Evaluation of decision making policy on public private partnership transport projects in Vietnam.Evaluation of decision making policy on public private partnership transport projects in Vietnam.Evaluation of decision making policy on public private partnership transport projects in Vietnam.Evaluation of decision making policy on public private partnership transport projects in Vietnam.Evaluation of decision making policy on public private partnership transport projects in Vietnam.Evaluation of decision making policy on public private partnership transport projects in Vietnam.Evaluation of decision making policy on public private partnership transport projects in Vietnam.Evaluation of decision making policy on public private partnership transport projects in Vietnam.Evaluation of decision making policy on public private partnership transport projects in Vietnam.Evaluation of decision making policy on public private partnership transport projects in Vietnam.Evaluation of decision making policy on public private partnership transport projects in Vietnam.Evaluation of decision making policy on public private partnership transport projects in Vietnam.Evaluation of decision making policy on public private partnership transport projects in Vietnam.Evaluation of decision making policy on public private partnership transport projects in Vietnam.Evaluation of decision making policy on public private partnership transport projects in Vietnam.Evaluation of decision making policy on public private partnership transport projects in Vietnam.Evaluation of decision making policy on public private partnership transport projects in Vietnam.Evaluation of decision making policy on public private partnership transport projects in Vietnam.Evaluation of decision making policy on public private partnership transport projects in Vietnam.Evaluation of decision making policy on public private partnership transport projects in Vietnam.Evaluation of decision making policy on public private partnership transport projects in Vietnam.Evaluation of decision making policy on public private partnership transport projects in Vietnam.
Rationales for the research
Vietnam's swift economic expansion has heightened the need for enhanced infrastructure, particularly in transportation To address this demand, the government is actively pursuing Public-Private Partnership (PPP) models to draw private investment and expertise for the development, operation, and maintenance of transportation infrastructure projects.
Since the introduction of the first PPP legal document in 1997, Vietnam has mobilized approximately 224 projects, attracting around 674.080 trillion VND for transportation infrastructure development through various PPP methods, including BOT, BT, and BOO contracts The Ministry of Transport has successfully initiated 72 projects, investing about 247.575 trillion VND to construct around 2,690 km of national roads and highways, while localities have undertaken 152 projects with a total investment of approximately 426.505 trillion VND The majority of these investments, about 97%, are concentrated in road transport, with 214 projects totaling around 656.877 trillion VND, while other sectors account for only 10 projects with an investment of 17.203 trillion VND According to the Vietnam Chamber of Commerce and Industry (VCCI), PPPs have played a crucial role in enhancing Vietnam's transport infrastructure, contributing 17% of the total investment in this sector from 1992 to 2014.
The statistics clearly indicate that Public-Private Partnership (PPP) projects significantly contribute to Vietnam's socio-economic development Notably, the transport sector leads in the implementation of PPP projects, playing a crucial role in resource mobilization, both within the sector and for national construction efforts Therefore, assessing the effectiveness of these policies is essential.
2 of PPP transport project decision-making is a vital tool for successfully making use of this investment
Evaluating the decision-making policy of PPP transport projects is crucial for several reasons
Firstly, it can provide insights into the PPP models and their potential for improving infrastructure development, which is a driving force for socio-economic development
Secondly, it provide a framework for effective and efficient decision-making, ensuring consistency across different projects within an organization, and different projects within organizations
PPP transport projects in Vietnam encounter significant challenges in planning, development, and implementation, which impede their success and adversely affect public welfare and economic growth Assessing these projects is crucial for identifying the factors that contribute to their success or failure, thereby guiding policymakers in enhancing the regulatory framework and execution of PPP initiatives.
Evaluating the decision-making policy on PPP transport projects in Vietnam is crucial for gaining insights into various PPP models, identifying challenges, and guiding policymaking This assessment aims to enhance the regulatory framework and implementation of PPP projects, ultimately contributing to the effectiveness and efficiency of sustainable development goals.
Objective and scope of the study
The objective of the dissertation revolves around conducting a comprehensive analysis and assessment of decision-making policy on PPP transport project
Scope of time: the research focuses on the policy on decision-making for PPP transport projects within the timeframe from 1997 to 2022
Scope of geography: the research focuses on the policy on decision-making for
PPP transport projects in Vietnam
Research also introduces International experiences of Non-government Organizations (such as the World Bank and the Asian Development Bank), and foreign countris include Burkina Faso and India.
Research question
The research question focuses on the policies governing decision-making in public-private partnership (PPP) transport projects in Vietnam It aims to identify effective and efficient policy recommendations that can enhance outcomes in these projects By analyzing current practices, the study seeks to propose strategies that ensure successful implementation and sustainability of transport initiatives within the PPP framework in Vietnam.
Methodology
This study employs a mixed-methods research design, integrating both quantitative and qualitative techniques to gather data on decision-making policies related to Public-Private Partnership (PPP) transport projects in Vietnam.
This research approach effectively addresses the research question by facilitating a thorough analysis of the issue and enabling data triangulation from various sources The study will gather data on the decision-making process of Public-Private Partnership (PPP) projects through interviews and document analysis Subsequently, both qualitative and quantitative data analysis techniques will be employed to analyze the collected data.
This thesis establishes criteria for evaluating decision-making policies related to Public-Private Partnership (PPP) transport projects in Vietnam It introduces the existing decision-making framework for these projects, followed by an analysis and comparison of the policies Finally, the thesis offers recommendations aimed at enhancing Vietnam's approach to PPP transport project decision-making.
This study will utilize interviews and document analysis as its primary data collection methods Interviews will target decision-makers involved in Public-Private Partnership (PPP) projects in Vietnam to gather insights on the key criteria and factors influencing the selection of these projects Additionally, document analysis will be employed to review international experiences and examine the policies, laws, and regulations that govern PPP projects.
