PPP IN THE FIELD OF ICT IN VIET NAM A PRACTICAL VIEW. The 5 th ASEAN Connectivity Forum Seoul, November 2017

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2 PPP IN THE FIELD OF ICT IN VIET NAM A PRACTICAL VIEW The 5 th ASEAN Connectivity Forum Seoul, November 2017

3 General legal framework of PPP PPP in the field of ICT Recommendation AGENDA 3

4 How does Viet Nam government define? General legal framework of PPP PPP in the field of ICT Recommendation What are the noteworthy terms? 4

5 Law on Public Procurement, 2013 (promulgated by National Assembly) Law on Public Investment, 2014 (promulgated by National Assembly) PPP Law and other applicable texts Decree on Public-Private Partnership Investment Form (Decree 15/2015/NĐ-CP promulgated by Government) Decree providing Detailed Regulations for the Implementation of A Number of Articles of Law on Public Procurement on Selection of Investors (Decree 30/2015/NĐ-CP promulgated by Government) Other applicable sectoral laws Law on Construction, 2014 (promulgated by National Assembly) Law on Management of Public Debt, 2009 (promulgated by National Assembly) Regulator body: PPP Office Public Procurement Management Agency (under the Ministry of Planning and Investment) REGULATION SYSTEM 5

6 (Decree 15/2015/NĐ-CP, art.3) Public-private partnership investment form means an investment form to be a contract authorized implemented based on between an state agency (an) investor(s) the and and project enterprise implement, manage, to operate infrastructure project provide an and to public services. BOT BT BTO BOO BTL BLT O&M DEFINITION 6

7 Based on competition, fairness, transparency and economic effectiveness Tendering and contracting process / Choice of the private partner (Decree 30/2015 art.9) International open bidding must be applied for the selection of investor for PPP projects, except for the cases as below: Foreign investors are fully or partially restricted, or no foreign investors participate/fail to pass in international pre-qualification Preliminary estimated total costs for project is below VND 120 billion (~USD 6 mil.) TENDERING 7

8 (Decree 15/2015/NĐ-CP) Project proposals usually are formulated by the Ministries and provincial-level People s Committees to be the basis for investor selection. (art.16) These proposals are appraised and approved by different levels of authorities based on their economic scale as well as levels of national importance. (art.17) Feasibility studies provided by investors are appraised by the State Appraisal Committee (for those of national importance) and the focal unit assigned by the Ministers, Heads of ministerial-equivalent bodies and Chairmen of provincial level People s Committees. (art.26) PROJECT EVALUATION 8

9 (Decree 15/2015/NĐ-CP) Lenders shall have step-in rights in the event that the investor or the project enterprise fails to fulfil the obligation under the agreements. (art.33) Right to assign part or all of its rights and obligations under project contract to the lender or another investor. (art.34) Right to be given favorable conditions to collect properly and in full the service fees. (art.51) Right of investor/project enterprise to be entitled to incentives on corporate income tax, import duties, exemption from or reduction of land use fees etc. (art.55) Right of contractors participating in implementation of projects to be entitled to tax incentives. (art.56) Right of investor/project enterprise to be permitted to mortgage assets, land-use rights and the rights to commercially operate the project facility to the lenders. RIGHT OF PRIVATE PARTNER 9

10 (Decree 15/2015/NĐ-CP) Obligation to contribute equity and mobilize other capital sources to implement the project, of which the equity ratio must meet certain thresholds according to different investment scales. (art.10) Obligation to provide security for performance of project contract, if required by and agreed with the authorized state agency. (art.38) Obligation of investor/project enterprise to issue regulations on selection of contractors to ensure fairness, transparency and economic efficiency. (art.44) Obligation of investor to ensure the quality of the project facility and services. (art.47) Obligation to make public the financial statement and audit reports in compliance with the laws and agreements in project contract. (art.52) OBLIGATION OF PRIVATE PARTNER 10

11 (Decree 15/2015/NĐ-CP) Obligation of the provincial-level People s Committee, coordinated with the authorized state agency, to organize land clearance and complete procedures for land allocation or lease of land to implement the project. (art.45) Right to supervise the investor s compliance with their obligations of the investor and employ third party for support if necessary. (art.47) Obligation of the authorized state agency to support the investor/project enterprise for collecting user fees. (art.51) Obligation of the agency appointed by the Prime Minister acting on behalf of the government to provide a guarantee for provision of raw materials, sales of products, services and other contractual obligations to the investor/project enterprise, as well as guarantee for obligations of state -owned enterprises selling fuel, raw materials, purchasing products and services of the investor/project enterprise. (art.57) Obligation to ensure the land use purpose of the project remain unchanged in the entire implementation term of the project contract. (art.59) Obligation to provide assurance of foreign currency balance. (art.60) Obligation to provide assurance of provision of public services. (art.61) Obligation to provide assurance of property right. Lawful properties of the investors shall not be nationalized or expropriated by administrative measures and in case of compulsory purchase or requisition for the purposes of national defense, public interests or other emergency situations, the investor shall be compensated accordingly. (art.62) RIGHT AND OBLIGATION OF PUBLIC PARTNER 11

