PM launches nationwide PPP initiative

What is a Public Private Partnership?
Any collaboration between public bodies such as the State, government ministries, local municipalities and private companies tends to be referred to a public-private partnership (PPP).

The Prime Minister is focused on expanding the range of public private partnerships because he believes it is the best way to secure improvements in public services that Vietnam so desperately needs.

He wants to develop a comprehensive nationwide PPP programme because Vietnam's rapid economic growth has outpaced its infrastructure, creating a major constraint to continued export-led growth and investment in the future.

What are the arguments for PPP?

Advocates of PPP argue that because sufficient public money is not available, many infrastructure projects would not be constructed at all if it were not for private investors providing the funds to finance them.

They claim that the PPP would also lead to a dramatic improvement in the quality of public services and point to the numerous successes other countries around the globe have had with it.

What are the drawbacks?
Critics argue that the projects often end up costing substantially more with the PPP and that private companies often cut corners to maximize profits to the detriment of the public’s best interest.

They claim there is some evidence that a few PPP projects around the globe and in Vietnam have not been up to standard and that in particular the wages and benefits they pay their employees are below what the private sector pays.

An honest assessment
According to Ha Cuong from MCG Consulting Group LLC there are some areas where PPPs may ultimately prove unsuitable and adds that the model has only had limited success in Vietnam over the past few years due to weak competitiveness.

He added that it is important to keep the PPP in perspective. The government has not written off the public sector and the majority of projects would be undertaken with oversight exercised by the government protecting the public’s best interest.

The recent decision by the PM demonstrates the government’s commitment to a nationwide PPP initiative and it could be a game changer leading up to a massive increase in private involvement in public services in the years ahead.

The key to future success of the PPP is dependent upon completing the legislative framework for the model, which should be thorough and contain a wide range of beneficial incentives to attract private firms’ participation.

In addition, there should be timely guidance emanating from the PPP Office under the Ministry of Planning and Investment (MPI), which has been established as a one-stop-shop division in charge of national coordination of PPP projects.

Other activities including study tours to other nations that have successfully implemented PPP programmes, workshops with key stakeholders to build their consensus on PPP related issues should be undertaken.

Additionally, obtaining technical assistance from cooperating with leading quasigovernmental and governmental organisations from other nations to help build capacity in central government, provincial and city agencies that will implement PPP projects should be high on the agenda of things to accomplish.

This would be of great assistance in minimizing risk for the private investors and help to increase their participation in the national PPP programme, he said.

Other forms of private investment such as the build-operation-transfer (BOT) or build-transfer (BT) have had their shortcomings as well and on balance the PPP is a much better model to attract private investment.

Despite Vietnam's great potential for PPP development, significant challenges lie ahead. International firms are eying opportunities for PPP projects in Vietnam, but they won’t participate in these projects until a strong, comprehensive and transparent PPP programme is in place.