Route 1: the main trans-Vietnam artery (Bình Giang/Public domain)

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Vietnam’s new PPP law will boost infrastructure, says Fitch

8 July 2020 | By GCR Staff | 0 Comments

A new law on public-private partnerships (PPPs) in Vietnam will boost infrastructure development there, says analyst Fitch Solutions Country Risk & Industry Research.

The National Assembly approved it on 18 June, making it the main, unified piece of legislation governing PPP transactions.

Fitch said investors had previously been put off by the complexity of PPP laws and the lack of a comprehensive risk sharing mechanism.

Fitch forecasts construction growth in the country of 6.8% a year on average from 2021 to 2029.

“We will be monitoring and assessing the progress of PPP transactions under the new PPP law, and make adjustments to our forecasts if necessary,” Fitch said.

The law makes projects in transport, grid infrastructure and power plants, water management, IT infrastructure, schools and hospitals eligible for PPP deals.

To qualify, a project’s value must be at least around $8.6m (VND200bn), except in healthcare and education projects where the threshold is half that.

The lower threshold also applies to projects in areas with difficult socio-economic conditions.

Fitch said road projects would be a litmus test for the effectiveness of the new law.

It believes there are 98 major infrastructure projects in planning earmarked as PPPs, of which 58 are roads and bridges, with an estimated value of $20.8bn.

Better transport infrastructure is needed to keep pace with the country’s rapid economic growth, which has been helped by its emergence as an alternative to China for low-cost manufacturing.

The flagship road project is the 2,100km North-South Expressway running the country’s entire attenuated length from the top at Hanoi to the bottom at Ho Chi Minh City.

At first, the government tried procuring parts of the project as PPPs, but switched to traditional public funding owing to bidding complications.

Image: Route 1: the main trans-Vietnam artery (Bình Giang/Public domain)

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