Law on Public – Private Partnership Investment 2020 of Vietnam: 04 purposes for use of state capital invested in a PPP project

Specifically, according to Article 69 of the Law on Public – Private Partnership Investment 2020 of Vietnam, state capital may be used for the following purposes:

1. Supporting the building of construction works and infrastructure systems as part of a PPP project

- State capital used for supporting the building of construction works or infrastructure systems may be used for supporting project implementation during the construction phase in order to increase the financial efficiency of the project.

- The ratio of state capital used for supporting the building of construction works or infrastructure systems belonging to PPP projects shall be determined on the basis of the preliminary financial plan included in the pre-feasibility study report when an investment policy is granted.

- Proportion and value of state capital used for supporting the building of construction works or infrastructure systems shall be paid under PPP contracts.

- State capital used for supporting the building of construction works and infrastructure systems shall be allocated from the following funding sources:

+ Public investment capital prescribed under law on public investment; 

+ Value of public assets prescribed under law on use and management of public assets.

- Use and management of State capital used for supporting the building of construction works and infrastructure systems shall be allocated from sources of public investment capital according to one of the following approaches:

+ Splitting a PPP project into subprojects. The use and management of state capital shall be subject to laws on public investment;

+ Aligning state capital with specific items according to the rates, value, progress and conditions specified under the contract.

2. Paying PPP project enterprises supplying public products and services

State capital-funded payments to PPP project enterprises which are used in BTL or BLT contracts on the basis of the quality of public products and services shall be allocated from state capital invested in PPP projects and other legal capital according to the law.

3. Paying costs of site clearance, site clearance compensation, support, resettlement; costs of support for construction of temporary works

- State capital paid for compensation, site clearance, support and resettlement; temporary work construction support, shall be allocated from public investment capital in accordance with the law on public investment.

- Based on the size and characteristics of each project, the contracting authority shall consider separating the state capital used for compensation, site clearance, support and resettlement; support for the construction of temporary works into component projects or sub-projects, in compliance with the law on public investment and the law on land.

4. Costs of competent authorities, contracting authorities, PPP project preparation units, bid solicitors, PPP project assessment boards, units assigned to evaluate PPP projects

- Project preparation costs of competent authorities, PPP project preparation units; expenses for the evaluation conducted by PPP Project Assessment Boards and the units assigned to the task of evaluating PPP projects; expenses for organization of the investor selection or signing of contracts by competent authorities or bid solicitors shall be covered by public investment capital, other lawful capital sources, and shall be included in the total investment in each project.

- The selected investor shall be responsible for reimbursing expenses specified in Clause 1 of this Article to the state budget in accordance with the law on state budget or legal capital used for the project preparation.

- Expenses for project implementation after signing a contract by a competent authority or a contracting authority shall be covered by their regular capital.

Note: The proportion of state capital participating in a PPP project as prescribed sections 1 and 3 must not exceed 50% of the project's total investment. As for projects with many component projects, including those component projects developed according to the PPP investment approach, the state capital ratio specified in this Clause shall be determined in proportion to the total investment in such component projects.

Moreover, state capital may also be used for compensating for the reduced revenue and covering costs and expenses of PPP Project Assessment Boards and its subordinate units assigned to conduct the evaluation of PPP projects.

View more details at the Law on Public – Private Partnership Investment 2020 of Vietnam, effective from January 01, 2021.

Ty Na

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