Vietnam These data collection methods will ensure a complete and balanced representation of perspectives on PPP project decision-making in Vietnam
This study will prioritize ethical considerations by obtaining informed consent from all participants, safeguarding their confidentiality, and upholding their privacy rights To protect participants' interests, all collected data will remain confidential and anonymous Furthermore, the research will adhere to relevant laws, regulations, and ethical standards applicable to studies conducted in Vietnam.
Literature review
Foreign authors are increasingly drawn to the comparison of decision-making policies in Public-Private Partnership (PPP) projects between Western countries and China Research by Y Zhou et al (2019), Groenleer et al (2012), and Cheng et al (2021) has analyzed literature and legal documents to evaluate PPP practices in several developed Western nations against those in China The findings indicate that China encounters significant challenges, including a lack of driving force, insufficient information, and limited participation To address these issues, the authors propose a conceptual framework accompanied by practical models and strategies.
This literature review highlights the critical evaluation of decision-making policies in public-private partnership (PPP) transport projects, focusing on key factors such as risk management, financial viability, stakeholder engagement, and sustainability The insights and methodologies presented in these studies are valuable for policymakers and project managers, aiding them in developing effective decision-making strategies for successful PPP transport initiatives.
While literature reviews provide valuable insights, they exhibit limitations in objectivity by predominantly concentrating on China, often overlooking other Eastern nations Furthermore, some analyses may lack compatibility, failing to address critical aspects comprehensively.
When analyzing Asian countries, it is crucial to consider the political systems and infrastructure foundations that shape them Acknowledging these factors is essential for future research, which should aim for a more comprehensive examination of Eastern nations to achieve a deeper understanding of the subject.
Foreign scholars have shown a keen interest in the identification and classification of risks in project management Various techniques, such as comparisons to previous projects and leveraging personal experience, are effective for identifying risks (McKim 2005; Yuan et al, 2008) Previous research has employed the Risk Breakdown Structure to organize and identify risks within projects (Mehdizadeh et al, 2012) This structure serves as a valuable tool for categorizing risks into groups, which aids in the subsequent stages of risk management, including risk analysis and response Generally, risks can be classified using two main approaches: by their nature and by the phase of the project life cycle in which they arise (Xenidis and Angelides, 2005).
The previous study's narrow focus on the drafting contract phase overlooks critical risks in the decision-making phase, potentially leading to incomplete findings and recommendations for comprehensive risk management.
There are two main sectors in Vietnam that have conducted a literature review on this issue, which are official reports from state agencies, and studies from the private sector
A significant study by the Vietnam Ministry of Transport in 2018 analyzed public-private partnership (PPP) transport projects from 1997 to 2017, revealing several challenges in their implementation Key issues identified included an unclear legal framework, the limited capacity of local authorities, and unstable macroeconomic conditions The report also offered recommendations to address these challenges.
6 that the government provide clear guidance on project selection, risk allocation and financial sustainability
The Ministry of Transport Vietnam report serves as a valuable resource for understanding the challenges of PPP transport projects; however, it has notable shortcomings It primarily focuses on projects contracted by the central government, which limits its scope and may not accurately represent local conditions Additionally, the report lacks a detailed assessment of the decision-making process's effectiveness in these projects, concentrating instead on implementation and operational challenges.
The Ministry of Transport Vietnam report offers valuable insights for policymakers, investors, and stakeholders engaged in the development and execution of Public-Private Partnership (PPP) transport projects in Vietnam, despite certain limitations.
PT Le et al (2014) performed a systematic literature review on the taxonomy of risks in PPP transportation projects, highlighting a key limitation: the reliance on the subjective judgment of authors for refining articles, establishing risk titles, and categorizing risks within the Risk Breakdown Structure This subjectivity can lead to potential biases among researchers However, to address this limitation, measures such as cross-examination among researchers and a double review process have been implemented to enhance the reliability of the findings.
These studies highlight the complexities of Public-Private Partnership (PPP) transport projects in Vietnam, emphasizing the necessity for transparent and objective decision-making processes Although they offer valuable insights into different facets of these projects, limitations remain This dissertation aims to address the gap in policy evaluation regarding decision-making for PPP transport projects in Vietnam.
Thesis structure
Apart from Acknowledgement, Introduction and Conclusion, this paper shall include 03 chapters:
Chapter 1: Theoretical framework of evaluation of decision-making policy on PPP transport project
Chapter 2: Analysis of decision-making policy on PPP transport project in Vietnam
Chapter 3: Recommendations for decision-making policy on PPP transport project in Vietnam
Theoretical framework OF EVALUATION OF DECISION-
Overview of Evaluation of Decision-making policy on PPP transport
1.1.1 Key definitions and History of Evaluation of Decision-making policy on PPP transport project
1.1.1.1 Definition of Evaluation of Decision-making policy on PPP transport project
Public-Private Partnerships (PPPs) are a key method for executing public projects, alongside traditional public procurement and hybrid models The definition of PPPs can differ based on the country and the organization defining them For instance, the World Bank, India’s National Assembly, and the UK Infrastructure and Projects Authority each provide distinct interpretations of PPPs, highlighting the diverse understanding of this collaborative approach to infrastructure development.
A public-private partnership (PPP) is defined by the World Bank as a long-term agreement between a private entity and a government body aimed at delivering a public asset or service In this arrangement, the private party assumes considerable risk and management duties, with compensation tied to their performance outcomes.
In India, a public-private partnership (PPP) is defined as a collaborative arrangement between a government-owned entity and a private sector company aimed at delivering public assets and services This partnership involves investments and management by the private entity for a designated period, with a clear allocation of risks between both parties The private sector partner is compensated through performance-linked payments that adhere to predetermined standards, which are measurable by the public entity or its representative.
