Lessons on the Division of Responsibility Between the State and the Private Sector

2.3.4.2. Lessons on the division of responsibilities between the State and the private sector

When investment capital for infrastructure development is still limited as in Vietnam today, when mobilizing investment capital for socio-economic development in general and road traffic in particular from the non-state budget sector is inevitable, support from the State in terms of policies and mechanisms is extremely important and necessary. The State needs to clearly understand the aspirations of the private sector. Private investors not only expect policies to encourage them from the State, but also need a clear definition of the rights and obligations of each party participating in the implementation of the highway project. This lesson from previous countries shows that if the responsibilities of each party in the economic contract are not clearly defined, it will be very difficult to implement, and it will also be difficult to assign responsibilities, as well as other constraints. The definition of responsibilities both demonstrates the State's management and operation rights in infrastructure investment activities and clearly shows its interest in private investors. Through this, private investors are clearly aware of their rights and responsibilities in the Public-Private relationship, thereby demonstrating their determination to implement the project. Private investors are proactive right from the time of establishing the pre-feasibility project, feasibility project as well as throughout the project implementation period.

2.3.4.3. Lessons learned from establishing a focal point agency for PPP

The establishment of a focal agency for the development of PPP projects must be considered a conditional factor. This agency is responsible for supporting the development of the PPP market, healthy competition, with the core being the participation of experts in economics, finance, law, bidding and other technical fields (as in the case of the UK, Japan...). In this model, economic experts are responsible for determining investment efficiency through specific data and models, ensuring that calculations are carried out scientifically and objectively. Meanwhile, financial experts tend to focus on the requirements of financial knowledge and skills in project implementation, corporate finance, microfinance, rather than macrofinance, with the task of designing project financial models to ensure the most attractiveness to investors and the financial market.

CONCLUSION OF CHAPTER 2

Building a modern, synchronous and complete highway system is Vietnam's goal in the medium and long term. To achieve that goal, it requires the determination of the entire system, the solidarity and consensus of all forces in society, especially the non-budgetary force (both domestic and foreign). In the current conditions, the contribution of this force is increasingly affirmed, growing in both scale and value, which, according to the trend of the times, is not only of interest to developing countries, but also to developed countries, this is a very important source of capital.

Through research and analysis, it is shown that investment capital is a prerequisite for the implementation of highway projects, and mobilizing investment capital outside the state budget to build highways is a trend of the times. With the increasingly important role of capital contribution with the State in implementing projects of the private sector. The State cannot help but encourage such participation by perfecting the legal system. The requirement for a consistent and stable legal environment is a legitimate demand of private investors in investment cooperation in the construction of highways under the PPP form. International experience shows that for the investment form under the PPP model to be successful in countries, no country has been successful in implementing investment in the construction of highways through PPP cooperation without first having a consistent legal system related to activities in this investment field.

With the Pilot Regulation, for the first time, both competent State agencies and investors have the most complete understanding of a project implemented under the PPP model; Necessary criteria for a project to be applied under the PPP model; The participation rate of the State and the private sector is very clear; Specific responsibilities of the parties participating in the project. At the same time, the Pilot Regulation also provides criteria for selecting PPP projects, which will help the Government and relevant Ministries promptly review and classify expressway projects so that they can switch to applying the model.

PPP, mobilizing capital contributions from both domestic and foreign private sectors with the goal of soon turning the project into reality...

Lessons learned from previous countries that Vietnam can apply in mobilizing non-state budget capital in the form of PPP for investment in construction and development of highways are valuable lessons for Vietnam to successfully implement PPP in infrastructure development in general and in implementing highway construction projects in particular.

CHAPTER 3

CURRENT STATE OF APPLYING PPP INVESTMENT TO MOBILE CAPITAL OUTSIDE THE STATE BUDGET FOR IMPLEMENTATION

HIGHWAY CONSTRUCTION PROJECTS IN VIETNAM

3.1. Overview of the development of road traffic in Vietnam

3.1.1. Road transport system development process

After peace was restored (1954), the road and bridge system was generally severely damaged, most of which were not safe for vehicles to travel on. The government planned to restore it in three phases:

+ Healing and restoration phase: 1954 - 1957

+ Economic recovery period: 1958 - 1960

+ Implementation period of the first 5-year plan: 1961-1965

During the period of 1964-1975, road traffic increasingly developed, the task of ensuring road traffic was quite heavy, requiring specialized management and repair of roads. Therefore, the Road Management Department (Road Management Department) was established, on the basis of separating the Road Transport Department into two Departments in accordance with the spirit of Decision No. 201/CP of the Government dated October 4, 1965. The Road Management Department is the specialized road management agency in the whole country, directly managing a number of important national highways, while other national highways are entrusted to the Departments of Transport of the provinces for management. The Department assigns annual plans, reviews designs and estimates of projects, and manages operations in terms of maintenance, repair and overhaul of national highways. The Department also has the responsibility and authority to approve the design of basic construction works on national highways.

