VIETNAM: WILL FOREIGN INVESTORS SHRINK FROM THE NEW PPP LAW?

LULU AKHALIDI WRITES – Vietnam’s National Assembly passed the Public-Private Partnership Law designed to streamline  bureaucracies that have made it difficult for investors to enter the growing Vietnamese economy. The law goes into effect on January 1, 2021

In 2019, Vietnam registered a 7% GDP growth, making it one of Southeast Asia’s fastest-growing economies. The country has also managed to reduce its poverty rate from 70% to below 6%. Despite this economic growth, most of the development has been done in a haphazard manner and with minimal private sector involvement.

That’s why the Ministry of Planning and Investment prepared the first draft of the PPP investment law – to eliminate numerous bottlenecks in public-private partnerships, making it easier for Vietnam to share infrastructural projects’ risks with foreign and local investors and to incentivize foreign investors.

Despite the law’s attractive and desirable intent, it makes it harder for the government to disperse funds. Why? Because some projects will depend on massive government expenditure and so will take longer to complete. In addition, the law creates loopholes that could end up curtailing investments if members of the public sue a project or a project’s companies. And the law makes it impossible for an international arbiter to manage such issues.

With these glaring issues, it’s too soon to tell whether the perennial issue of Vietnam’s underdeveloped infrastructure will improve or get worse. The written agreement may not play out as smoothly as it sounds.

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