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Phạm Văn ĐồngBsc of Civil Engineering 2006(CTU)Msc of CME 2009 (TUDelft)Working at DoT 2009-now

Breaking the Iceberg of Public-Private Partnership in Vietnam

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

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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 Project6. Lessons learned 7. Conclusion & Future Research8. The process of theory application

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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

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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

Project6. Lessons learned 7. Conclusion & Future Research 8. The process of theory application

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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?

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PPP concept: forms of PPP

• Forms of private sector participation

Source: Koppenjan (Adapted from Bennet et al.,

2000)

• Public-Private Partnership (PPP): 1. Service

contracts2. DBFM(O) and

BOT3. Joint ventures

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PPP concept: motives

Public party Private party

Efficiency New 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

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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

Project6. Lessons learned 7. Conclusion & Future Research 8. The process of theory application

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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

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PPP in Vietnam: expectations

• Filling in financial gaps

• Preventing the involvement of State-Own Enterprises (SOEs) with ineffectiveness, corruptions

• Stimulating private sector participation

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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)

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PPP in Vietnam: Hindering Factors

• Unfavorable investment environment: • Weak financial market • Weak PPP frame law

• Leading to high financial risks political risks

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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)

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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

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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

Project6. Lessons learned 7. Conclusion & Future Research8. The process of theory application

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Fishbone Framework for CSFs of PPP projects

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Fishbone: success of feasibility phase

Feasibility study

Successful

Favorable investmentenvironment

Viable project

Financial trade-off

Being PPP character Parties’ good willfor collaboration

Community supportPolitical support

Project scope adaptation

Innovative idea

Stable political system

Precise law frame

Favorable legislation & regulations

Consistent with public interest

Available financial market

Stable macro-economicsituation

Predictable exchange risk

Uncorrupted government

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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 Project6. Lessons learned 7. Conclusion & Future Research 8. The process of theory application

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

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PM2.2: Contractual arrangement (World Bank

2003)

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PM2.2: Financial arrangement

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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

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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

Project6. Lessons learned 7. Conclusion & Future Research 8. The process of theory application

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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

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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

Project6. Lessons learned 7. Conclusion & Future Research 8. The process of theory application

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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.

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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

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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

Project6. Lessons learned 7. Conclusion & Future Research 8. The process of theory application

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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

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Questions and discussion