United Kingdom definition: “A partnership between the public and private sectors for the purpose of delivering a project or service traditionally provided by
9 the public sector, using the skills and expertise of the private sector, with the transfer of significant risks to the private sector”
Public-Private Partnerships (PPPs) are contractual agreements between public and private entities that primarily focus on infrastructure and service delivery In these partnerships, private partners assume considerable risks and management duties, with payment often tied to their performance The main goal of PPPs is to leverage private sector expertise to enhance public services and infrastructure, while shifting certain risks and responsibilities to private entities.
Definition of decision-making policy
Decision-making is often tailored to specific situations but can be linked to other decisions across various contexts Policies are developed as structured plans or procedures aimed at shaping the decision-making process, offering essential guiding principles Importantly, decision-making is intrinsically connected to policy, highlighting a dynamic interplay between the two elements.
A decision-making policy is a structured framework that includes guidelines, criteria, and procedures essential for effective decision-making in organizations or government entities It specifies the evaluation criteria and steps necessary for assessing options, selecting the most suitable course of action, and executing decisions that align with the organization's goals and objectives.
Policy evaluation is a systematic process that assesses key aspects such as design, implementation, outcomes, effectiveness, efficiency, and relevance (Theodoulou and Kofinis, 2004) Various methodologies and approaches are discussed in the available sources, offering deeper insights into the evaluation of policies.
In this thesis, policy evaluation is defined as a systematic and objective assessment of the effectiveness, and efficiency of policies The aim of policy
10 evaluation is to provide information to policymakers and stakeholders, and the public about the strengths and weaknesses of a policy, and to inform future decision-making
Definition of evaluation of decision-making policy on PPP transport project
Evaluation of decision-making policy on PPP transport project is a systematic and objective assessment of the effectiveness, and efficiency of policy on PPP transport project
Policy evaluation serves to inform policymakers, stakeholders, and the public about the effectiveness and shortcomings of a policy or program, ultimately guiding future decision-making.
1.1.1.2 History of Evaluation of Decision-making policy on PPP transport project
History of decision-making policy on PPP transport project
The evolution of decision-making policies for Public-Private Partnership (PPP) transport projects is closely linked to the broader history of PPP initiatives across various countries This historical context highlights the development and implementation of policies that guide decision-making in the realm of transport infrastructure projects.
While the specific timelines and approaches may vary, the general evolution of PPP transport projects can be summarized as follows:
Before the 20th century, the involvement of the private sector in public infrastructure was evident through historical examples like toll roads and canals, which were funded and managed by private entities with government oversight.
In the mid-20th century, the concept of formalizing public-private partnerships (PPPs) began to gain popularity, particularly with the introduction of the Private Finance Initiative (PFI) in the 1990s in the United Kingdom, which set the stage for increased private sector participation in public infrastructure projects, such as transportation.
In the late 20th century, public-private partnership (PPP) transport projects surged in popularity worldwide, with countries like Australia, Canada, and numerous European nations adopting these models for the development of roads, railways, and airports.
11 development This period saw a diversification of project types, including the incorporation of technology-driven transport systems
History of evaluation of decision-making policy on PPP transport project
The development of Public-Private Partnership (PPP) investments necessitates a robust evaluation decision-making policy, which is often marked by specific milestones Many nations have established dedicated institutions and legal frameworks to support PPP transport projects, encompassing aspects like project procurement, contract management, risk allocation, and dispute resolution Guidance from international organizations, including the World Bank and the Asian Development Bank, has contributed to the establishment of best practices Over time, decision-making policies for PPP transport projects have evolved, informed by lessons from past initiatives Key factors such as transparency, risk management, stakeholder engagement, and value-for-money considerations have significantly influenced these processes, prompting countries to continuously refine their policies to balance public interest, private sector involvement, and project viability.
The evaluation of decision-making policies for PPP transport projects is influenced by the distinct socio-economic contexts and political landscapes of different countries, leading to significant variations in their history and evolution.
1.1.2 Process of Evaluation of Decision-making policy on PPP transport project
The process of implementing a PPP project generally involves the following steps (World Bank Organization, 2016):
- Step 1 Project Identification: The government identifies a need for infrastructure development or public service delivery that can be fulfilled through a PPP arrangement
In the decision-making phase, a comprehensive feasibility study is carried out to evaluate the project's viability, analyzing its economic, financial, social, and environmental impacts while also identifying potential risks and challenges.
Based on the Feasibility study, the Decision-making Authority makes decision on investing the project or not
- Step 3 Procurement Process: The government initiates the procurement process to select a private partner through a competitive bidding process
- Step 4 Proposal Evaluation and Selection: The government evaluates the received proposals based on predetermined criteria The private partner is selected based on the evaluation results
- Step 5 Contract Negotiation: Once a preferred private partner is selected, contract negotiations begin The terms and conditions of the PPP agreement are finalized
- Step 6 Contract Signing: After reaching an agreement, the government and private partner sign the PPP contract
- Step 7 Project Implementation: The private partner commences the construction or operation of the infrastructure or public service, as specified in the contract
Criteria to Evaluate Decision-making policy on PPP transport project 16 1 Effectiveness criteria
A successful policy for decision-making in PPP transport projects hinges on several key components that vary by context and specific policy area The primary aim of these components is to fulfill policy objectives, which encapsulate the desired outcomes and benefits that both the government and stakeholders seek to attain through the execution of the PPP transport project.
Policy objectives differ across countries and regions, making it crucial for decision-makers to align their choices with these goals to ensure projects contribute to societal and economic development Public-Private Partnerships (PPP) serve as an alternative to traditional financing and procurement methods for infrastructure, achieving success through enhanced effectiveness and efficiency, as noted by various development banks (ADB, EBRD, IDB, IsDB, and WBG, 2016).
