Assessment of public private partnership policies and current status in vietnam

Public-Private Partnerships PPPs have become an important tool for mobilizing private capital and expertise for infrastructure and public service projects in Vietnam.. Public-Private Par

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UNIVERSITY FACULTY OF ECONOMICS DEVELOPMENT

ESSAY

PUBLIC ECONOMIC Assessment of Public-Private Partnership Policies and Current

Status in Vietnam

Tutor: Prof Dr Truong Thu Ha

Authors: Đỗ Hải Ninh - 22051779

Bùi Đức Anh - 22051595

Nguyễn Hoàng Anh - 22051606 Nguyễn Tùng Bách — 22051627 Trần Thị Quỳnh Chỉ — 22051779

Course code: FIB2002-E

won HaNoiydu

Table of contents

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*Part 1 : Introduction L Definition and sipnificance of PPPS co sec on CỤ n9 Su HH on nÝ ng 4 1 210i: ÖẮ 4

2 The Historical Journey of Public-Private Partnerships (PPPs) + 5

H Ratonale and Research Ôbj€CfIV€S - con non 0o 0 0n no HH n1 V058 8 1 Reasons for Choosing the Topic of Public-Private Partnerships (PPPs) "— 8

2 Objectives and Significance of Evaluating PPP Policies and Current Situation in Mini 8 - 5

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Thank You

First of all, my team would like to send my most sincere thanks to teacher Truong Thu Ha During the process of studying and learning about Marcoeconomics, I have received a lot of attention, help, and enthusiastic guidance and the teacher's dedication Teachers helped us accumulate more knowledge about this subject so we could complete the essay on the topic: Assessment of Public-Private Partnership Policies and Current Status in Vietnam

In the process of doing the test, it is certainly difficult to avoid shortcomings Therefore, I respectfully hope to receive your comments to help my essay become more and more perfect Thank you sincerely!

Public-Private Partnerships (PPPs) have become an important tool for mobilizing private capital and expertise for infrastructure and public service projects in Vietnam The Vietnamese government has issued numerous policies and regulations to promote PPPs, however, the implementation of PPPs remains challenging

Background

Vietnam is in a rapid development phase, with a growing demand for infrastructure and public services However, the limited state budget makes it difficult to invest in these areas PPPs are considered a potential solution to mobilize private capital for development projects

Research Objectives

This study aims to assess Vietnam's PPP policies and the current status of PPP implementation The study will analyze the strengths, weaknesses, opportunities, and challenges of PPPs in Vietnam

Research Content

The study will be conducted in the following steps:

Assess the legal and institutional framework for PPPs in Vietnam

Analyze specific policies and regulations related to PPPs

Evaluate the effectiveness of PPP implementation in Vietnam

Identify the challenges and barriers to PPPs in Vietnam

Propose solutions to improve PPP implementation in Vietnam

Research Methodology

The study will employ both qualitative and quantitative research methods Qualitative research methods will be used to collect data from interviews with policymakers, government officials, PPP experts, and representatives of private enterprises Quantitative research methods will be used to collect data from reports, statistical documents, and other data sources

Expectations

This study will provide useful information for policymakers, government officials, PPP experts, and private enterprises in developing and implementing more effective PPP projects in Vietnam

Part 1: Introduction

L Definition and significance of PPPs

Public-Private Partnership (PPP) is a collaborative arrangement between a government agency and a private sector company to finance, build, and operate infrastructure projects and deliver public services In this model, the government establishes service standards, while the private sector is incentivized to provide them through a performance-based payment mechanism Key Characteristics

Long-term collaboration : PPPs typically involve long-term contracts between the public and private sectors, ranging from 15 to 30 years

Risk sharing: Risks associated with the project are shared between the government and the private partner, aligning their interests in project success

Private sector expertise: PPPs leverage the private sector's expertise in project management, financing, and operational efficiency

Significance of PPPs:

1 Addressing Infrastructure Gaps: PPPs play a crucial role in bridging the infrastructure gap by leveraging private sector expertise, innovation, and resources to develop and maintain public infrastructure projects such as roads, bridges, ports, and utilities Efficiency and Cost-effectiveness: PPPs often result in more efficient project delivery and cost-effective infrastructure solutions due to the private sector's incentives for innovation, risk management, and performance optimization

Enhancing Service Quality: By incorporating private sector participation, PPPs can improve the quality and reliability of public services, leading to enhanced user satisfaction and overall societal well-being

Risk Sharing and Allocation: PPPs allow for the sharing and allocation of project risks between public and private partners, thus reducing the burden on government budgets and taxpayers while ensuring project viability and sustainability

