VIETNAM - THE NEW LAW ON PUBLIC PRIVATE PARTNERSHIPS - MAIN IMPROVEMENTS OVER THE OLD LEGAL FRAMEWORK:

1. VIETNAM - THE NEW LAW ON PUBLIC PRIVATE PARTNERSHIPS - MAIN
IMPROVEMENTS OVER THE OLD LEGAL FRAMEWORK:
by Dr. Oliver Massmann
1. Main improvements of the new PPP law over the old legal framework:
-Investment sector reduction: Article 04.01 of the new law sets out 05 investment sectors. Compared to
Article 04.01 of Decree No. 63/2018/ND-CP, the scope of investment sectors in the new law has been
narroweddown to 5 sectors:transportation, healthcare,education, transmission grid, water.This list implie s
the intention of the Government in promoting primary and sustainable economic sectors.Ifinvestors engage
in projects relatedto these sectors,they will benefit from investment incentives (Article 79 & 80), especially
those set forth in the new Law on Investment 2020 such as preferred enterprise income tax, exemption or
reduction of land lease fee, credit support to name a few.
The PPP law also stipulates the total investment capital requirement for a PPP project. For instance,
excluding Operation & Maintenance Contracts, power projects must have the minimum total invested
capital of VND 200 billions. The figure is lower (VND 100 billions) for projects in areas with difficult
socio-economic conditions.
-Open bidding commitment: While Decree No. 63/2018/ND-CP does not prescribe the open bidding
process, the new law of PPP treats it as a prerequisite. In specific, Article 37 of the new law requires that
all PPP projects must apply the open bidding process for selection of preferred investors, except for cases
provided in Article 38; 39; 40 (e.g. there are less than 3 qualified investors, the project applies technologies
that are prioritized for development, there’sa need to protect national security…). The open bidding process
entitles investors to compete in good faith for the PPP projects. Hence,foreign investors should make use
of this process,also with their advantagesof substantial investment capital, to win the bids of major projects.
2. Do you think the new law is likely to make PPPs in Vietnam more attractive to foreign investors
specifically? Our understanding has been that at least in the water sector, foreign investors have felt
reluctant towards PPPs due to the previous lack of guarantees.
Absolutely. The main goal of the new law is to attract investors, especially foreign investors, to execute
PPP projects. Types of guarantees under the new PPP law include:
- Guarantee of access to land, exercise of land use right and other public goods.
- Guarantee of provision of civil service.
- Guarantee of right to mortgage of property, right to operate project and infrastructure.

2. - Guarantee of revenue risk sharing.
-Guarantee of foreign-currency balance-ensuring scheme.
Vietnam commits to provide guarantees for private and foreign investors. The issue, however, lies on the
enforcement ability of officials. Thus, in case investors are deprived of above guarantees, investors shall
assert claim against authorities before Vietnamese courts or arbitration bodies to be granted award (article
97 of the new law).
3. In your opinion, are there any sectors where the appetite for PPPs will be larger than in other
sectors? Does this reflect the current attitudes towards PPPs in different sectors, or is it something
that could change with the new law?
The new law reflects market demand: the 5 eligible sectors under PPP law are also the sectors that have
been, are and will in the long run require funding from foreign investors. This is due to the increasing
demand in those sectors not corresponding with the limited State budget.
4. In the water sector, while we haven’t seen much large-scale activity under the previous PPP
decrees, we have seen privately financed projects proceed under the Direct Investment Law – could
this have a negative impacts on PPPs under the PPP law in the sense that such projects are
‘competing’ with the PPP law?
A reason why projects may have chosen to follow the route set out in the Law on Investment is because the
framework for investment procedures under it is less complex and less time-consuming than the one set out
for PPP projects. However,for large-scale projects, it is recommended that investors follow the latter form
since PPP projects come with certain guarantees and commitment from the Vietnamese government, which
can help investors to avoid substantial risks if risks cannot be managed well.
5. Obstacles which the new law does not address might bother potential investors:
- The difficulty in disbursement of state budget: The overlapping regulations in legal documents such as
Law on State Budget and Law on Public Investment deters special purpose entities from receiving
investment capital from state budget.
- Legal uncertainty in the judgment of Vietnamese courts: Indeed, for most foreign investors, international
arbitration centers are the preferred choice,rather than Vietnamese courts,whose judgments maybe biased.
Investors may struggle for dispute settlement if trial clarity does not improve.
- Burden of administrative procedures: In 2018, the Vietnamese government issued Resolution No.
19/2018/NQ-CP on implementation of major duties and measures to improve business environment. The
Resolution featured determination of central authorities in reducing and reforming administrative
procedures. Investors, however, still have to fulfill lengthy and unclear administrative procedures before
operation of business and investment.

3. 6. Opinions on how likely it is that there will be political will in favor of PPPs:
In the 1980s, Vietnam, with a central-planning economy, put an unfriendly attitude towards private sector
and foreign investment. The accession to WTO and a variety of FTAs, however, has changed the attitude
of Vietnamese authorities as to these economic sectors. Indeed,respectively in 2017 and 2019, the Central
Committee and the Politburo of the Communist Party of Vietnam (CPV) issued two resolutions on private
sector and foreign investment, particularly the Resolution No. 10/NQ-TW on developing the private
economy sector into an important motivation of the socialist-oriented market economy and the Resolution
No. 50/NQ-TW on orientations to perfect mechanisms, policies, raise quality and efficiency of foreign
investment by 2030. These resolutions significantly emphasized the promotion and variation of PPP
projects to which private and foreign investors are parties. Therefore, Vietnamese government and other
authorities, in accordance with the CPV’s directions, will certainly assist investors in implementing PPP
projects, especially large-scale ones.
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.