Figure 1.1 Criteria to evaluate policy on decision-making
Framework for establishing appropriate legal and regulatory provisions, including the preparation and negotiation of contracts, dispute resolution mechanisms, and compliance requirements to ensure accountability and protection of stakeholders' interests
The legal framework serves as the cornerstone of a policy, providing essential legitimacy and authority for its implementation and enforcement Policies grounded in a legal framework are binding, ensuring compliance from individuals and entities Without such a framework, a policy risks losing its authority and enforceability, making it vulnerable to arbitrary changes A well-structured legal process for amending policies fosters stability and continuity, promoting thorough consideration and scrutiny Furthermore, a legal framework aligns the policy with existing laws and regulations, preventing conflicts and ensuring its legal validity and enforceability.
The ultimate goal of the PPP project is to offer public services Therefore, a policy should consider these issues to warrant enough public interest consultation with end users:
- Social and Cultural Values: Societal values and cultural norms, such as public values, ethical considerations, social equity, and issues related to human rights and justice, shape policy decisions
Stakeholders, such as interest groups, industry representatives, civil society organizations, and affected communities, play a crucial role in shaping policy decisions Policymakers often engage with these stakeholders to incorporate diverse perspectives and effectively balance competing interests and demands.
Policymakers must prioritize environmental considerations in their policies, focusing on sustainability, climate change, biodiversity, and effective resource management By assessing environmental impacts and adhering to conservation principles, they can promote sustainable development that benefits both the planet and society.
Global and regional contexts significantly impact policy decision-making, especially concerning international agreements, trade, security, and cooperation Policymakers must carefully evaluate how their decisions affect global commitments, international relations, and regional dynamics.
Public input and engagement play a crucial role in shaping policy decisions by utilizing methods such as public consultations, surveys, and active participation from citizens and civil society organizations Policymakers aim to foster transparency, inclusiveness, and accountability throughout the decision-making process.
- Political Considerations: Politics often play a significant role in policy decision-making Politicians may consider factors such as public opinion, electoral implications, and party ideology when formulating policies
Technical feasibility plays a vital role in the effectiveness of decision-making policies for Public-Private Partnership (PPP) projects By assessing technical feasibility, stakeholders can determine the viability of a proposed PPP project from a technical perspective, ensuring that its objectives are achievable with the available technology, resources, and expertise This analysis also identifies potential risks and challenges related to the project's technical aspects, including the availability of necessary technology, expertise, and infrastructure, as well as any technical constraints Understanding these risks enables policymakers to formulate strategies to mitigate them, ultimately contributing to the project's success.
Assessment of whether the proposed project can be successfully implemented from a technical standpoint involves evaluating the technical aspects of the project,
19 including its design, engineering requirements, technological considerations, and the availability of necessary resources and expertise
The core of a Public-Private Partnership (PPP) project encompasses essential technical requirements alongside structural criteria, ensuring sufficient detail for infrastructure design and service characteristics without stifling innovation Conducting a technical feasibility analysis is crucial, as it sheds light on the project's complexity, timeline, and resource needs, empowering policymakers to craft realistic plans, establish achievable targets, and allocate resources efficiently Additionally, this analysis highlights critical technical dependencies and interdependencies that must be addressed during both planning and implementation phases.
Costs are evaluated as part of the technical requirements design process, which is a crucial component of the commercial viability analysis
A technical feasibility assessment is crucial for decision-making in Public-Private Partnership (PPP) projects, as it evaluates project viability, manages risks, ensures cost-effectiveness, and facilitates realistic planning and implementation By incorporating technical feasibility into their evaluations, policymakers can make informed decisions that enhance the likelihood of successful project outcomes and promote long-term sustainability.
This thesis establishes a decision-making policy for selecting efficient Public-Private Partnership (PPP) transport projects, referred to as the "outcome evaluation method" (Kwak, 2009).
Public-Private Partnerships (PPPs) facilitate innovative private funding and management solutions while maintaining public engagement in ownership and strategic policymaking By leveraging public funds, these partnerships enhance resource efficiency and effectiveness in delivering public services.
20 benefits such as collaborating with qualified private enterprises to oversee and deliver infrastructure services
According to Delmon, J (2017), PPP Infrastructure project financing is generally obtained from three typical sources:
Government financing involves borrowing funds that are then allocated to projects through subsidies, grants, guaranteed loans, or on-lending While governments benefit from lower interest rates, they encounter fiscal limitations due to competition among various deserving initiatives for limited financial resources Additionally, they often struggle to manage commercial risks effectively.
Corporate financing involves a corporation borrowing funds based on its credit profile and business operations, often without securing the loan against specific assets These borrowed funds are typically allocated to infrastructure projects However, utilities and state-run enterprises may struggle with limited debt capacity and face competing investment needs that can complicate their funding efforts.
Project financing involves limited-recourse loans provided directly to a special-purpose vehicle, where debt repayment is primarily dependent on the project's cash flow The security for this debt is largely confined to the project's assets and revenue streams, serving as collateral.
ANALYSIS OF DECISION-MAKING POLICY ON PPP
Overview of Evaluation of Decision-making policy on PPP transport
2.1.1 Key Definitions and History of Evaluation of Decision-making policy on PPP transport project in Vietnam
2.1.1.1 Definition of Decision-making policy on PPP transport project in Vietnam
According to the Law on PPP 2021, a Public-Private Partnership (PPP) project is defined as an investment model involving a fixed-term collaboration between the government and a private investor, established through a PPP project agreement to encourage private sector participation in the initiative.
Public-Private Partnerships (PPPs) involve collaboration between the public and private sectors, leveraging private sector financing and expertise However, the specific characteristics and regulatory frameworks governing PPP projects can differ significantly across various countries and institutions.
