the State separately

State and private party to have sufficient strong capacity on PPP; but in many

cases, either or both of them are incompetent And the combination of an incompetent and inexperienced government and a private partner not familiar with PPP might lead to political risks for the government itself The lack of capacity is also reflected in the heavy dependence of the PPP model on external consultants and the risk that both the State and private sector fail to learn from the project implementation

the introduction of PPPs is the transparency of the project Thesis due to the restricted access to the information of the private partner, especially financial and commercial information which are considered as trade secrets of the private sector Furthermore, the assessment of the entire project will also be very difficult, because various information and data are hold by various parties, making it hard for the public to track and check Low transparency and accountability may provoke the public to criticize the collaboration of the State and the private sector and require the State’s guarantee on the community interests

projects are often longer and more complex than the traditional methods On the other hand, due to the complexity and long-term duration of the collaborative contracts between the State and the private sector, any conflicts, disputes or changes arising will take much time to be settled or renegotiated

* Thus, not every sector should apply PPP because the type itself has both benefits and challenges Before any decision to apply the PPP, the analysis of Costs (challenges and difficulties) and Benefits (advantages) is of critical importance

1.1.3 Types of PPP

Depending on government regulation, the involvement of private sector and the sharing of responsibilities and/or risk management level between private-sector and public sector, there are some popular types of PPP in the world as below:

Functions Transferred

Payment Mechanism

‘maintain’ function may be left out of the description An alternative description along similar lines is Design- Construct-Manage-Finance (DCMF), which is

equivalent to a DBFOM contract

New infrastructure

As captured

by contract name

Either government

or user pays

performance-based maintenance contracts)

Existing infrastructure

Operations and maintenance

Government pays

at the end of the contract

BOOT is often used Interchangeably with BOT

In contrast, a Build-Transfer Operate

(BTO) contract, asset ownership is transferred once construction is complete

Ownership rights mainly affect

how handover of assets is managed at the end of the contract

New infrastructure

Typically, design, build, finance, maintain, and some or all operations Under some definitions, BOT or BTO may not include private finance, whereas BOOT always includes private finance

Can be either government

or user pays

Existing infrastructure

As above, but

“rehabilitate”

instead

of “build”

As above

Concession ‘Concession’ is used for a

range of types of contract In some jurisdictions, concession may imply a specific type of contract;

while in others it is used more widely

In the PPP context, a concession is mostly used to describe a ‘user-pays’ PPP

A distinct ‘PPP Law’

regulates contracts that require some payment from government On the other hand, ‘concession’ is sometimes used as a catch-all term to describe a wide range

of PPP types

New or existing infrastructure

Design, rehabilitate, extend or build, finance, maintain, and operate—

typically providing services to users

Usually user pays—in some countries, depending

on the financial viability of the

concession, the private party might pay a fee to government,

or might receive a subsidy

affermage

A lease or affermage contract

is similar to a concession, but with the government typically

remaining responsible for capital expenditures

‘Affermage’ in particular may have a specific meaning

in some jurisdictions Such contracts may or may not come under the definition of PPP, depending on the duration of the contract

Existing Maintain and

operate, providing services to users

User pays— private party typically remits part

of user fees to government,

to cover capital expenditures

Franchise ‘Franchise’ is sometimes

used to describe an arrangement similar to either

Existing or new

May include design, build, and

May be user

or government

a concession or a lease

or affermage contract

finance;

or may be limited

to maintaining and

operating an asset

build, finance, maintain—

may include some operations, but often not providing services directly to users

Government pays

Source: PPPs Reference Guide, Version 2.0, 2014 International Bank for Reconstruction and Development / The World

Bank, Asian Development Bank, and Inter-American Development Bank

1.2 Solid waste and role of solid waste management in the economic development

socio-1.2.1 Definition and overview of solid waste management

1.2.1.1 Definition

The term ‘solid waste’ used in this paper implies all kinds of mixed solid wastes from urban communities as well as typical solid wastes from the production of

agriculture, industries, and mining, but more focuses on municipal solid waste as its

accumulation and storage potentially have huge impact on the living environment of human beings As per different purposes, the definition of solid waste varies from country to country, some of them are shown below:

United State Environmental Protection Agency defines “Municipal Solid Waste

—more commonly known as trash or garbage—consists of everyday items we use and then throw away, such as product packaging, grass clippings, furniture, clothing,

bottles, food scraps, newspapers, appliances, paint, and batteries This comes from our homes, schools, hospitals, and businesses”.3

Municipal Solid Waste (MSW) is defined by the Landfill Waste Classification and Waste Definitions 1996 (Final 2001) (DEP, 2001) of Western Australia as waste, consisting of:

• household domestic waste that is set aside for kerb-side collection or delivered by the householder directly to the waste facility; or

• other types of domestic waste (e.g domestic clean-up, furniture and residential garden waste); or

• local council generated waste (e.g waste from street sweeping, litter bins and parks); or

• commercial waste generated from food preparation premises, supermarkets etc.).4

For the purposes of national yearly reporting of municipal waste to Eurostat,

'municipal waste' is defined as follows (Eurostat, 2012e): “Municipal waste is mainly produced by households, though similar wastes from sources such as commerce, offices and public institutions are included The amount of municipal waste generated consists of waste collected by or on behalf of municipal authorities and disposed of through the waste management system”

In the Law of Waste Management and Public Cleansing (2001) of Japan, “waste refers to refuse, bulky refuse, ashes, sludge, excreta, waste oil, waste acid and alkali, carcasses and other filthy and unnecessary matter, which are in solid or liquid state (excluding radioactive waste and waste polluted by radioactivity)” and

“municipal solid waste refers to waste other than industrial waste”5

3 https://archive.epa.gov/epawaste/nonhaz/municipal/web/html/index.html

4 http://www.wastenet.net.au/municipal-solid-waste.aspx

The Environmental Protection Law of Vietnam (2014) stated that “Wastes refer

to a kind of materials emitted from activities such as manufacturing, trading, service, daily activities and others”

With more detailed, under Decree No 38/2015/ND-CP dated 24 April 2015 on management of waste and discarded materials, several terms related to waste were defined:

“Solid waste means waste in solid or paste form (also called waste sludge) discharged from production, business, service, daily life or other activities”

“Ordinary waste means waste that is in the list of hazardous waste or in the list

of hazardous waste of which risk factors are below hazardous waste level”

“Domestic solid waste (called also daily-life garbage) means solid waste in the daily life of people”

Depends on usage, purpose and socio-economic context etc of each country, the definition of solid waste might be flexible and applicable in detailed situation

1.2.1.2 Overview of solid waste management

(i) The process of operating and managing solid waste normally covers the

Transport

Disposal and burying of solid waste and hazardous waste

Recycling Intermediate processing Secondary collection

Figure 1: Process of operating and managing solid waste

(ii) Sources of solid waste

The source, composition and generation rate of solid waste are crucial bases for design and selection of treatment technology, and recommended solid waste management programs

The sources of municipal solid wastes include:

 Daily living of the community

 Schools, residences, workplaces

 Industrial production

 Agricultural production

 Hotels, restaurants

 Waste treatment plants

 Trade centers, public facilities

(iii) Classification of solid waste

The classification of solid waste will help to identify its different types generated By doing this, the possibility for recycling and re-use of waste materials will be raised, bringing economic efficiencies and environmental protection

Solid waste varies, thus there are a number of different ways to classify it, for example:

- Classification by characteristics: flammable waste, non-flammable waste,

mixed waste

- Classification by the location of generation: household waste, external waste, street waste, market waste…

- Classification by source:

• Domestic solid waste: is the waste generated by human activities,

primarily from residential areas, offices, schools, services and trade centers

Domestic solid waste is composed of metals, porcelain, glass, broken brick, soil, stone, rubber, plastics, leftover or expired food, animal bones, bamboo, wood, feathers, fabric, paper, straw, animal carcasses, peelings, etc

productions and handicrafts

• Construction solid waste: is refuse such as soil, stone, brick, cracked

concrete from demolition and building activities

• Agricultural solid waste: is the waste and redundant samples from

agricultural activities such as planting, harvest, waste products from milk processing, and slaughterhouse

