Ministry proposes higher cap for State's share in PPP projects
Economists and policymakers have voiced their support over a proposal put before the National Assembly by the Ministry of Planning and Investment (MPI) to raise the State's contribution limit in public-private-partnership (PPP) infrastructure projects to 65%.
A highway junction under construction in Hanoi (Photo:VGP)
Hanoi (VNS/VNA) - Economists and policymakers have voiced theirsupport over a proposal put before the National Assembly by the Ministry ofPlanning and Investment (MPI) to raise the State's contribution limit inpublic-private-partnership (PPP) infrastructure projects to 65%.
The current limit for state contribution in PPP projects was set at 50%.
They said as the economy slows down, it is important to introduce additionalmeasures to encourage the private sector to participate in such projects lestthey will grind to a halt.
With the State shouldering a larger share of the initial investments, therewould be considerably less pressure on its private partners. However, it wouldlikely result in long-term repercussions for the State's budget.
However, given the rather large number of critical infrastructure projectsrequired to spearhead economic development in the coming decades and a gloomyeconomic outlook for the foreseeable future, raising the State's contributionlimit could be a reasonable compromise in the short run.
The limit can be later adjusted, depending on the economy and what thecountry's legal framework would allow in the future.
The proposal also reviewed the effect of the State's contribution limit in PPPprojects in remote and disadvantaged areas across the country, which typicallyattract few investors.
According to the MPI, it is only logical the State should shoulder a largershare of the risk involved in such areas in comparison to that of investors.Conversely, investors should expect to contribute more to PPP projects in largecities and provinces.
Dr. Nguyen Huu Nguyen from the Ho Chi Minh City Urban Planning DevelopmentAssociation said lifting the cap on state contribution will help speed up thedevelopment of critical infrastructure projects, which largely fall under theState's responsibility.
Nguyen said even without participation from the private sector, such projectsmust be carried out.
From an investor's perspective, they have to balance between risk and profit,and in their eyes, only projects with good potential rates of return are worthconsidering.
Economist Ngo Tri Long said along with raising the limit, the centralgovernment must look into issues that are currently hindering the developmentof numerous infrastructure projects. He said it's a matter just as importantfor investors./.
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A highway junction under construction in Hanoi (Photo:VGP) 
