Decree 63/2018/ND-CP regulates the sectors, conditions, sequence and procedures for conducting investment in public private partnerships (“PPP”), and replaces Decree 15 which became effective on April 10, 2015. The new decree became effective on the 6th June, 2018.
The PPP models mentioned in the decree include: Project contracts, Build-Operate-Transfer contracts (BOT), Build-Transfer-Operate contracts (BTO); Build-Transfer contracts (BT), Build-Own-Operate Contracts (BOO), Build-Transfer- Lease Service Contacts (BTL), Build – Lease Service– Transfer Contracts (BLT), and Operate – Management Contract (O & M) and Mixed Contracts.
Decree 63 stipulates that the state shall encourage investment in infrastructure projects including the following sectors:
(a) Transportation,
(b) Energy,
(c) Lighting systems, water supply, water drainage, waste water, waste collection and treatment, parks, housing, vehicles and machinery,
(d) Office of state agencies, official residential housing, social housing,
(e) Health, education, and training; culture, sport, tourism, science and technology,
(f) infrastructure for commercial, urban, economic, industrial and other zones, technical and SME infrastructure,
(g) agriculture and rural development, sale of agricultural products, and
(h) other areas designated by the Prime Minister.
One of the objectives of Decree 63 is to remove difficulties and obstacles arising in the implementation of PPP projects in the past.
Higher Equity Capital Ratios
One of several important changes with the new decree is an increase in the equity investment required for projects up to VND 1.5 trillion from 15% to 20%, and for projects over VND1.5 trillion, an increase in equity capital required from 15% to 20% for the investment up to VND1.5 trillion. The ratio for the investment amount above VND1.5 trillion rests the same at a minimum of 10%. The State Bank of Vietnam has reported that banks’ capital in BOT projects represented 85-90 percent of the total investment capital in these projects; investors only accounted for 10-11 percent.
Decree 63 also permits investors to contribute equity capital according to a schedule, reducing the financial burden for investors. The decree also addresses the State’s participation in PPP projects: that state funding must be used in support of the construction of works to ensure project viability. State funding of auxiliary works, groundwork, resettlement, etc will not be included in the total investment to determine the equity capital ratio.
Authority to Make Investments
Article 16 sets out the governing body with the authority to make the investment policy decisions for projects:
(a) Projects of national importance shall be authorised by the National Assembly,
(b) Projects that require using central State Budget funding of 30% or more, or below 30% but above 300 billion Dong (called Group A projects), must be approved by the Prime Minister, as well as projects of the same magnitude but BT type projects (called Group B projects),
(c) Ministers shall make the investment decisions regarding their own projects other than those in (a) and (b) above, and
(d) Provincial people's councils shall make the investment policy decisions for: Group A projects of lesser magnitude, Group B projects that use public investment capital or are of the BT contract type. Provincial people's committees shall make the investment decisions for investment projects in their localities outside for cases not included in the above (a) through the first part of (d).
Investment Registration Certificates; Contracts Disclosure Requirements
Some procedures have been changed and streamlined including abolishing the requirement to issue investment registration certificates. This is in accordance with international practice that the PPP contract is the most important legal basis of the project, but not the investment registration certificate. In addition, project contract information disclosure requirements have been increased, to help ensure greater transparency and to enable state bodies to manage, analyze and evaluate regarding PPP projects over time.