Definition of decision-making policy on PPP transport project
In Vietnam, the Law on PPP lacks a clear and comprehensive definition of decision-making policy, leading to a decision-making process for PPP projects that is influenced by various laws, regulations, guidelines, and administrative procedures This process can vary based on the specific project and the relevant authorities involved.
Article 17 of Vietnam's Law on Public-Private Partnership Investment outlines essential elements for an investment policy decision regarding a PPP project, including the project name, the competent authority overseeing the initiative, the project's objectives, proposed scale, location, execution timeline, and land considerations.
The project requires an assessment of 28 natural resource demands and outlines the proposed Public-Private Partnership (PPP) contract type It includes a preliminary total investment estimate and financial plan detailing the investment structure, expected price range, and pricing for public products or services in fee-based projects Furthermore, it outlines mechanisms for guaranteeing investments and managing revenue reductions For projects involving advanced technologies, the investment policy must specify the bid solicitor's name, the investor selection criteria, and the timeline for the investor selection process.
To find out the decision-making policy, stakeholders need to find a variety of principles, guidelines, and procedures that govern the process of making decisions regarding the above information
2.1.1.2 History of Evaluation of Decision-making policy on PPP transport project in Vietnam
History of decision-making policy on PPP transport project in Vietnam
The history of decision-making policy on PPP transport project goes along with the history of PPP project in Vietnam
In Vietnam, PPP investment was first implemented in 1997 with only one form of BOT (Build - Operate - Transfer) contract (Decree No 77/CP dated June
In 1997, the Government issued regulations for investment through build-operate-transfer (BOT) contracts, which were expanded in 1998 to include build-transfer-operate (BTO) and build-transfer (BT) contracts, specifically for foreign investments in Vietnam (Decree No 62/1998/ND-CP) By 2004, the Ministry of Finance further regulated road investments through Circular No 90/2004/TT-BTC, which provided guidelines for the collection, payment, management, and use of road tolls, establishing conditions for toll stations and business investments in road infrastructure.
In 2005, the concept of the three types of BOT, BTO, and BT contracts was first regulated in the Investment Law and continued to be implemented in Decree
No 78/2007/ND-CP dated May 11, 2007 of the Government on investment in the form of build-operate-transfer contracts, build-transfer-operate contracts, and build- transfer contracts
During this period, legal documents primarily addressed general aspects such as investment fields, capital sources, project implementation conditions, investment licensing procedures, contract signing, and project execution The contract content was largely determined by mutual agreement between parties, with no specific guidance on investor selection Although the 2005 Bidding Law was enacted and effective from April 1, 2006, it did not regulate the selection process for PPP project investors.
According to data from the Ministry of Transport, most infrastructure investment projects utilizing BOT and BT contracts are currently underway, following Government Decree No 108/2009/NĐ-CP and Circulars No 166/2011/TT-BTC and No 159/2013/TT-BTC from the Ministry of Finance Between 2011 and 2015, the Ministry of Transport mobilized around 158.742 trillion VND for 52 BOT projects.
BT and BOO contracts, including 46 BOT projects, 1 BT project combined with BOT, 4 BT projects and 1 BOO project
Between 2015 and 2020, despite comprehensive legal provisions for investment through the Public-Private Partnership (PPP) method, the number of projects implemented remained low Specifically, from 2016 to 2021, the Ministry of Transport executed only four PPP projects, including one automatic toll collection system under a Build-Operate-Own (BOO) contract and three segments of the East North-South Expressway completed between 2017 and 2020, namely Dien Chau – Bai Vot, Nhan Trang - Cam Lam, and Cam Lam - Vinh Hao.
Since the introduction of the Law on Public-Private Partnerships (PPP) in Vietnam in 2020, it was anticipated to serve as a significant milestone in establishing a robust legal framework for PPP projects, aimed at enhancing decision-making policies However, as of now, no transport projects have been successfully completed under these regulations.
History of evaluation of decision-making policy on PPP transport project in Vietnam
Vietnam has established dedicated institutions and legal frameworks to facilitate PPP transport projects
Over time, decision-making policies on PPP transport projects have evolved based on lessons learned from earlier initiatives
In the early 2000s to 2010s, Vietnam began utilizing Public-Private Partnerships (PPPs) for infrastructure development, particularly in transport projects During this period, decision-making policies for these projects emphasized financial viability, economic benefits, and environmental impact assessments Authorities evaluated projects based on cost-effectiveness and revenue potential, while also conducting environmental and social impact assessments to ensure compliance with sustainability standards.
In 2020, Vietnam implemented the Law on Public-Private Partnership (PPP), establishing a legal framework for PPP projects, particularly in transport This law introduced comprehensive evaluation criteria such as technical feasibility, financial viability, risk allocation, and private sector involvement Since its enactment, Vietnam has enhanced the evaluation process for transport PPP projects by prioritizing detailed feasibility studies, including traffic demand, cost-benefit, and value-for-money analyses Additionally, social and environmental impact assessments have been strengthened to ensure alignment with sustainable development goals.
2.1.2 Process of Evaluation of Decision-making policy on PPP transport projects in Vietnam
Process of PPP project in Vietnam
According to Article 11 of the Law on Public-Private Partnership Investment in Vietnam, the process for PPP projects is outlined as follows:
Figure 2.1 Process of PPP project in Vietnam
Special PPP projects that involve high or new technologies, particularly those requiring architectural proposals, are subject to additional regulations As per Decision No 38/2020/QD-TTg, issued on December 30, 2020, by the Prime Minister, the list of prioritized high technologies and encouraged hi-tech products does not generally include transport projects Consequently, these projects will follow the standard process outlined in Figure 3 above.
