New decree on BT projects yet to address bidding issues

23-Aug-2019 Intellasia | The Saigon Times | 6:02 AM Print This Post

Since the values of build-operate (BT) projects are determined by tender results, as regulated in the government’s Decree 69/2019, problems with tender appointments should be avoided. However, this problem has not been properly addressed, which may result in losses of State assets.

The practice of using public assets to pay BT project investors, based on contracts signed after January 1, 2018, has been suspended as Decision 23/2015 is no longer valid.

Instead, agencies must follow the new law on the management and use of public assets, which came into force in 2018, but no guidelines have been issued so far.

Before Decree 69/2019, which was issued on August 15, many notices from the government Inspectorate and the State Audit, reports from supervisory teams and feedback from experts had referenced inadequacies in Vietnam’s BT investment model, which mainly followed the land-for-infrastructure system.

This land-based system should have been based on project tenders or bids for public assets used for project payments, but instead, it was based on tender appointments.

Investors would propose projects for approval, and the State would use public land to pay them.

There are many gray areas surrounding the determination of BT project values, resulting in wastefulness.

The rule basing the value of BT projects on tender results was expected to ensure transparency, but instead, it is combined with the principle that public assets used for investor payments must be of equivalent value to the BT project.

Moreover, the asset value is determined at the time of payment and the project value is based on the tender results.

The equal price principle has been applied to all projects where the State has held tenders and selected investors. With projects proposed by investors, the State can either approve or reject them and not all BT projects are opened for tenders.

The decree still permits the use of public assets to pay BT investors directly, while it should be putting the land up for auction and use the proceed to pay the investor.

The equivalent price method has created a major loophole that has been exploited rampantly, as seen in the number of corruption cases filed over the last few years.

The Ministry of Finance last year, before the decree was issued, reported to the government that it was difficult to match the value of BT contracts with that of land. Therefore, a margin of some 10 percent of the contract is needed to fix the issue.

Nonetheless, the decree, when issued, will still not resolve this problem. Although it mentions bidding for BT projects, specific issues need to addressed.

In one case, a small BT project worth VND497 billion obtained land worth VND2.241 trillion as payment. To avoid breaching the equivalent value principle, the investor is obliged to repay the difference to the budget.


Category: Economy, Vietnam

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