Funds strapped HCMC hopes public-private partnerships will do the trick

By Huu Cong   March 30, 2019 | 03:27 am PT
Funds strapped HCMC hopes public-private partnerships will do the trick
Pham Van Dong Boulevard, one of the projects built under the public-private partnership model in Ho Chi Minh City. Photo by VnExpress/Huu Cong
Top HCMC officials reiterate that public-private partnership (PPP) is the best way to implement key infrastructure projects.

Municipal Chairman Nguyen Thanh Phong said at a recent conference that for a city with high demand for investment in infrastructure and services like Ho Chi Minh City, PPP will help deal with the lack of funds.

To achieve its socio-economic development targets for the 2016-2020 period, HCMC needs roughly VND330 trillion ($14 billion) but the city and the state’s budget can only meet half this need, officials said.

Since 2000 to date, just 22 public projects with a total investment of $3 billion in the city have been developed under the PPP format: 16 in transport, three involving technical infrastructure, two in environment and one in culture.

"The city urges foreign organizations and companies to be patient and continue their investment and cooperation with the city.

"We promise to create the best conditions for investors and make changes to make the city a long-term destination for investors," Phong said.

Experts and insiders at the conference identified several weaknesses and offered solutions for the city to make itself more attractive to PPP investors.

Victoria Rigby Delmon, senior counsel at the Water Supply and Sanitation Global Practice with the World Bank, said the city has limited experience in investment and development and thus many of its projects have had inconsistent results.

In addition, most of its projects are either chosen from particular sources or proposed by investors, most of them build-transfer (BT) projects, in which all agreements are made between the investor and the city, which leads to a lack of transparency and competition.

Private investors are very sensitive to national risks, especially corruption, Delmon said.

Ousmane Dione, World Bank country director for Vietnam, said HCMC is a big city that is in dire need for more investments in infrastructure, especially in traffic, health care, education and environment to catch up with its fast urbanization speed.

He also noted that the model will not always succeed and failures had been seen in several nations.

In order for PPP projects to work, both the private and public sectors have to share benefits and risks, he said.

Dione suggested that HCMC comes up with specific and coherent legal frameworks and institutions so that investors can accept long-term risks in the long term with a certain degree of certainty.

Some of the PPP models that have been applied so far in HCMC include build-operate-transfer (BOT), build and transfer (BT), and build-own-operate project (BOO).

BOT is an agreement between a private company and a governmental body that commits the private company to build and operate a facility for a period of time then transfer ownership to the government.

BT is a deal whereby a private company undertakes the financing and construction of an infrastructure project and after its completion hands it over to the government agency. 

BOO is an agreement in which a private organization builds, owns and operates some facility or structure with some degree of encouragement from the government such as tax-exemption.

With a population of 13 million including migrants, HCMC, the biggest city in Vietnam, has been struggling for years to deal with heavy traffic jams, lack of public transportation, overloaded healthcare services and regular urban flooding.

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