Vietnam's new Law on Public-Private Partnership (Law No. 64/2020/QH14) (the "PPP Law") was ratified on 18 June 2020 by the Vietnamese National Assembly and will come into effect on 1 January 2021.
Prior to the introduction of the new PPP Law, which was first mooted back in 2017, the legal framework in Vietnam in relation to PPPs was found in various legislative instruments as illustrated in the diagram below:
Vietnamese laws are generally drafted in relatively broad terms, with the intention being, in common with many other jurisdictions, that the Government and its ministries implement decrees, circulars and directives to give greater specificity and refinement to the broadly-framed laws.
However, with ministries and government departments empowered to independently issue these clarifying regulations, it has been the case in the past that overlapping provisions have led to grey areas and conflicting interpretations resulting in a lack of certainty, particularly for foreign investors seeking robust and predictable frameworks within which to make their capital investments.
In the context of PPP projects, with ring-fenced project financing and long concession periods, a transparent and unified legal framework is preferable in order to facilitate predictable behaviour and decision-making and ultimately, the efficient allocation of risk. The PPP Law, which will become effective on 1 January 2021, represents a consolidation of the existing complex legal framework as well as an evolution in the approach to foreign investment.
A unified, well-developed framework for implementing PPP projects will be crucial if Vietnam is to successfully achieve its significant infrastructure goals and overcome its current infrastructure bottleneck. The application of the PPP Law to upcoming road projects will be a true test of whether enough has been done to address the expectations and concerns of foreign investors, particularly as countries grapple with the consequences of a global pandemic.