- Classification by hazardousness

• Hazardous waste: includes highly reactive and toxic chemicals, rotten biological waste, flammable and explosive substances or radioactive waste, infectious waste, etc… potentially threatening the health of people, animals and plants The source of hazardous waste is mainly medical, industrial and agricultural activities

• Non-hazardous waste is the waste that contains no substances and compounds having one or more direct hazards or component interaction

1.2.2 Role of solid waste management in the socio-economic development

Along with the increase in population and urbanization, effective solid waste management plays an important role to the governments of developing countries all over the world Good solid waste management means minimum negative impacts and avoidance of conflicts in land use In addition, with the limited economic resources, effective solid waste management will not only bring about economic benefits for the countries, but it is also one of the guarantees of socio-economic growth and sustainable environment Several fundamental roles of solid waste management in the socio-economic development are considered below:

1.2.2.1 Social aspects (Public health)

Solid waste management is particularly important to the protection of public health Without proper management, collection and treatment of solid waste, the public health is easily threatened by serious diseases Infectious diseases transmitted through intermediate vectors such as dengue (mosquitoes), leptospirosis (rats) and intestinal tract infection (flies) will increase in number if there is no effective solid waste management system Waste itself is the source of food and shelter for the intermediate vectors (mosquitoes, flies, rats and so on ) In fact, effective collection and treatment of solid waste in urban areas as well as improvement of environmental sanitation for the residents are essential to reduce the risk of infectious diseases through intermediate vectors Solid waste itself is a threat to the public health, particularly in developing countries where it is rarely classified at source and people are easily in direct exposure to hazardous solid waste (medical/chemical waste, etc ), causing vulnerability or, in the long-term, incurable and fatal diseases (cancer, hematologic diseases, AIDS, etc.) Solid waste treatment process also easily provokes environmental pollutions affecting the public health; waste being buried in unqualified landfills or uncontrolled leakage of wastewater to the ground will contaminate the clean water on a large scale In developing countries, solid waste treatment using incinerators is quite common, but the incinerators are not controlled properly/ fail to satisfy environmental standards, together with ineffective incineration process resulting in high emission level of VOC (Volatile organic compounds), e.g Polychlorinated dibenzodioxins, dibenzofurans, polycyclic aromatic hydrocarbons, etc proven as highly potential cause of cancers

Thus, the development of efficient solid waste management system and policies will help to significantly improve the public health, contributing to enhancing the quality of human resources for the whole society

1.2.2.2 Economic aspects

(i) Public finances

Waste collection and waste treatment are the two activities radically affecting the cost/revenue of an economy, particularly developing countries Typically, in the developing countries, the state budget for waste management activities accounts for about 30% of the total local budget (Henry, et al., 2006), of which waste collection makes up for 60-75% of the total waste management cost (Nemerow, et al., 2009) The cost of waste treatment and waste burial depends on the method to be selected Local budgets will be increased when waste management cost is reduced, hence the economic benefits will be significantly improved by boosting waste management effectiveness

(ii) Value of waste

Instead of conventional waste burial, people can employ recycling and produce organic fertilizers for agricultural production Economically, some basic benefits can

of brand-new input materials

- Cost reduction of waste collection and transport to landfill

Effective recycling will help to minimize the investment in waste collection and transport such as collecting vehicles, garbage trucks and labors Thanks to that, the marginal cost of management of a unit of waste will go down The reduced cost is the benefit gained from waste recycling, reuse and processing

- Reduction of waste disposal cost

Disposal costs are often related to social costs, for example burial cost or compensations for both immediate and long-term adverse impacts to the environment Avoiding those costs is beneficial to the society It is often more difficult to count these costs

