The legal framework governing investment under the public-private partnership (PPP) model underwent significant changes in 2024-2025, marking an important shift that broadened the range of eligible sectors, expanded the authority of local governments, and introduced new risk-sharing mechanisms. The overhaul is expected to create an environment more conducive to private-sector participation in national infrastructure development.
At the recent “PPP Dialogue - Partner, Innovate, Deliver”, co-organized by the Ministry of Finance (MoF) and the Asian Development Bank (ADB), Ms. Nguyen Thi Linh Giang, Chief of the PPP Office under the Public Procurement Agency at the MoF, said the latest changes to the Law on Public-Private Partnership Investment are not merely legislative technicalities but also reflect a shift in the underlying philosophy of PPP operations, paving the way for greater application than previously.
Broader pathway
Under the previous Law on Public-Private Partnership Investment, projects were largely confined to traditional infrastructure such as roads, waste treatment, water supply and drainage, and energy. In reality, however, many areas of public investment have a strong demand for private capital, including information technology, digital transformation, science and technology, healthcare, education, digital infrastructure, and emerging public services.
In the amended Law, all public-investment sectors may now adopt the PPP model. This is seen as a major step towards removing longstanding constraints that limited PPPs to conventional infrastructure.
Another notable shift is the removal of the minimum total investment requirement. Previously, PPP projects had to be valued at VND200 billion ($7.69 million) or more, or VND100 billion ($3.85 million) in disadvantaged localities, effectively shutting out many small and medium-scale proposals. The new Law eliminates this threshold entirely, giving ministries, agencies, and particularly local governments greater autonomy in assessing feasibility and selecting projects. As a result, PPP becomes a more flexible tool, suitable not only for large works but also for digital transformation initiatives, data infrastructure, high-tech applications, and mid-scale urban projects.
The new Law also authorizes local governments to appraise, approve, and sign contracts for Group B and C projects. Greater local authority is expected to accelerate implementation and improve responsiveness to urgent infrastructure needs.
One procedural reform welcomed by investors is the removal of the investment policy approval step for several project categories. According to Ms. Giang, this exemption now applies to projects without State capital; science and technology and innovation projects; projects applying high or new technology; O&M (Operations and Maintenance) contracts; land payment build-transfer (BT) projects; and BT projects requiring no payment. Eliminating this initial step substantially shortens preparation time, particularly for fast-moving technology projects.
Regulations on State capital in PPP projects have also been made more flexible. While the general cap remains 50 per cent of total investment, the amended law permits this ratio to rise to as much as 70 per cent in certain cases, such as projects where land clearance costs account for more than half of the total investment, those in disadvantaged areas, or those requiring high-technology transfer. This adjustment enhances financial feasibility for projects with weak early-stage cash flows.
One of the most significant advancements is a more refined revenue risk-sharing mechanism. In cases of revenue shortfall, the government will share up to 50 per cent of the deficit when actual revenue falls between below 90 per cent and below 75 per cent of the financial plan. Conversely, investors must share 50 per cent of excess revenue when actual revenue ranges from above 110 per cent to 125 per cent of projections. The framework aims to improve stability and reduce financial risk by defining clear limits for both sides.
The amended Law also broadens the range of PPP contract types, adding BT contracts payable in cash, land, or without payment. It also allows PPP project companies to undertake off-contract business activities, provided they maintain independent accounting and secure lender approval; a move designed to increase flexibility and investor appeal.
With wide-ranging reforms spanning procedures, eligible sectors, and financial mechanisms, the amended Law on Public-Private Partnership Investment aims to create a more transparent, stable, and private-sector-friendly investment environment - a key condition for mobilizing private resources for national infrastructure development in the years to come.
Challenges from reforms
Though the PPP legal framework has been significantly overhauled, feedback from regulators and the business community indicates that implementation still faces major hurdles, from long-term credit constraints and early-stage cash flow pressures to slow responses from government agencies and lingering uncertainty over risk-management mechanisms. Private investors, in particular, are watching closely to see whether the latest reforms will translate into real improvements on the ground.
A representative from the Deo Ca Group said long-term credit remains the biggest bottleneck. Build-operate-transfer (BOT) transport projects often require 20-30 years to recover capital, yet low initial traffic volumes restrict early cash flow. Banks, facing substantial risk and the prospect of economic or social volatility over such long horizons, remain highly cautious. Delays in responses from State bodies on key procedures have also stretched project timelines and further strained investor finances.
The Group proposed three solutions: improving access to credit; issuing dedicated credit policies for PPP projects; and, most importantly, ensuring that risk-sharing mechanisms are implemented consistently in practice, rather than left vague or unused.
International investors, meanwhile, are most concerned about contract flexibility over the life of a project. With agreements running for decades, exchange-rate swings, economic cycles, and force majeure events, from pandemics to extreme weather, can all affect project viability. Investors say they want mechanisms that allow government and businesses to resolve issues quickly, warning that “each day of delay increases the risk of losses.”
Meanwhile, a representative from a major Vietnamese bank said lenders evaluate PPP proposals based on three criteria: investor capacity, the financial model, and risk-mitigation measures. These remain central considerations for domestic banks reviewing PPP loan applications. Transport projects are often high-risk because key assumptions, such as local GDP growth or traffic volumes, may shift significantly over time. Banks therefore need stable, transparent baseline assumptions and detailed guidance on risk-sharing to build confidence in their lending decisions.
Speakers also highlighted the absence of a secondary financial market. Currently, PPP loans sit entirely on banks’ balance sheets, with no mechanism to trade or transfer this debt; a situation that creates long-term pressure on the credit system. As the volume of PPP projects rises, the lack of a secondary market could hinder banks’ capacity to extend new loans.
Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association, said the establishment of a derivatives or secondary market is increasingly necessary to help banks manage credit for PPP projects more effectively.
To improve transparency, he also called for a clearer, more independent legal framework for BT contracts, especially those involving land payments. Determining the value of land used for payment is the biggest challenge, he said, as it hinges on the Land Law and a series of decrees on land valuation. He urged stronger coordination between the MoF and the Ministry of Agriculture and Environment to clarify land-valuation principles and make BT contracts more workable in practice.
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