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The Ministry of Planning and Investment (MPI) is proposing to set up the fund to be backed up by the Vietnamese government, donors and banks. The MPI said the fund would provide private investors with loans at attractive interest rates when investing in infrastructure projects under the public-private partnership (PPP) form.

PPP, rarely seen in Vietnam, involves the government and private sector carrying out projects with social benefits and sharing the responsibility and risks.

At present, the government is developing three pilot PPP projects including two transport and one water supply project. “The fund would open the way for private investors to get involved in PPP projects offering them low interest rate loans,” said Nguyen Trong Tin, director of the MPI’s Department for Infrastructure and Urban Development.

Tin said mobilising and reclaiming investment capital from PPP projects could be a stumbling block for some firms. However, he said while the new fund had not been established, the government would seek financial assistance from international donors like the World Bank for supporting PPP projects in Vietnam.

Domestic Bitexco Group, for example, is one of few investors involved in a PPP project in Vietnam. The group is pursuing the pilot Dau Giay - Phan Thiet highway project, worth about $750 million. Bitexco announced it could arrange $78.6 million, equivalent to 10 per cent of total investment capital and asked for a government guarantee to borrow capital from World Bank’s International Bank for Reconstruction and Development (IBRD).

Vu Duc Thuan, deputy general director of Bitexco, said it was important for investors to get IBRD incentive loans under the government’s guarantee to ensure a project’s success. Thuan said infrastructure projects required huge investment capital, while it took a long time to reclaim capital. “With the current difficulties and the ability of reclaiming funds during this pilot PPP project, borrowing funds from the IBRD is considered as the most effective and feasible method for mobilising capital,” said Thuan.

Tin said thanks to IBRD incentive loans, the effectiveness of PPP projects would be better for investors to reclaim investment capital.

Source: Vietnam Investment Review