Hanoi (VNA) – The nature of Public-Private Partnership (PPP) projects is sharing risks between the State and the private sector, therefore a detailed audit framework should be developed to ensure the projects are under tight management, according to Auditor General of the State Audit Office of Vietnam Ho Duc Phoc.

Specific audit framework needed for PPP projects: Auditor General hinh anh 1Auditor General of the State Audit Office of Vietnam Ho Duc Phoc (Photo: VNA)

At the National Assembly’s discussion session on a draft Law on PPP on November 11, Phoc held that “With the nature of the PPP projects, it is a must to carry out thorough inspections so that public assets are tightly controlled. Besides, the move is important to preventing violations like recent Build-Operate-Transfer (BOT) and Build-Transfer (BT) projects”.

According to the draft PPP law, the Government would have to commit to sharing with investors not more than half of the deficit between the actual revenue and committed revenue in the contract. Meanwhile, investors have to share with the Government not less than half of the increase in revenue between the actual revenue and committed revenue in the contract.

Phoc said the current regulations on inspection and auditing do not provide sufficient base for payment and risk sharing. Besides, except for specialised inspectors, provincial and Government inspectors are not allowed to examine PPP projects.

Article 80 of the draft law regulates that the State Audit carries out the audit of the use of public financial and public assets in PPP projects, which mean the audit agency only audits state capital used in infrastructure development, and that used in supporting facilities, compensation, and resettlement.

Regarding risks in the management of PPP projects, Vu Thi Luu Mai, a deputy from Hanoi, said PPP referred to voluntary economic agreements between the State and investors. Before signing the contract, investors must envision two factors - profit and risk - the greater the profit, the higher the risk.

The draft law on PPP that allowed investors to increase fees and extend the fee collection period would affect the interests of citizens, she said.

“In accordance with the draft law, the State will share 50 percent of the risk for large-scale projects. How will it be implemented?” Mai said.

Mai also suggested the compiling committee include provisions to determine the level of risk or which agency is authorised for risk identification.

Meanwhile, Deputy Ha Thi Lan Lan from northern Bac Giang province said, as regulated by the draft law, the State Audit Office only auditing State capital in resettlement projects was not reasonable because it was very difficult to control risks during the implementation of projects.

She said the SAV should cover projects related to public assets.

“Allowing the SAV to audit all PPP projects helps the State have more effective monitoring channels and certainly does not affect investor attraction," Lan said.

Regarding PPP scale, Minister of Planning and Investment Nguyen Chi Dung said that PPP project should be large enough to attract investors, particularly foreigners.

Therefore, the total investment of a PPP project as stipulated in the draft law is not lower than 200 billion VND (8.6 million USD), he added.

However, deputy Nguyen Thanh Hien of central Nghe An province said that big and long-term investment normally pose considerable risk while there is short of mechanisms to protect the investors.

The audit law has been a hot issue in recent National Assembly sessions after results of BOT projects were announced, he affirmed, suggesting auditors must engage in projects using public capital.

Hien said that the stipulated minimum capital for a PPP project was unreasonable as many projects such as waste treatment and market do not need huge investment capital.

Deputies Tran Hoang Ngan and Pham Phu Quoc from Ho Chi Minh City said that careful consideration must be made for the minimum level, holding the amount of capital depends largely on different investment fields, interest rate and inflation rate, among others./.