On 8 July 2020, Vietnam welcomed its first ever Law on Investment in the form of Public-Private Partnership ("PPP Law"), incorporating recommendations suggested by Duane Morris. Recently on 29 March 2021, the Government issued Decree No. 35/2021/ND-CP guiding the implementation of Law on Investment in the form of Public-Private Partnership 2020 ("Decree 35"). Below are key provisions investors should know when contemplating engaging in this investment method.
1. Investment capital of PPP projects
Decree 35 specifies in details the required minimum total capital
for each of the sectors eligible for PPP investment:
Transportation: at least VND 1500 billion (approximately USD 65
million)
Power grid, power plant: at least VND 1500 billion, with the
exception of renewable energy – at least VND 500 billion
(approximately USD 21 million)
Irrigation, water supply and drainage, treatment of wastewater and
waste: at least VND 200 billion (approximately USD 8 million)
Healthcare: at least VND 100 billion (approximately USD 4
million)
Education, training: at least VND 100 billion
Information technology infrastructure: at least VND 200 billion
2. PPP projects appraisal council
For each project, there will be two appraisal councils: the
interdisciplinary appraisal council and the grassroot-level
appraisal council.
An interdisciplinary appraisal council is to be established by the
Prime Minister at the proposal of the Ministry of Planning and
Investment ("MPI"). The Chairman of the appraisal council
shall be the Minister of the MPI, while the Deputy Chairman and
other key positions are to be held by representatives from relevant
ministries and government agencies.
A grass root-level appraisal council is to be established by
Ministers, heads of government agencies or Chairman of the
provincial people's committee at the proposal of the standing
agency of the appraisal council. The standing agency shall be the
Department of Planning and Investment or a government unit
responsible for PPP project management.
For projects self-proposed by investors, the investors are in
charge of appraising the project.
3. Surveying interests in PPP projects
During the preparation of the Feasibility Study Report, the
competent authority shall organize a survey of the interest of
investors and lenders, except for projects approved by the Prime
Minister for direct appointment of investor. The survey notice
shall be published on the Government Procurement Portal as well as
relevant government websites so that investor could register for
their interest online. The competent agency could then organize a
conference or roadshow to introduce the project and discuss on
project contents with investors. The result of the survey will
serve as a basis to determine prequalification and selection of
domestic and international investors.
4. Modes of investor selection
Open bidding: International open bidding is applicable if there are
at least one investor established under foreign law has registered
interest in the project. Domestic open bidding is applicable when
all registered investors were incorporated under Vietnam
laws.
In case domestic open bidding applies but the project needs to
promote the use of advanced technologies and techniques as well as
good international management experience then the bidding documents
can state investor's wish for a partnership with foreign
investors or for using foreign contractors to participate in
bidding. The domestic investor must be the head of the partnership
and the language used in investor selection must be
Vietnamese.
Competitive negotiation: Used when there are less than 03 investors
meeting the project implementation requirements or when the project
apply new and advanced technology.
Investor appointment: Applicable to projects that need to meet the
requirements of national security or projects that require
immediate substitution of investors to ensure continuity in the
project implementation process.
5. Deposit for project execution
For projects with total invested capital of less than VND 300
billion: deposit amount ranges from 1,5% to 3%.
For projects with total invested capital of at least VND 300
billion: deposit amount ranges from 1% to 1,5%.
6. The following standard project documents are
published:
a) Pre-Feasibility Study Report, Decision on Investment Policy of
PPP project
The Pre-Feasibility Study Report must contain the following
information:
_ Needs of project investment
_ Basic information about the Project: project objective, capacity,
location, demand for land, water surface and other resources (if
any), compensation plan
_ Preliminary explanation on technical design
_ Primary assessment of the socio-economic efficiency, environment
impact of the Project
_ Project financial plan: Capital structure including investor
capital, PPP project enterprise capital (equity, loan and other
legal sources of capital), state capital in PPP project (if any);
Prices and charges for public products and services (for projects
with direct collection from users)
b) Feasibility Study Report, Approval of PPP Project
c) Guidelines for creation of PPP Project Contract
Among other things, the PPP Contact must include details on the
Special Purpose Vehicle and Means of raising capital and bond
issuance.
Regarding the Special Purpose Vehicle, the contract must state the
obligations of the investors to contribute equity capital according
to the agreed schedule as well as rights and obligations of an
investor when transferring capital and consequently their own
rights and obligations under a PPP project contract.
In respect of capital increment, the contract must include
application of capital mobilization through the issuance of bond or
other legal capital. Conditions, principles, time and method of
issuing bonds of the project enterprise along with value of capital
raised through the issuance of bonds and other legal capital must
also be specified.
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For more information on the above, please do not hesitate to contact the author Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC, Member to the Supervisory Board of PetroVietnam Insurance JSC and the only foreign lawyer presenting in Vietnamese language to members of the NATIONAL ASSEMBLY OF VIETNAM.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.