In general, PPP process in Vietnam is the same as international PPP process
Establishing PPP project enterprises and concluding PPP contracts
Selecting investors for the project
Project approval Making feasibility study reports Assessing feasibility study reports
Decisions on investment policiesMaking pre-feasibility study reports Assessing pre-feasibility study reports
Process of decision-making PPP transport project in Vietnam
The decision-making process for Public-Private Partnership (PPP) transport projects in Vietnam shares similarities with international practices, encompassing stages such as project proposal by the preparing unit, feasibility studies, evaluation, approval, and final decision-making.
Figure 2.2 Process of decision-making PPP transport project in Vietnam
Process of Evaluation of Decision-making policy on PPP transport projects in Vietnam
The evaluation of decision-making policy on PPP transport projects in Vietnam, as outlined in Chapter 1, assesses the effectiveness of the evaluation process applied to these initiatives.
- Step 1 Define Evaluation Criteria: Establish clear evaluation criteria and objectives to assess the decision-making policy on PPP transport projects in Vietnam
- Step 2 Collect Relevant Data: Gather relevant data and information on the decision-making policy on PPP transport project in Vietnam
Assessment of Feasibility study reports for PPP projects
Decision on PPP transport project investment
- Step 3 Analyze Policy: Evaluate the performance of decision-making policy on PPP transport projects based on the established criteria in Vietnam
Apply Evaluation Criteria to Decision-making Policy on PPP transport
Current legal system on Decision-making policy on PPP transport project in Vietnam
The legal framework for decision-making policy on Public-Private Partnership (PPP) transport projects in Vietnam consists of several key laws and regulations
Table 2.1 Current legal framework on PPP transport project decision-making in Vietnam
The Law on Public-Private Partnership Investment (Law on PPP), enacted in 2020, establishes a legal framework for PPP projects across multiple sectors, including transport It clearly defines the roles and responsibilities of key stakeholders such as the government, private investors, and project implementers.
Law on PPP is mainly intended to regulate the specific provisions of PPP investment For other matters, the PPP Law does not prescribe but refers to other laws, including:
The legal framework governing the authority responsible for issuing investment policy decisions in Public-Private Partnership (PPP) projects encompasses several key laws, including the Law on National Assembly Organization, the Law on Government Organization, and the Law on Local Government Organization.
+ Law on public budget, such as: Law on Public Investment, Law on State Budget, et al
• Decree No 35 on elaboration of some Articles of the Law on PPP
• Decree No 28 on financial management mechanism for PPP Projects
•Circular No 09 of Ministry of Planning and Investment providing guidelines for selection of investors executing PPP projects and investment projects involving land use.
Circular No 09 from the Ministry of Transport outlines the bid evaluation methods and criteria for selecting investors involved in Public-Private Partnership (PPP) projects It also includes a template for the build-operate-transfer (BOT) contract specifically tailored for the transport sector.
The Ministry of Transport's Circular No 22 outlines essential guidelines for pre-feasibility and feasibility study reports related to investment projects in the transport sector, specifically focusing on public-private partnerships and build-operate-transfer contracts.
+ Law regulates private entity, such as: Law on Enterprise, Law on Taxes, Law on Investment, et al
+ Law on state management, such as: Law on Inspection, Law on Auditing, regulations on publicity and transparency, Law on Land, et al
+ Specialized law, such as: Law on Construction, Law on Road traffic, Law on management and use of public property, et al
The Law on Public-Private Partnerships (PPP) is primarily guided by two key decrees Decree No 35/2021/ND-CP, issued on March 29, 2021, outlines essential aspects such as investment sectors, project scales, assessment boards, investor selection, project completion confirmation, contract termination, and the management of various issues during PPP investments Complementing this, Decree No 28/2021/ND-CP, dated March 26, 2021, focuses on the financial management mechanisms of PPP projects, detailing financial planning, bond assurance by PPP enterprises, state capital management, the settlement of investments in completed infrastructure, procedures for transferring completed works to authorities, and the distribution of revenue fluctuations.
The transport sector's Public-Private Partnership (PPP) projects are governed by three key circulars: Circular No 09/2018/TT-BKHDT from the Ministry of Planning and Investment, which outlines the investor selection process and the preparation of necessary documents; Circular No 09/2021/TT-BGTVT from the Ministry of Transport, which details bid evaluation methods and provides a template for build-operate-transfer contracts; and Circular No 22/2022/TT-BGTVT, also from the Ministry of Transport, which offers guidelines for pre-feasibility and feasibility study reports for investment projects.
The 39 forms of BOT encompass various key metrics, including socio-economic efficiency indicators, investor rates of return on equity (ROE), evaluation indicators for the quality of infrastructure projects, and the depreciation periods of infrastructure systems.
The primary challenge of PPP legislation lies in the conflicting interests of state agencies and private investors State agencies prioritize compliance with regulations and civil servant responsibilities, while private enterprises focus on maximizing profits within the legal framework This fundamental difference in objectives often leads to difficulties in contract negotiation and construction To address these challenges, the Government should provide specific contract templates; however, overly detailed regulations may hinder adaptability and contribute to legal instability.
According to Article 14, 15 Law on PPP, the bases for preparation of feasibility study reports will not only depend on law documents, but also the strategies, plans and planning schemes
Bases for PPP transport project decision-making in Vietnam
Table 2.2 Bases for PPP transport project decision-making in Vietnam
National socio- economic development strategies, plans and other planning schemes in accordance with law on planning;
Provisions of this Law and other regulations of other laws related to the sectors where projects invest
In addition to legal documents, planning and guiding documents serve as essential foundations for Public-Private Partnership (PPP) projects, reflecting the urgency and strategic context of development While these documents address factors often overlooked in traditional legal frameworks, they can complicate investors' ability to identify the project's legal basis An example of the legal foundation can be found in Appendix 1.
