Enabling Public-Private Partnerships to Spur Growth and Development in Vietnam
Public-private partnerships for infrastructure play an important role in Vietnam’s rapid economic development. A 2020 PPP law provides the current legal and regulatory framework, but there have been major limitations in understanding and applying it in a way that attracts sufficient international investment. USAID is working to strengthen the country’s overall PPP environment by building capacity among public and private stakeholders in how to implement these projects, through “bootcamp” trainings and a comprehensive online portal of information.
By Natalie Alm, USAID INVEST Communications Advisor
Vietnam is one of the fastest growing economies in Asia, and infrastructure has been a driving force in its development. As of 2019, the Vietnamese government invested 6.3% of GDP into infrastructure, well above Asia’s regional average of 4.1%. The Vietnamese government provides 90% of infrastructure spending, but with demand for infrastructure continuing to grow, the estimated gap between current and needed investment is expected to be $102 billion by 2040.
Vietnam needs private investment to make up the difference, to boost growth and spur economic development across the country. Public-private partnerships (PPPs) can play an important role in addressing those needs, especially at scale. They often focus on infrastructure projects, such as transportation, energy, water, or information and communications technology. To facilitate this type of collaboration, in which a government entity and a private investor engage in a long-term contract to provide a public asset or service, the Government of Vietnam approved a new PPP law, which took effect in 2021.
The PPP Law was meant to help develop a new generation of PPP projects that apply the best international practices. However, there have been significant limitations in its ability to develop an appropriately encouraging regulatory and legal environment to attract international investors. First, the legal framework is insufficient, with multiple overlapping laws leading to difficulties in actual implementation. Second, there has been insufficient resource allocation; government agencies at the national and provincial level lack capacity to prepare, procure, and manage PPP projects. Finally, there are challenges on the private sector side. When international investors look at markets in Southeast Asia, Vietnam is missing a pipeline of credible projects. Investment costs are high, as are the potential risks, and the procurement process is often subject to severe bottlenecks.
As a result, despite high hopes for PPPs, only a handful of projects have been implemented in the last few years, and some projects that were initially being prepared for PPP procurement are even being re-released through traditional procurement processes instead.
USAID helps address the underperformance of PPPs
USAID has been involved in a comprehensive program to strengthen Vietnam’s PPP environment since 2019, beginning with support to the National Assembly and Ministry of Planning and Investment on the draft PPP law. Now, USAID is focused on strengthening understanding of PPPs in the country and creating an enabling environment. Through its INVEST initiative, USAID is providing technical assistance on two main fronts to the Vietnam Chamber of Commerce and Industry (VCCI), one of the main organizations championing PPPs among both public and private stakeholders since the PPP Law was released.
First, with support from USAID INVEST, KPMG, a global professional services firm that has been working in Vietnam since 1994, built out the VCCI PPP platform, a comprehensive portal of information on PPPs for all stakeholders, including government authorities, investors, and even academics and students. It contains legal documents on PPPs, toolkits and guidelines, training courses, and a project pipeline. The website also features a helpdesk, with VCCI staff and expert consultants on deck to answer specific questions.
Second, USAID INVEST and KPMG designed a PPP infrastructure bootcamp to teach participants about the fundamentals of PPPs in Vietnam, particularly under the new PPP Law, as well as bring stakeholders together to develop a better understanding of their respective goals and abilities in carrying out PPPs. A two-day bootcamp was held in Danang in April 2022 with 54 participants, mainly from the public sector — representing ministries at the national level, as well as city and provincial departments.
Developing the next generation of PPP implementers
This April, USAID INVEST and KPMG held a second bootcamp in Quy Nhon, this time focusing on an academic audience, with the goal to train university professors and lecturers who can bring the material back to their institutions and students. “The aim is sustainability,” said Johann Joubert, Director of Infrastructure, Government, and Healthcare at KPMG Vietnam. “It’s a train-the-trainers format, both a short-term and a long-term investment in developing the next generation of PPP implementers.” In addition to using the training material to update their curricula, participants will also join VCCI’s roster of future trainers to replicate the training courses for wider audiences.
In opening remarks, VCCI Chairman Nguyen Quang Vinh highlighted the importance of developing a healthy PPP environment to achieve Vietnam’s development goals, and USAID Vietnam’s Trevor Hublin, Deputy Director of the Office of Governance and Economic Growth, described how the bootcamp will build a knowledge base on PPPs in Vietnam. “With this activity, we hope to build understanding of what is possible among both the public and private sectors and raise awareness that the PPP Law is a usable policy framework,” Hublin said. “There is a lot of reticence among private sector investors, but we can get them comfortable engaging with the Vietnamese government on potential partnerships.”
When participants went around the room to introduce themselves at the start of the bootcamp, they reinforced the multidisciplinary nature of public-private partnerships. The seventeen academics represented fields like law, governance, banking, finance, and international economics, as well as construction and engineering, and they all expressed high hopes for applying what they learned back at their universities. Le Vinh Trien, Vice Director of the Health and Agricultural Policy Research Institute at the University of Economics (UEH) in Ho Chi Minh City, noted that his students include provincial officials and others who will be the ones implementing PPPs, so he hopes to bring this knowledge back to his students and use it to develop additional curricula for their benefit.
The makeup of the bootcamp also reflects an important focus on building capacity at the province level. Tran Duy Hung, CEO of Monitor Consulting and one of the expert trainers KPMG brought on to lead the training, noted that Vietnam’s PPP system is decentralized, with most projects happening in the local provinces and not managed by the central government. “The provinces play an important role in implementing PPPs, but many have rarely or never seen foreign investment. Building this capacity at the national level is important, but it’s even more critical in local institutions,” he said.
After rapid-fire primers on subjects like the legal and regulatory framework, PPP life cycle and project appraisals, and contract design, participants gathered in groups to recap and talk through discussion questions and quick quizzes on the content. “The active participation in the workshops signifies a promising level of enthusiasm for the potential that PPPs can bring to the country,” said KPMG’s Joubert on the sidelines. “Overall, we are hopeful that this represents a positive step in implementation of PPPs in Vietnam.”
Building the PPP community
Looking forward, USAID is happy to see VCCI take ownership over this long-term process of building PPP expertise across Vietnam. Trevor Hublin noted, “VCCI has great capability to act as an intermediary between the Government of Vietnam and the private sector. USAID is glad to have them as a local champion for this work, especially as it keeps evolving.” The fact that VCCI has representation in every province is critical, as it will be able to continue replicating these trainings, organizing roundtables, maintaining the online platform, and staffing the helpdesk.
Luong Huong Song Thuy, Projects Coordinator at VCCI, said that PPPs will remain a priority for the organization, and that the USAID support has positioned them to expand this work. “We receive some funding from the government, but USAID has been a highly effective international partner for us. They are interested in supporting this work even though it’s new. PPPs are now part of our conversation with other donors, and we’re hoping to receive increased funding from the government as well.” In addition to developing the platform and offering training and expert advice, VCCI is helping build a community of PPP practitioners, connecting business associations, and keeping in touch with participants from both bootcamps and facilitating connections through email and WhatsApp groups.
The PPP Law is expected to be up for revision in a few years, so there is ample opportunity to increase cooperation among government ministries, harmonize budget cycles, and generally improve the rollout of PPP projects. According to Hublin, “The Vietnamese government is listening to the private sector to see how to improve the law. INVEST’s championing and VCCI’s leadership has helped put in place feedback loops that can help improve the PPP enabling environment in the long term.”
