1 Phạm Văn Đồng Bsc of Civil Engineering 2006(CTU) Msc of CME 2009 (TUDelft) Working at DoT 2009-now Breaking the Iceberg of Public- Private Partnership in Vietnam

2 A story: lack of funding for infrastructure projects of a city in Vietnam

3 Outline 1.Research questions and goal 2.Public-Private Partnership (PPP) concept 3.PPP in Vietnam 4.Fishbone Framework for Critical Success Factors (CSFs) of PPP projects 5.Case Studied: BOT Phu My 2 Phase 2 Energy Project 6.Lessons learned 7.Conclusion & Future Research 8.The process of theory application

4 Research questions and Goal Research questions: What is PPP in Vietnam? Is there a framework to assess the success/failure of PPP? What are the problems with Vietnamese PPP? Goal: Clarify the problems with current BOT projects in Vietnam, find out what actors and factors (the iceberg) hinder the good PPP practices in Vietnam and come up with definite solutions

5 Outline 1.Research questions and goal 2.Public-Private Partnership (PPP) concept 3.PPP in Vietnam 4.Fishbone Framework for Critical Success Factors (CSFs) of PPP projects 5.Case Studied: BOT Phu My 2 Phase 2 Energy Project 6.Lessons learned 7.Conclusion & Future Research 8.The process of theory application

6 PPP concept: Definition What is Public-Private Partnership? Is it so simple? I don’t have money to realize the projects, can you come in? No, it is much more complex (Koppenjan 2005): Long-term contractual agreement between Public-Private party; Planning, construction, and/or exploitation and “co-financing”; Sharing or reallocating : risks, costs, benefits, resources & responsibilities. How about: Design-Construction (Maintenance) contract?

7 PPP concept: forms of PPP Forms of private sector participation Source: Koppenjan (Adapted from Bennet et al., 2000) Public-Private Partnership (PPP): 1.Service contracts 2.DBFM(O) and BOT 3.Joint ventures

8 PPP concept: motives Public partyPrivate party EfficiencyNew markets Inclusion private skills and knowledge Reduction of long term uncertainties Creation of added values and innovative solutions Public contributions to unprofitable project parts * Added value - Efficiency (cheaper,faster, better) - Enrichment and synergy Motives Source: Koppenjan

9 Outline 1.Research questions and goal 2.Public-Private Partnership (PPP) concept 3.PPP in Vietnam 4.Fishbone Framework for Critical Success Factors (CSFs) of PPP projects 5.Case Studied: BOT Phu My 2 Phase 2 Energy Project 6.Lessons learned 7.Conclusion & Future Research 8.The process of theory application

10 PPP in Vietnam: legislation Current key legislation: Decree No. 78/2007/CP enacted on the 11th of May 2007 Generic law Build-Operate-Transfer (BOT), Build-Transfer- Operate (BTO) or Build-Transfer (BT) contracts for all infrastructure services Decree No. 108/2009/CP enacted on the 27th of November 2009: BT focus

11 PPP in Vietnam: expectations Filling in financial gaps Preventing the involvement of State-Own Enterprises (SOEs) with ineffectiveness, corruptions Stimulating private sector participation

12 PPP in Vietnam: State of the Art Overall context of PPP in Vietnam: Projects: 17 vs. 83 Philippines, 80 Indonesia and 672 China Amount: US$ 4 billion vs. US$ 38 billion Philippines, US$ 37 billion Indonesia, and US$ 90 billion China Private Participation by sector (World Bank 2008)

13 PPP in Vietnam: Hindering Factors Unfavorable investment environment: Weak financial market Weak PPP frame law Leading to high financial risks political risks

14 PPP in Vietnam : sectors’ investigation Similarities: SOEs have kept dominant powers across sectors The competitive bidding is lacking across sectors Sector performance: Energy sector: most PPP projects (10 /17) Telecom: only BT contract (restrictions) Transportation: poor performance sector Water sector: tariff and affordability (turning into Design-Build-Lease)

15 PPP in Vietnam: Solutions Macro improvements: Improve financial market and PPP policy Sectors’ strategy Energy sector: redefine master plans Telecom: true joint ventures, private ownership, management control right, and equity contribution Transport sector: determine the boundary of SOEs and private investors Water sector: income measures, differentiation of tariff and differentiated management

16 Outline 1.Research questions and goal 2.Public-Private Partnership (PPP) concept 3.PPP in Vietnam 4.Fishbone Framework for Critical Success Factors (CSFs) of PPP projects 5.Case Studied: BOT Phu My 2 Phase 2 Energy Project 6.Lessons learned 7.Conclusion & Future Research 8.The process of theory application

17 Fishbone Framework for CSFs of PPP projects

18 Fishbone: success of feasibility phase

19 Outline 1.Research questions and goal 2.Public-Private Partnership (PPP) concept 3.PPP in Vietnam 4.Fishbone Framework for Critical Success Factors (CSFs) of PPP projects 5.Case Studied: BOT Phu My 2 Phase 2 Energy Project 6.Lessons learned 7.Conclusion & Future Research 8.The process of theory application

20 Case Studied: BOT Phu My 2 Phase 2 Energy Project (PM2.2)

21 PM2.2 : Contractual arrangement (World Bank 2003)

22 PM2.2: Financial arrangement

23 PM2.2 : Successful factors (fishbone verification) Exploration phase: The intensive interests and strong commitments of government Feasibility study phase Planned Government guarantees (GG) Contract phase “Coguarantee”: GG and IDA PRG of World Bank Construction phase Trade-off Operation en maintenance phase Empowerment

24 Outline 1.Research questions and goal 2.Public-Private Partnership (PPP) concept 3.PPP in Vietnam 4.Fishbone Framework for Critical Success Factors (CSFs) of PPP projects 5.Case Studied: BOT Phu My 2 Phase 2 Energy Project 6.Lessons learned 7.Conclusion & Future Research 8.The process of theory application

25 Lessons learned from PM2.2 Update fishbone framework: 4 new factors Facilitating PPP in Vietnam Short term: PRG of World Bank or ADB Long term: release this layer of cost

26 Outline 1.Research questions and goal 2.Public-Private Partnership (PPP) concept 3.PPP in Vietnam 4.Fishbone Framework for Critical Success Factors (CSFs) of PPP projects 5.Case Studied: BOT Phu My 2 Phase 2 Energy Project 6.Lessons learned 7.Conclusion & Future Research 8.The process of theory application

27 Conclusions & Future Research Conclusions: It is difficult for PPP investments in Vietnam due to weak financial market, weak PPP policy; But, PPP can be lived up by good arrangements at operational level; Side effect: it is costlier to invest PPP projects in Vietnam by Government guarantees & risk premiums.

28 Conclusion & Future Research Future Research: PPP in Vietnam: Transplant good PPP laws in other countries How to optimize the GG and establish the “Guarantee Fund” PPP in general: Valuate the effectiveness of risk transfer process How public reacts with PPP scheme as introduced

29 Outline 1.Research questions and goal 2.Public-Private Partnership (PPP) concept 3.PPP in Vietnam 4.Fishbone Framework for Critical Success Factors (CSFs) of PPP projects 5.Case Studied: BOT Phu My 2 Phase 2 Energy Project 6.Lessons learned 7.Conclusion & Future Research 8.The process of theory application

30 The process of theory application 3 BT projects in Cantho city with the amount of approximately 1600billion VND Provincial road 918: 675billion VND Provincial road 923: 549billion VND Political school: 377billion VND Progress: in detailed design – Cost estimate phase

31 Questions and discussion