The French Agency for Development (AFD) has granted the government of Vietnam an €8 million loan and €600,000 grant in order to help the country develop the regulatory framework for public-private partnership infrastructure projects.
This will be added to a $20 million loan granted to Vietnam by the ASEAN Development Bank (ADB) in January, which was dedicated to the same purpose, according to Jean-Marc Gravellini, manager of AFD’s Vietnam office.
Gravellini describes the two loans as a “first step” in Vietnam’s PPP framework. Although Vietnam has grown to become a “middle-income” country, the need for development in infrastructure, water, and energy is critical, he said – the Vietnamese government estimates that the Southeast Asian nation will require $150 billion in infrastructure funding before 2020.
“It’s just not possible to get that money with only a national budget – they need the support of the private sector,” Gravellini told Infrastructure Investor.
Before the Vietnamese government can begin looking into PPP projects, however, the country needs to implement a large number of regulations for both domestic and international investors into order to make the PPP model viable.
“Many private investors want to set up PPPs in energy, etc. … but they can’t be sure they will get a good rate of return,” Gravellini said. Various barriers, like visibility and tariffs, make a PPP investment in Vietnam too risky for most corporations.
According to Gravellini, all AFD and ADB funds will be used to enhance the PPP regulatory framework, as well as educate interested investors about how to invest in Vietnam. AFD and ADB will also be providing advice to the Vietnamese government about the legal framework.
“When the framework is done, then we can mobilise other financing for PPP projects,” he said.
Both AFD’s and ADB’s loans are very low-interest for the Vietnamese government – between 1.0 and 1.5 percent, Gravellini said. The programme is expected to be implemented between now and 2018.