Knowledge Highlights 18 May 2021

On 29 March 2021, Decree No. 35/2021/ND-CP (“Decree 35”), providing details and guidance on the first-ever Law on Public Private Partnership No. 64/2020/QH14 (“PPP Law”), came into effect. Prior to the issuance of Decree 35, PPP projects were regulated by Decree No. 63/2018/ND-CP (“Decree 63”), which is now repealed.

The PPP Law came into effect on 1 January 2021 and, together with the new Decree 35, will enhance the legal framework relating to, and create long-term effectiveness and stability in the implementation of, PPP projects in Vietnam. Read our article on the coming into force of the PPP Law here.

This article discusses some of the key highlights of Decree 35.

1. Shortened list of PPP investment sectors

Decree 63 enumerated a list of State-encouraged PPP investment sectors in its Article 35. Article 2 of the new Decree 35 provides for a considerably shortened list of State-permitted PPP investment sectors (“permitted list”). In particular, sectors such as power transmission lines, public lighting systems, headquarters of State agencies, social/resettlement housing, infrastructure of urban zones, economic zones and industrial zones (all of which were previously on the state encouraged PPP investment list in Decree 63) are not in the permitted list. The six State-permitted PPP investment sectors identified in Decree 35 and the minimum capital requirements for a project in such sectors to be eligible for PPP investment, are set out below.

No

Sectors

Permitted Fields

Minimum Capital

1.      

Transportation

Road, rail, inland waterways, shipping, and air

VND1,500 billion

2.      

Power grids, power plants

Renewable energy, coal thermal power, gas thermal power (including liquefied natural gas (LNG)), nuclear power, electricity grid

VND1,500 billion in general, and VND500 billion for renewable energy projects

3.      

Waste supply and treatment

Irrigation, clean water supply, water drainage and waste water; waste treatment

VND200 billion

4.      

Healthcare

Medical examination and treatment establishment; preventive health care; test

VND100 billion

5.      

Education and training

Infrastructure, facilities, equipment for education (training and vocational education activities)

VND100 billion

6.      

Information technology (IT) infrastructure works

Digital information infrastructure, digital economy; modernising information technology in the Party and State agencies; application and development of information technology, database, data centre; shared national platforms, applications and services; network safety and security; application system, service to serve people and businesses; information technology and telecommunications (ICT) infrastructure for smart cities

VND200 billion


2. PPP project evaluation

The PPP Law provides that each PPP project must undergo two phases of evaluation, the pre-feasibility evalution and feasibility evalution. The evaluation will be conducted by the Evaluation Council (“EC”) at three different levels, namely the State EC, the inter-branch EC and the grassroots level EC (“grassroots EC”). In this regard, Decree 35 provides as follows:

  • The State EC will be established by the Government to evaluate projects of national importance. Such projects require the approval of the National Assembly. 
  • The inter-branch EC will be established by the Prime Minister for each project based on the Ministry of Planning and Investment’s proposals. 
  • The grassroots EC will be established by a Minister, the head of a central agency or other agency, or the head of the provincial People’s Committee for the relevant project.

The inter-branch and grassroots EC are project-based units which will be dissolved after completing the evaluation of the relevant project.

3. Modes of investor selection

Decree 35 provides details and guidance on the various modes of investor selection (as specified in Article 31 of the PPP Law). In particular:

  • Open tendering is generally applicable to all PPP projects, except where the other modes of investor selection set out below apply. 
  • Competitive tendering shall be applicable where (a) no more than three investors meet the requirements of the PPP project, and/or (b) the project applies new or advanced technology.
  • Direct appointment of investors shall be applicable to (a) projects relating to national defence and security, and/or the protection of state secrets and/or (b) projects that require an alternative investor to be selected on an urgent basis to ensure continuity in project implementation. 
  • Where none of modes set out above are able to be utilised or in situations which may affect national interests, the competent authorities may propose another mode for investor selection and submit it to the Prime Minister for his approval.

These modes apply to the selection of both foreign and domestic investors. However, please note that a foreign investor may not permitted where the project is in an industry or trade that is not yet open to foreign investment or relates to national defence and security and/or the protection of state secrets.

4. Protests on investor selection 

An investor may object to the investor selection process and its results, where the investor’s rights and/or interests have been affected, by lodging a protest with the competent authorities and the Petition Settlement Advisory Board. Decree 35 sets out the conditions for such an objection, which include the following: 

  • Protest on investor selection process:
    • The protest must be made by an investor participating in the tender; 
    • The petition must be sent to the party calling for tenders before the result of the investor selection; and
    • The protest has not yet been brought by the investor to the court.
  • Protest on investor selection results:
    • The protest must be made by an investor participating in the tender;
    • The petition must be sent to the party calling for tenders within 10 days from the receipt of the investor selection result;  
    • The protest has not yet been brought by the investor to the court; and
    • The investor making the protest must pay the Petition Settlement Advisory Board 0.02% of the total investment amount of the project but subject to the range of from VND20 million to VND200 million.  

5. Security for PPP contract performance

A PPP project company must provide or arrange for security to secure the performance of the PPP contract, such security to have a value equivalent to (i) 1.5% to 3% of the project’s total investment amount (for investment amounts of up to VND300 billion), or (ii) 1% to 1.5% of the project’s total investment amount (for investment amounts of more than VND300 billion).

6. Publication of PPP investment information

The PPP Law and Decree 35 require the following information to be published on the national tendering network system:

  • Details of PPP projects including decisions on investment policy and/or decisions approving PPP projects, contact address of the competent authority, of the authority entering into the contract, and of the party inviting tenders;
  • Information on the selection of investors including notices inviting pre-qualification tenders, notices inviting tenders, short lists and results of the selection of investor; 
  • Details of the selected investors and PPP project companies; 
  • Main contents of a PPP project contract including total investment amount, structure of capital sources in the project, type of contract, term for project implementation, price/fees and charges of products and public services, form and location for collecting fees and charges (if any) and other necessary information; 
  • Values of public investment capital finalisation in the PPP project using public investment capital; 
  • Legal instruments on investment in the PPP form; 
  • Database on investors; and 
  • Information on resolution of complaints and denunciations, recommendations, and dealing with breaches of the law on investment in the PPP form.

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