On May 4th, the Decree No. 63/2018/ND-CP was approved to replace the previous Decree 15/2015/ND-CP. This new Decree will be effective starting from June 19th, 2018 and it reforms and implements various issues about investments in the form of Public-Private Partnership (PPP). In this article, we will point out the most important areas introduced in this Decree regulating investments in the form of PPP, which represents one of the most common ways for foreigners to invest in infrastructure projects.
According to the Law on Investment No. 67/2014/QH13, PPP is defined as any agreement signed between a State agency and an investor, or a project enterprise, in order to implement an investment project for a new construction venture, renewing, upgrading, expanding or managing infrastructure facilities, or for providing public services.
According to the relevant law, the following contracts are all deemed PPP contracts:
- Build-Operate-Transfer (BOT) contracts;
- Build-Transfer-Operate (BTO) contracts;
- Build-Own-Operate (BOO) contracts;
- Build-Transfer-Lease (BTL) contracts;
- Build-Lease-Transfer (BLT) contracts;
- Operate-Manage (O&M) contracts;
- Build-Transfer (BT) contracts;
Parties also have the option to combine the above mentioned contracts stipulating a “Mixed Contract”, however, in these such cases, the Prime Minister’s prior approval may be required.
The State encourages PPP projects in specific sectors including but not limited to: transportation; power plants and transmission lines; public lighting systems; clean water supply systems; water drainage systems and waste collection and disposal systems.
With this reform, the procedures for obtaining the Investment Registration Certificate will be abolished in order to simplify the administrative procedures, therefore, this is a big advantage for investors in terms of saving time. In fact, the main purpose of the approved Decree is to make procedures clearer and to ensure more transparency. As a consequence, the Decree now requires that the Ministry and the People’s Committee of province shall publicize the approved project proposal on the National Procurement Network and that, once the contract has been signed, the competent authority shall publish certain information of the contract on the National Procurement Network.
In order to add a further level of guarantee to the reliability of an investor to a PPP Project, the Decree provides strict regulations on the rate of equity that the investor shall contribute. To calculate the rate of equity that shall be contributed by an investor in a proper way, it is necessary to refer to the amount of the total investment capital of a PPP Project. Specifically, if the amount is up to VND 1,500 billion, the rate of equity shall be equal to at least 20% of the total investment capital. On the other hand, if it is more than VND 1,500 billion the rate shall not be lower than 20% for the part of the capital up to VND 1,500 billion and no less than 10% for the remainingportion.
Concerning BT projects, an open payment mechanism has been created and investors may be compensated with land use rights, head offices or infrastructure, according to the Law on Management and the use of public property or the concession of rights to operate works or services, according to specialized laws.
Now, the investor shall be allowed to transfer a part or all of the rights andobligations under the project contract only upon completion of construction. When the contract does not have a construction phase, investors may transfer a part or all of the rights during the operation phase.
In conclusion, thanks to this Decree, the new regulation of investment in the form of PPP guarantees more stability to projects implementation. If you are interested in the reform and require further information, please do not hesitate to contact us via email at info@dandreapartners.com