One challenge of public-private partnerships is the legal status imbalance between contracting parties, as the contracting agency also serves as a state administrative body This dynamic can create apprehension for Special Purpose Vehicles (SPVs), which may worry about state agencies conflating their roles while managing contracts To address this issue, the World Bank recommends implementing an "Independent Engineer" mechanism, which operates independently from both the government and investors, serving as an intermediary in project management This approach has proven to be quite effective.
In Vietnam, the government will oversee project quality, with independent third parties involved only in the event of disputes This approach aims to reduce the overall investment budget by eliminating the need for third-party costs throughout the entire project.
A specialized unit oversees the monitoring of Public-Private Partnership (PPP) schemes to ensure compliance with relevant legislation and guidelines The Ministry of Planning and Investment is responsible for the overall PPP framework and protocols, while the Ministry of Transport handles the implementation of PPP projects related to highways.
In a Public-Private Partnership (PPP) project, it is essential for all parties involved to have timely access to crucial information, which must be shared transparently and openly Adhering to the following mandatory requirements is vital for maintaining transparency throughout the project.
The Vietnam National E-Procurement System, as outlined in Article 9 of the Law on PPP, provides comprehensive online information about investment policy decisions and approvals for PPP projects This includes details on investor selection processes, such as prequalification invitations, bidding invitations, shortlisted candidates, and selection results Additionally, it covers essential aspects of PPP project contracts, including total investment, funding proportions, contract types, project duration, pricing, and cost structures for public products and services The system also includes information on public investment capital settlements, relevant legislative documents, an investor database, and procedures for addressing complaints and violations related to PPP investment law.
The government will hold public consultations to conduct market sounding, allowing interested parties to express their concerns, ask questions, and gain insights about the project.
Some case studies of Decision-making policy on PPP transport project in
2.3.1 Evaluate policy on decision-making in Binh Loi PPP project
In the Binh Loi Bridge PPP project (Tuoitre Newspaper (2022), due to problems with capital sources and commitments on planning, the project has arisen
The financial plan outlined in the BOT contract for the Binh Loi bridge project, which relies on tolls from full-tonnage watercraft as the source of payment for the budget loan from Binh Duong, is deemed unfeasible due to numerous inadequacies and problems.
The initial plan aimed to handle over 300 tons of cargo at An Son, Rach Bap, and Ben Suc ports along the Saigon River, from Binh Loi railway bridge to Ben Suc port However, Rach Bap and Ben Suc ports have yet to be constructed as per the approved plan, and An Son port has only received partial investment, rendering it unable to collect fees Consequently, the Binh Duong Provincial People's Committee has revised the planning, opting to abandon Ben Suc port in favor of a new port location.
Ho Chi Minh City's budget has disbursed 110 billion VND out of 153 billion VND allocated for the ground clearance of the Binh Loi railway bridge, while investors have utilized 248 billion VND of the 300 billion VND borrowed from Binh Duong province's budget However, the Binh Duong Investment and Development Fund has announced that it will not continue disbursing the remaining capital due to findings from a State Audit on the province's budget Additionally, the fund has issued multiple requests for the return of the disbursed loans related to the Binh Loi bridge BOT project.
Due to changes in the capital structure, the bank is unable to disburse the loan for the project, resulting in a breach of the credit contract Consequently, there is no funding available to complete the renovation of the Saigon River channel following the construction of the new Binh Loi railway bridge.
The Binh Loi bridge project highlights significant inadequacies stemming from insufficient examination of legal regulations regarding the state budget during the decision-making phase This oversight resulted in findings from the State Audit that rendered the financial plan of the contract unfeasible Additionally, despite the project being based on an approved plan, the inability to execute this plan has led to a halt in project progress.
2.3.2 Evaluate policy on decision-making North-South expressway PPP project
The North-South expressway project in the East has caused significant damage to local residents due to high-speed trucks transporting construction materials, which has led to heavy road dust accumulation and subsequent plant diseases and stunted growth Although community feedback procedures were implemented, the risks associated with the project were not fully anticipated, complicating the search for effective solutions The most appropriate remedy involves the Government utilizing the project's contingency budget to compensate affected residents, although this process is complex, time-consuming, and labor-intensive.
Addressing risks like river and lake pollution control, compensation for land subsidence, and the restoration of public roads during the project development phase can lead to significant cost savings By incorporating these considerations into the budget, all parties involved can minimize damage, reduce time, and streamline efforts throughout the project.
2.3.3 Evaluate policy on decision-making Thai Nguyen - Cho Moi PPP project
The BOT project to build Thai Nguyen - Cho Moi and upgrade and expand Highway 3, section Km 75-Km 100 started in 2015, completed and put into operation in May 2017
The project contract stipulates that the investor must secure approximately VND 2,746 billion to finance the 40 km long Thai Nguyen-Cho Moi expressway in Bac Kan, which will feature two lanes Additionally, the investor is tasked with upgrading and expanding National Highway 3 from Km 93 to Km 100, as well as managing and maintaining the section of National Highway 3 from Km 75 to Km 100 for the duration of the project.
The Ministry of Transport, in collaboration with the Thai Nguyen Provincial People's Committee, has permitted investors to initiate toll collection on the Thai Nguyen-Cho Moi route starting in 2018 to facilitate repayment.
Investors can collect tolls at two stations on Thai Nguyen-Cho Moi Street and National Highway 3 to recoup their investment, with an initial payback period of 16 years and 1 month This period extends to 25 years and 4 months once free plans and reduced fees for local residents are implemented.
The Thai Nguyen-Cho Moi BOT project has encountered significant challenges, including strong opposition from local residents who have protested against toll fees, calling for reductions or the elimination of toll booths These demonstrations have sometimes resulted in tensions between the authorities and the community Additionally, disputes have arisen over the placement of toll booths, with some stakeholders arguing that their locations contribute to traffic congestion and inconvenience for commuters and locals alike.