1.2.2.3 Environmental protection aspects

In the countries with scarce natural resources (water, arable land, etc.), the effective solid waste management performs a vital role in environmental protection and sustainable environmental development Improper treatment of solid waste alone will induce the contamination of sensitive lands as well as the surface water Furthermore, the collection of solid waste and burial of hazardous solid waste unsatisfied environmentally are the two main causes of environmental pollution The failure to collect solid waste or the failure to separate at source hazardous waste from municipal solid waste cause not only impacts to the public health but serious environmental pollutions

Effective solid waste management system is considered to be a major economic incentive with the potential to achieve environmental sustainability objectives such as waste reduction, resource conservation, and material reuse

1.2.3 Challenges of solid waste management in developing countries and in Vietnam

A typical solid waste management system in a developing country displays an array of problems, including low collection coverage and irregular collection services, crude open dumping and burning without air and water pollution control, the breeding of flies and vermin, and the handling and control of informal waste picking

or scavenging activities These public health, environmental, and management problems are caused by various factors which constrain the development of effective solid waste management systems They can be categorized into technical, financial, institutional, economic, and social constraints Each of these constraints is discussed,

in relation to the sustainability of solid waste collaborative projects, below

1.2.3.1 Technical Constraints

Solid waste management planning in developing countries is normally incomplete and incomprehensive Consequently, the selection of technology for solid waste management is given no proper attention for a fit with the overall system Sometimes, there is part of the solid waste management system which though resourced probably brings no effectiveness receiving some external investment Developing countries normally fail to devote proper attention to research and development (R&D) activities in solid waste management, resulting in bad selection

of technology which should have fit the local climate, nature, finance, labor, society and culture This consequently deserts the chosen technology, wastes the input resources and hinders the project

1.2.3.2 Financial Constraints

Solid waste management typically is not rightly valued in developing nations, apart from in big municipalities That is why only tiny proportions of the state budgets are allocated to the solid waste management sectors, and also the public health and the environment are not protected satisfactorily

To local governments, the situation is severe due to the deficiencies in their own taxation system and ultimately poor funding for public services in general and solid waste management in particular Charging for the services may help to make up for the poor funding, but it is often extremely hard for citizens in developing countries to afford the charges and even hard for them to be pleased to do so for such services of low quality This requires collaborative projects to find ways to obtain further finance for its sustainability

The failure to effectively manage and plan budgets is another weak point of local governments, which for example makes a locality in a poor country to nearly exhaust their annual budget for solid waste management during only half of a year This incompetence, particularly in cost accounting, rapidly drains the tight budget for solid waste management and interrupts the relevant services, raising doubts in the users

1.2.3.3 Institutional Constraints

As a public matter of significant importance, solid waste management is inevitably somewhat engaged by state authorities Unfortunately, the roles and functions of the authorities in solid waste management are usually not apparent, and

no nomination is made for the coordination of relevant projects and activities As a result, other organizations involved in collaborative projects on solid waste management as national counterparts have no idea about the roles and functions of relevant state authorities, causing overlapped activities, waste of resources and unsustainable waste management projects

Part of the reason for those shortcomings is the absence of tough laws and regulations on solid waste management, which is shared largely among developing countries Acts and regulations on solid waste management are often scattered in a number of different laws and enforced by various authorities This shows an overlap

in responsibilities and the inadequacy of legal provisions which are made to perfect solid waste management systems As a result, it is obviously crucial to develop an effective legislative system without the existing shortcomings in order to sustain solid waste management

1.2.3.4 Economic Constraints

It is evident that the wealthier a nation is, the better its public infrastructures, including solid waste management systems are That explains the poor solid waste management in developing countries where the funding for the sector is very limited and unstable

With local manufacturers supplying solid waste equipment and vehicles, the prices will be more affordable and the demand for imported costly equipment as well

as foreign exchange will decline or even disappear Spare parts which are essential for stable and effective performance of solid waste collection and disposal system can also be provided by the local manufacturers Sadly, such industry is normally not the inevitable in developing countries