The new points of the Vietnam Investment Law 2024 on PPP investment

To promote infrastructure development and attract effective investment resources, the public-private partnership (PPP) investment method has been widely applied in Vietnam for many years. However, to meet sustainable development requirements and address difficulties in the implementation process, the Investment Law 2024 has made significant amendments and supplements, especially regarding PPP regulations. These new points not only create a clearer legal framework but also open up many opportunities for both the public and private sectors to cooperate in implementing projects. The following article by Viet An Law analyzes the new points of the Investment Law 2024 on PPP investment and their impact on the development of future projects.

What is PPP investment?

Based on Clauses 9 and 10 of Article 3 of the 2020 Law on Investment under the Public-Private Partnership method, it is stipulated as follows:

Public-Private Partnership (PPP) investment is an investment method implemented based on a limited-term cooperation between the State and private investors through the signing and implementation of a PPP project contract to attract private investors to participate in PPP projects.

which, PPP project is a collection of proposals related to investment to provide public products and services through the implementation of one or more of the following activities:

• Construction, operation, and business of infrastructure works and systems;
• Renovation, upgrading, expansion, modernization, operation, and business of existing infrastructure works and systems;
• Operation and business of existing infrastructure works and systems.

The new points of the Investment Law 2024 on PPP investment

Regulations on PPP investment sectors and the minimum total investment scale of PPP projects

The investment sectors under the PPP method include:

• Transportation;
• Power grid, power plants, excluding hydropower plants, and cases where the State has a monopoly as prescribed by the 2004 Electricity Law;
• Irrigation; clean water supply; drainage and wastewater treatment; waste treatment; water development, storage, and restoration;
• Healthcare; education and training;
• Information technology infrastructure.

The minimum total investment scale of a PPP investment project is regulated as follows:

• Not lower than 200 billion VND for projects in the sectors specified in points (1), (2), (3), and (5); in cases of areas with difficult socio-economic conditions, areas with extremely difficult socio-economic conditions as prescribed by investment law, not lower than 100 billion VND;
• Not lower than 100 billion VND for projects in the sector specified in point (4);
• The regulations on the minimum total investment scale in the above two points do not apply to projects under the O&M contract type.

Regulations on PPP investment sectors and PPP project classification

Based on Clause 2, Article 3 of the 2024 Law amending the Law on Planning, the Law on Investment, the Law on Investment under the Public-Private Partnership method, and the Law on Bidding, which amended and supplemented Article 4 of the 2020 Law on Investment under the Public-Private Partnership method, it is regulated as follows:

• PPP investment projects are implemented in public investment sectors and industries to invest in and construct infrastructure works and systems, and providing public products and services, except for projects that fall under the following cases:
• Projects that fall under state monopolies as prescribed by law;
• Projects in national defense, security, and social order and safety sectors and industries as prescribed by the law on public investment.
• PPP projects are classified according to the authority to decide on investment policies, including:
• Projects under the authority to decide on investment policies of the National Assembly;
• Projects under the authority to decide on investment policies of the Prime Minister;
• Projects under the authority to decide on investment policies of Ministers, heads of central agencies, and other agencies specified in Clause 1, Article 5 of the 2020 Law on Investment under the Public-Private Partnership method;
• Projects under the authority to decide on investment policies of the Provincial People’s Council;
• Projects under the authority to decide on investment policies of the Provincial People’s Committee;
• Projects that do not fall under the cases where investment policies must be decided, including projects specified.

Regulations on the PPP project process

Based on Clause 4, Article 3 of the 2024 Law amending the Law on Planning, the Law on Investment, the Law on Investment under the Public-Private Partnership method, and the Law on Bidding, the PPP project process is regulated as follows:

For PPP projects applying high technology that are on the list of high technologies prioritized for investment and development as prescribed by the law on high technology, applying new technologies as prescribed by the law on technology transfer, the PPP project process is:

• Preparation and appraisal of the pre-feasibility study report, investment policy decision, project announcement;
• Investor selection;
• The selected investor prepares the feasibility study report;
• Appraisal of the feasibility study report, project approval;
• Establishment of the PPP project enterprise and signing of the PPP project contract;
• Implementation of the PPP project contract.

For other PPP projects:

• Preparation and appraisal of the pre-feasibility study report, investment policy decision, project announcement;
• Preparation and appraisal of the feasibility study report, project approval;
• Investor selection;
• Establishment of the PPP project enterprise and signing of the PPP project contract;
• Implementation of the PPP project contract.

Regulations on conditions for selecting PPP investment projects

Based on Clause 7, Article 3 of the 2024 Law amending the Law on Planning, the Law on Investment, the Law on Investment under the Public-Private Partnership method, and the Law on Bidding, which amends and supplements some points and clauses of Article 14 of the 2020 Law on Investment under the Public-Private Partnership method, the conditions for selecting PPP investment projects include:

• Investment necessity;
• Belonging to the sectors specified in Clause 1, Article 4 of this Law and meeting the minimum total investment scale specified in Clause 2, Article 4 of this Law;
• Not overlapping with a PPP project that has an investment policy decision or project approval decision;
• Having advantages compared to other investment forms;
• Having the ability to allocate state capital in case of need for state capital.

Positive changes when the Investment Law 2024 on PPP investment takes effect

• In the past 3 years, more than 40 new projects have been deployed, preparing for investment under the PPP method.
• These are all key, large-scale national and local projects with a total investment of approximately 380,000 billion VND, with a need for approximately 190,000 billion VND of state capital.
• New PPP projects implemented under the provisions of the PPP Law are expected to form about 1,000 km of expressways, 2 standard 4C airports, 3 special-grade solid waste treatment projects, 3 clean water supply plants, contributing to expanding and upgrading traffic, socio-economic infrastructure projects of localities.
• The Law with many amended points is expected to create new steps in attracting private capital under the PPP method. Accordingly:
• To expand the space for attracting PPP investment, the Law encourages the implementation of the PPP method for all projects in the public investment sector to provide public products and services, except for projects in the State monopoly sector or projects in the national defense, security, and social order and safety sectors.
• Abolish the minimum investment capital scale limit for PPP project implementation.
• The Investment Law 2024 also stipulates the application of a flexible mechanism in allocating state capital to participate in PPP projects, continuing to stipulate the state capital ratio at 50% and assigning the Prime Minister or provincial People’s Councils to decide on a higher state capital participation ratio but not exceeding 70% of the total investment.
• The Law stipulates the continued application of the BT contract type, payment in cash, and payment by land fund, towards comprehensively innovating the implementation and payment methods for investors, maximally overcoming inadequacies in the implementation of this contract type.

The Investment Law 2024 with new points on PPP investment brings many development opportunities for public infrastructure projects, while creating a more transparent and favorable investment environment for private investors. These changes will certainly create a strong impetus for the sustainable development of Vietnam’s economy in the future.

Clients with related questions or legal consulting needs on the new points of the Investment Law 2024 on PPP investment, please contact Viet An Law for the best support.