Protests and disputes have led to a temporary suspension of toll collection at certain booths, affecting the project's revenue and financial stability In light of these controversies, the Ministry of Transport and local authorities are implementing measures, including halting toll collection, engaging in negotiations, and seeking alternative solutions to address community concerns.
Public-Private Partnership (PPP) projects significantly affect local communities, making it essential to consult residents to incorporate their voices and concerns This inclusive approach fosters transparent and accountable decision-making, ultimately leading to solutions that effectively address the needs of all stakeholders involved, including businesses and community members.
By providing residents with information, seeking their input, and involving them in the decision-making process, the project sponsors and government authorities demonstrate their commitment to openness and accountability
In this case, even though all the efficiency factors seem positive, it is nonsense as the investor can not collect fee.
Assessment of Decision-making policy on PPP transport project in
2.4.1 Strengths of Decision-making policy on PPP transport project in Vietnam
Overall, the decision-making policy on PPP transport projects in Vietnam has been a positive development
The policy's strength lies in fostering collaboration between the government and private investors, sharing risks and benefits, which has successfully attracted both domestic and foreign investments in Vietnam's transport sector Recognizing the private sector's role in enhancing infrastructure and transportation systems, the Vietnamese government has implemented clear guidelines and frameworks for project execution This approach streamlines decision-making, enhances transparency, reduces corruption risks, and facilitates efficient project implementation.
2.4.1.1 Strengths of regulation regarding to effectiveness
One of the strengths of the decision-making policy on PPP transport projects in Vietnam is its effectiveness in terms of the legal framework and technical feasibility
The legal framework for Public-Private Partnership (PPP) projects in the transport sector in Vietnam establishes clear guidelines and laws, ensuring that all activities are conducted legally The Vietnamese government has implemented specific regulations, including the Law on Public-Private Partnership Investment and the Law on Investment, to support these initiatives Furthermore, the policy highlights the necessity of comprehensive feasibility studies prior to the approval of PPP projects, which assess their viability and potential returns.
The technical and economic viability of proposed projects is assessed by evaluating market demand, financial feasibility, and environmental impact This thorough analysis ensures that only projects with a strong likelihood of success are approved, thereby reducing the risk of failure.
The policy promotes the adoption of international best practices and standards in the implementation of PPP transport projects in Vietnam, ensuring adherence to high technical standards and significantly enhancing their overall effectiveness.
Vietnam's decision-making policy on PPP transport projects underscores the significance of a robust legal framework, feasibility studies, and adherence to international standards, which collectively enhance project implementation and mitigate the risk of failure.
2.4.1.2 Strengths of regulation regarding to efficiency
Vietnam's decision-making policy for PPP transport projects showcases significant efficiency, particularly through key financial evaluation metrics including Net Present Value (NPV), Internal Rate of Return (IRR), Benefit-Cost Ratio (BCR), and Return on Equity (ROE).
The policy mandates a thorough financial evaluation for PPP transport projects, emphasizing the calculation of Net Present Value (NPV) to assess profitability by discounting future cash flows By prioritizing projects with a positive NPV, the policy highlights their potential for generating long-term financial returns.
In addition, the IRR is considered in the decision-making process The IRR measures the rate at which the project's net cash inflows equal the initial investment
By setting a minimum IRR threshold, the policy ensures that projects are financially viable and capable of generating sufficient returns to attract private sector investment
The Benefit-Cost Ratio (BCR) is a crucial metric for evaluating the economic efficiency of Public-Private Partnership (PPP) projects, as it compares the present value of benefits to the present value of costs A BCR greater than one signifies that the benefits of a project surpass its costs, indicating a favorable level of efficiency This policy emphasizes the importance of maximizing project benefits relative to costs.
56 projects with a favorable BCR, ensuring that public resources are allocated efficiently
The policy prioritizes Return on Equity (ROE), a key indicator of investment profitability for equity investors By focusing on ROE, the policy fosters private sector involvement and guarantees that projects yield appealing returns for investors.
Vietnam's decision-making policy for Public-Private Partnership (PPP) transport projects recognizes the unique characteristics of these initiatives, enabling authorities to incorporate additional financial metrics Key indicators such as the debt-to-equity ratio, debt service coverage ratio, quick asset turnover rate, payment capability ratio, and capital preservation measures, as outlined by existing laws, are utilized to evaluate and select financially viable and efficient investment projects.
The policy enhances the evaluation of PPP projects by incorporating additional financial indicators beyond traditional metrics like NPV, IRR, BCR, and ROE This comprehensive approach considers essential factors such as debt repayment capacity, asset turnover efficiency, liquidity, and capital preservation, leading to a more accurate assessment of the project's financial health and its ability to meet financial obligations.
The decision-making policy for PPP transport projects in Vietnam allows authorities to incorporate additional financial indicators tailored to the specific characteristics of each project This approach is designed to ensure the selection of investment projects that are financially viable, efficient, and able to sustainably meet their financial obligations.
2.4.2 Weaknesses of Decision-making policy on PPP transport project in Vietnam
Despite progress, challenges remain, particularly in the project approval process, which is often complex and bureaucratic This complexity can discourage potential investors and delay the timely execution of projects.
2.4.2.1 Weaknesses of regulation regarding effectiveness
Vietnam's decision-making policy on public-private partnership (PPP) transport projects exhibits significant weaknesses, particularly concerning its legal framework and technical feasibility, which hinder overall effectiveness.
The legal framework for Public-Private Partnership (PPP) projects in Vietnam is intricate and lengthy, encompassing various regulations and procedures This complexity often results in delays and inefficiencies during project implementation, ultimately affecting decision-making effectiveness To enhance the efficiency of PPP projects, it is essential to streamline and simplify these legal procedures.