Since 1993, the new national highway system has a total length of 11,000km. By 2002, Vietnam's road system had a total length of 221,115km (this number increases annually, to date it is 221,596km), including:

- National highway: 15,824km; including 4,239 bridges/144,539m

- Provincial roads: 19,916km; including 3,640 bridges/79,279m

- District roads: 37,947km

- Commune roads: 134,463km

- Urban roads: 5,944km

- Dedicated road: 7,5021km.

Road transport today is creating a new look with full technical standards, modern advanced technology on par with the region and the world, demonstrated by the increasingly growing scale, increasingly improved quality, the network of bridges and roads being renovated, upgraded and newly built throughout the country. In particular, Vietnam has been building a network of expressways which are modern, standard roads and are a prerequisite for the modernization of a country.

3.1.2. The development situation of highways in some countries and in Vietnam

3.1.2.1. Highway development situation in some countries

Currently, there are over 80 countries and territories in the world with a highway network in operation with over 230,000km. Thanks to the highway network, it has promoted the formation of economic corridors and social development in the countries.

In European countries, the highway density is 10 – 45km/km2 and 50 – 130km/1 million people; currently in the US there are 88,800km of highway with a density of 9km/1000km2 and 380km/1 million people.

According to the experience of economically developed countries, in Europe, highways have been built since the beginning of the 20th century and the highway network in these countries has really contributed effectively to the country's rapid development. Currently, in the United Kingdom there are about 3,700km; in the Federal Republic of Germany there are about 11,700km; Finland, a relatively small country, also has about 600km of highways.

Table 3.1. Highway development situation in some European countries

Unit: Km

Water

Number of km of highway
United Kingdom	3,700
Federal Republic of Germany	11,700
Finland	600

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Source: World Bank, http://ppi.woldbank.org

In some Asian countries, there is a complete highway network, such as:

Table 3.2 Highway development status of some countries in Asia

Unit: Km

Country name

Number of highway kilometers	Year	Planning
China	41,000	2005	85,000
Japan	9,219	1998	11,530
Korea	3,400	2006	6.160

Source: World Bank, http://ppi.woldbank.org

after:

In Southeast Asian countries (ASEAN), the development of highways is as follows:

Table 3.3. Expressway development status of some ASEAN countries

Unit: Km

Country name

Number of highway kilometers	Year
Malaysia	1,492km	2005
Thailand	300km, Bangkok alone 171km	2005
Indonesia	472km	1998
Philippines	168km	1998

Source: World Bank, http://ppi.woldbank.org

Thus, the general trend is that the more developed the country, the more complete the highway network. The formation of the highway network will create socio-economic development corridors, contributing greatly to the development of all aspects of each country.

3.1.2.2. The development situation of expressways in Vietnam

Based on the trend of economic development and vehicle mechanization, the demand for highway traffic will continue to increase at a high speed, due to the requirement of not only increasing the competitiveness of the economy in terms of saving transportation time and reducing costs, but also highways combined with the road network also carry out the mission of trade, connecting regions in the country and the region in a unified entity.

In order to meet domestic demand as well as the rapid changes in the external environment, the Government has planned to develop the expressway network nationwide. Accordingly, focusing on studying transport development strategies in general and building feasible plans to develop the North-South expressway traffic corridors in particular is an important task of relevant ministries and branches.

When studying the development of highways in countries, a question is always asked: where does the capital for building highways come from? Through the experience of countries that have formed highway systems, the creation of capital for the construction and development of highways, many countries have allowed the private sector to participate in implementing highway construction projects, with the aim of diversifying capital sources. The State manages through a number of forms such as Government regulations on the ability to participate in projects, taxes, highway quality, etc. The following table shows the attraction of private sector participation in the development of the transportation system (in which the majority of capital is for highways) of countries:

Table 3.4. Private investment capital for transport development of regions from 1984 – 2006

Unit: Billion USD

Area

Investment level
East Asia and the Pacific	69.89
Europe and Central Asia	14.91
Latin America and the Caribbean	76.18
Middle East and North Africa	3.00
South Asia	13.82
Sub-Saharan Africa	10.04
Total	187.94

Source: World Bank, http://ppi.worldbank.org

According to the assessment of WEF (World Economic Forum), Vietnam's global competitiveness index (GCI) in the period of 2009 - 2010 ranked 75th (Vietnam's index was 70 in the period of 2008 - 2009). In which, the second pillar in the 12 pillars that make up the GCI index is infrastructure, in which highways play an important role. (Source: World Bank, http://ppi.woldbank.org)

Through analysis, comparison and evaluation, it shows that the quality of Vietnam's infrastructure compared to some countries in the region, the quality of Vietnam's infrastructure is the weakest in the region (compared to the countries being compared), Vietnam's ranking in road traffic is only ahead of the Philippines. This makes it impossible for Vietnam not to increase resources for investment in construction and development of infrastructure in general and roads and highways in particular, if Vietnam implements its strategic goals, wishing to integrate with the region and the world. Developing the highway network will also help Vietnam eliminate development bottlenecks, which is the problem Vietnam is currently facing.

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