12 (Decree 15/2015/NĐ-CP) Right and obligation of both side: Right to terminate the project contract upon expiry of the agreed term or before the expiry term due to breach by one party without effective remedial measures, force majeure or other agreed circumstances. (art.36) Applicable Law: Law of Viet Nam (art.63) International Law. If one party of the project contracts is foreign investor or the Government guarantees the performance of obligations for such contracts, the signing parties may agree on the application of foreign law. (art.37) Dispute resolution: The dispute must firstly be settled through negotiation and conciliation before being referred to an arbitration institution or courts of Viet Nam. (art.63(1)), except for: Dispute between the authorized state agency and a foreign investor or project enterprise established by a foreign investor could also be settled by an arbitral tribunal established on the basis of an agreement between parties. (art.63(2)) Awards of foreign arbitrations shall be recognized and enforced in accordance with the laws on recognition and enforcement of foreign arbitral awards. (art.63(4)) OTHER NOTABLE PROVISIONS 12

13 Specifics of PPP in ICT General legal framework of PPP PPP in the field of ICT Recommendation The 1 st case 13

14 (Circular 21/2016/TT-BTTTT promulgated by Ministry of Information and Communications) Building ICT zone (including infrastructure inside and outside ICT zone: transport, power, communication, water supply, drainage ) Providing IT application services for state agencies: National information system, database system, egov based information system Information security solutions E-services providing for people and businesses Back-office IT application Build-Lease-Transfer contract ICT AREAS OPENED FOR PPP 14

15 Building ICT zone investment (Decree 154/2013/NĐ-CP promulgated by Government) Supporting from Government on building inside and outside infrastructure ICT zone Decreasing 50% land-using fee Providing IT application for state agencies Corporate tax at 10% (1/2 ordinary case) for 15 years Decreasing 50% personal income tax INCENTIVES 15

Project on e-commerce application on government procurement (e-gp) Similar to KONEPS Objectives Develop, manage and operate the national e-procurement network Develop system consisting of 11

16 Project on e-commerce application on government procurement (e-gp) Similar to KONEPS Objectives Develop, manage and operate the national e-procurement network Develop system consisting of 11 components: Portal; User Management; Call Center; e-bidding, e-shopping Mall, e-contract, e-payment; Item list; e-document; Supplier s Performance Management; e-guarantee THE 1 ST CASE: E-GP 16

17 PPP contract type: D-B-F-O-M-T (Design - Build Financing - Operation Maintenance - Transfer) State: Financing, collaborate with investors, develop and promulgate legal documents and policies on online bidding 4 investors passed in international pre-qualification: Affiliated companies CDCi FASTEST (Malaysia - Viet Nam) Affiliated companies European Dynamics FPT Information System Company Viet Nam Post and Telecom Corporation (VNPT) Tendering will be opened in 2018 E-GP (2) 17

18 Total investment ~VND 335 bil. (~USD 15 mil.) PPP capital ~VND 281 bil. (~ USD 13 mil.), state s share 15% Contract period of 13 years Revenue: Annual registration fee Tender notification fee Bidding submission fee Winning bidder fee E-contract system use fee E-shopping mall use fee Indicator Value NPV VND 112 bil. (~ USD 5 mil.) B/C ratio 1,33 IRR 20% Payback period 9 year DSCR in ,33 E-GP (3) 18

19 Why? Invest to Viet Nam What? General legal framework of PPP PPP in the field of ICT Recommendation 19

20 GDP growth rate 6.7% (expected in 2017) Golden population structure (~70% aged 15-65) Telecom total revenue ~USD 16.5 bil. (growth rate 7.5%) IT industry total revenue ~USD 42.5 bil. (growth rate 10%) Mobile penetration 131/100, 3G/4G 50/100 Mobile coverage 94% Internet users 62,76% The imperative of PPP (State s budget for the Plan of meet only 50% the demand) POTENTIAL FOR KOREAN INVESTORS 20

21 Ho Chi Minh city Biggest city in Viet Nam 24 th super city for outsourcing service (Tholon, 2017) Ha Noi Capital city of Viet Nam 26 th super city for outsourcing service (Tholon, 2017) Da Nang The most livable city in Viet Nam Bac Ninh 20 bil. USD investment of Samsung Hai Phong 3.5 bil. USD investment of LG ICT ZONE IT APPLICATION Government s Plan of IT Applications in public agencies in the period : 30% public services upgraded to Stage 4 (connected services) 90% tax declaration and payment go online E-Customs upgraded to level of ASEAN4 (Singapore, Malaysia, Thailand, Philippines) Green field on Smart city/iot/big data/cloud computing/information security Almost 20 provinces/cities committed in building Smart-city 21

22 Ministry of Information and Communications, Viet Nam Tholon (2017), Tholons Services Globalization Index General Statistic Office, Viet Nam REFERENCE 22

23 23

24 Dương Khánh Dương (Dzuong) Deputy head of International Cooperation Division National Institute of Information and Communication Strategy Ministry of Information and Communication, Viet Nam (84) Q&A 고마워 24

Decree No.15/2015/ND-CP dated 14/02/2015 on Public Private Partnership Investment (PPP) (Effective from 10/4/2015)

Decree No.15/2015/ND-CP dated 14/02/2015 on Public Private Partnership Investment (PPP) (Effective from 10/4/2015) 1 Old legal framework on PPP Decision No. 71/2010/QD-TTg on pilot PPP Projects Decree