Stimulating Economic Growth: PPPs stimulate economic growth by attracting private investment, creating job opportunities, and fostering technological advancements, thereby contributing to overall economic development and prosperity

2 The Historical Journey of Public-Private Partnerships (PPPs)

The origins of Public-Private Partnerships (PPPs) can be traced back further than one might imagine Even in ancient Roman times, the concept of public-private collaboration was applied in crucial infrastructure development projects The Roman state partnered with private

entrepreneurs to construct the renowned stone-paved roads - vital transportation arteries that facilitated the expansion of the Roman Empire and boosted trade

However, it was not until the 20th century that PPPs truly flourished and emerged as a strategic tool for economic development In the aftermath of World War II's devastation, European nations faced an immense need for resources to reconstruct their severely damaged infrastructure Amidst tight budgetary constraints, governments turned to the private sector, seeking its financial clout, technological advancements, and advanced management capabilities The United Kingdom, France, and the United States were at the forefront of implementing large-scale PPP projects, contributing to post-war economic recovery and laying the groundwork for subsequent prosperity

The Rise of PPPs in the 20th Century

The post-World War II era witnessed a surge in PPP adoption, driven by several compelling factors:

¢ Infrastructure Reconstruction Needs: The widespread destruction caused by the war necessitated substantial investment in rebuilding infrastructure, particularly transportation networks and power systems PPPs offered a viable solution to bridge the funding gap and expedite reconstruction efforts

¢ Economic Growth and Development: As economies transitioned from wartime conditions to peacetime growth, the demand for infrastructure expanded to support burgeoning industries, increasing urbanization, and rising living standards PPPs provided

a mechanism to finance and deliver essential infrastructure projects that fueled economic progress

¢ Private Sector Expertise and Efficiency: The private sector brought valuable expertise

in project management, risk assessment, and cost optimization to the PPP table Their involvement enhanced efficiency, introduced innovative technologies, and ensured timely project completion

v PPPs in the Modern Era: A Global Phenomenon

From their initial emergence in the 20th century, PPPs have evolved into a global phenomenon, embraced by nations across diverse economic and development stages The underlying principles

of PPPs — leveraging private sector resources and expertise to complement public sector efforts — have proven adaptable and effective in addressing a wide range of infrastructure and service delivery needs

H Rationale and Research Objectives:

1 Reasons for Choosing the Topic of Public-Private Partnerships (PPPs)

v Significance of PPPs in Socioeconomic Development:

Mobilizing Investment Capital: PPPs attract private capital, alleviating the financial burden on governments, particularly in the context of tight public budgets

Enhancing Investment Efficiency: Private enterprises often excel in project

management, adopting advanced technologies, and optimizing costs, contributing to improved investment efficiency

Risk Sharing: PPPs enable a balanced allocation of risks between the public and private sectors, incentivizing both parties to work towards project success

Technology Transfer: PPP projects serve as bridges to access cutting-edge technologies from the private sector, enhancing the quality of infrastructure and services

Promoting Competition: PPPs foster a competitive environment among private investors, encouraging them to enhance their capabilities, operational efficiency, and provide high- quality services at reasonable prices

Contributing to Attracting Foreign Investment: PPPs create a transparent, secure, and attractive investment environment for foreign investors, facilitating Vietnam's deeper integration into the global economy

v Timeliness and Relevance of the Topic:

PPPs are a collaboration model that the Vietnamese government is actively promoting in various sectors, including transportation, energy, healthcare, and education

The Law on Investment under the Form of Public-Private Partnerships 2020 (PPP Law 2020) has been promulgated, establishing a favorable legal framework for PPP projects Numerous large-scale PPP projects have been successfully implemented and yielded positive outcomes, contributing to socioeconomic development

Nonetheless, there are still challenges to address for PPPs to develop more effectively in Vietnam

v Feasibility of Research and Exploration of the Topic:

Abundant documentation, statistical data, and information related to PPPs are publicly available, facilitating research endeavors

Numerous experts, researchers, and businesses with experience in the PPP field are willing

to share their knowledge and expertise

PPPs possess high applicability, enabling practical implementation to contribute to enhancing investment efficiency and project management

2, Objectives and Significance of Evaluating PPP Policies and Current Situation in Vietnam

v Evaluating the Effectiveness of PPP Policies:

Assess the alignment of current PPP policies with the country's socioeconomic

development goals

Evaluate the effectiveness of PPP policies in attracting private investment, mobilizing financial resources for infrastructure development, and providing public services Analyze the impact of PPP policies on the development of economic and social sectors Identify the strengths, weaknesses, opportunities, and challenges of current PPP policies

v Assessing the Implementation of PPPs in Vietnam:

Determine the number, scale, and sectors of PPP projects

Evaluate the financial, technical, social, and environmental effectiveness of PPP project implementation

Analyze the successes and limitations in the implementation of PPP projects

Identify the factors influencing the effectiveness of PPP project implementation

v Proposing Solutions for Policy Improvement and PPP Implementation:

Propose solutions to improve PPP policies to attract private investment more effectively, mobilize financial resources for infrastructure development, and provide public services Propose solutions to enhance the effectiveness of PPP project implementation, ensuring project quality, service quality, and efficient use of investment capital

Propose solutions to overcome obstacles and challenges in PPP project implementation

v Significance of Evaluating PPP Policies and Current Situation in Vietnam:

Assist the government in evaluating the effectiveness of current PPP policies and proposing policy improvement solutions in line with practical realities

Provide private investors with comprehensive information on the PPP investment environment in Vietnam to make informed investment decisions

Empower competent government agencies to enhance the management and

implementation of PPP projects

Contribute to the effective development of the PPP model in Vietnam, mobilize resources for socioeconomic development, and improve infrastructure and public service quality Part 2: Theoretical Framework and Basic Concepts of PPPs

1 Fundamental Concepts:

v Types of PPPs

There are various forms of PPP arrangements, each with its own structure and risk allocation: Build-Operate-Transfer (BOT): The private sector builds the project, operates it for a specified period, and then transfers ownership to the government

Build-Own-Operate-Transfer (BOOT): Similar to BOT, but the private sector retains ownership of the asset throughout the contract period

Design-Build-Operate-Maintain (DBOM): The private sector designs, builds, operates, and maintains the project for a defined period

Management Contract: The private sector manages the operation and maintenance of an existing public asset

v Differentiating PPPs from Other Forms of Public-Private Partnerships (PPPs)

Public-Private Partnership (PPP) is a model for mobilizing capital from the private sector to invest in, build, manage, and operate infrastructure projects and provide public services PPPs are implemented on the basis of contracts between authorized government agencies and private

investors

Contract Contract Contract Contract (Build- (Build- (Build-Toll- (Operation Transfer) Operate- Operate- and

Transfer) Transfer) Maintenance)

government

involvement

Risk Shared Primarily Primarily Primarily Primarily

between the | borne by borne by the | borne by the | borne by the government | the investor investor investor and the investor

investor Benefits Mobilizes Reduces Increases Increases Increases

capital from | the management | management | management the private investment | and and and

sector, burden on operational operational operational improves the state efficiency efficiency, efficiency

capital Examples Highways, Schools, Bridges, Power and Wastewater

airports, water tunnels water treatment

plants

Vv

Stable Returns: PPP projects typically generate stable and long-term returns for private investors, stemming from revenue streams from service provision or resource exploitation Risk Mitigation: Sharing risks with the government helps mitigate risks for private investors, particularly those related to policies, laws, and market fluctuations

Enhancing Brand Reputation: Successful participation in PPP projects enhances the brand reputation and competitive position of private enterprises in the market

Access to New Markets: PPPs open up opportunities for private enterprises to enter new markets, expand their business operations, and reach a broader customer base

Partnership with Government: PPPs create opportunities for private enterprises to partner with the government to implement critical projects, contributing to the country's socio economic development

v Disadvantages and Challenges of Public-Private Partnerships (PPPs) in Vietnam

Despite its numerous benefits, Public-Private Partnerships (PPPs) also face several disadvantages and challenges that need to be addressed to ensure their effectiveness and sustainable

development

Disadvantages:

Unreasonable Risk Allocation: The allocation of risks between the public and private sectors may be unreasonable, leading to one party bearing too much risk compared to the other This can affect project implementation and lead to disputes among stakeholders Lack of Transparency and Accountability: Some PPP projects may lack transparency in the selection of investors, project implementation, and financial management The lack of accountability can lead to corruption, waste, and inefficient use of investment capital High Transaction Costs: The transaction costs associated with developing and managing PPP projects can be high, including legal, consulting, appraisal, and supervision costs High costs can impact project economics and reduce attractiveness for private investors Increased Debt Burden on Government: In some cases, the government may have to guarantee PPP project loans, leading to an increased debt burden on the government and potential default risks

Negative Environmental and Social Impacts: Some PPP projects may have negative environmental and social impacts, such as environmental pollution, population

displacement, and land loss The need to mitigate and compensate for these negative impacts can increase project costs and add complexity to implementation

Challenges:

Incomplete Legal and Institutional Framework: The legal and institutional framework related to PPPs in Vietnam is still incomplete, inconsistent, and unclear This can hinder PPP project implementation and create legal risks for private investors