The Law on Investment under the Public-Private Partnership (PPP Law) 2020, which came into force on January 1, 2021, included a provision prohibiting the implementation of new BT projects. Existing BT project contracts signed before this effective date will remain enforceable according to their original terms.
A number of BT projects initiated prior to the implementation of the PPP Law have faced challenges, remain incomplete, and have yet to identify viable solutions. This situation has inadvertently resulted in significant waste.
The occurrence of delayed payments and modifications to payment methods has resulted in substantial financial detriment to investors in BT projects, leading to the stagnation of numerous projects. Consequently, some investors have been compelled to pursue legal recourse against the government.
For instance, the Prime Minister approved investment in a BT contract to upgrade the DT647 road connecting Phu Yen and Gia Lai provinces. The section of the project through Phu Yen Province has a total capital of VND4,662 billion (US$183,505,086).
The project's objective is to contribute to the enhancement of connectivity and the promotion of trade, economic, social, and cultural development between Phu Yen and Gia Lai provinces specifically, and between the Central Highlands region and the South Central Coast region more generally.
In particular, the project aims to facilitate travelling of ethnic minorities groups who live on both sides of the road between Phu Yen and Gia Lai as well as create condition for their cultural exchange and rescue and relief works if natural disasters hit the two regions. In July 2015, the project started construction, and completed phase 1 in June 2020, but was then interrupted.
Chairman Nguyen Van Minh of the Phu Mo Commune People's Committee highlighted that the construction of the DT647 route will facilitate trade between the Central Highlands and the South Central regions. Additionally, it will aid in rescue operations for people in mountainous areas affected by floods and landslides.
Upon reviewing the documents, it is noted that the project to upgrade the DT647 road, connecting the provinces of Phu Yen and Gia Lai, was approved by the Prime Minister in mid-December 2009 under the BT form. The Ministry of Planning and Investment and the Ministry of Finance included this project in the list of proposals to utilize government bond capital for the period of 2011-2015 to support the province.
The People's Committee of Phu Yen Province on December 30, 2011 issued a decision approving the investment project and simultaneously entered into a contract with Phu Yen - Gia Lai BT Investment Company Limited for the implementation of a two-phase project, encompassing a total length of 61 kilometers. The project was to be financed through government bonds issued during the periods 2011-2015 and 2016-2020, with a total investment of over VND4,660 billion.
The project has neither received funding approval from the Prime Minister, nor has it been permitted to continue implementation. As a result, the People's Committee of Phu Yen Province has reported to the Prime Minister, requesting permission to proceed with the project's implementation in accordance with Resolution No. 140/NQ-CP in 2018. Accordingly, phase 1 of the project is still implemented under the BT contract with a length of 31.5km.
Phase 1 of the project was completed and handed over for use in June 2020. By March 2021, the People's Committee of Phu Yen province had paid the investor over VND1,300 billion, which accounts for 85 percent of the contract value.
During a period of stagnation in Phu Mo Commune, a legal dispute emerged between Phu Yen - Gia Lai BT Investment Company Limited and the People's Committee of Phu Yen Province concerning the terms of the BT contract. The investor initiated legal proceedings against the People's Committee, seeking compensation amounting to 15 percent of the contract value, exceeding VND230 billion due to extensions to the project timeline.
The People's Court of Tuy Hoa City has accepted the case filed by the investor. Regarding phase 2 of the project, the Ministry of Planning and Investment announced in July 2020 that the BT contract would not be continued, citing the provisions of the PPP Law.
Prior to the implementation of the PPP Law, the Department of Transport and Department of Construction in Da Nang City had the authority to sign BT project contracts. Under this authority, they have implemented 18 BT projects in the city.
Among these, five projects invested by Da Nang - Central Investment Joint Stock Company and Traffic Construction Joint Stock Company are encountering payment difficulties for transport projects implemented in the BT form. These projects include the Technical Infrastructure Project of Phuoc Ly 2 Resettlement Area, the HTKT Project of Phuoc Ly 6 Resettlement Area, the HTKT Project of Hoa Lien 5 Resettlement Area, the Le Trong Tan Road Project, and the Tran Hung Dao Road Extension Project (section from Zone 4 of the New Urban Area Nam Tien Son Bridge to the border of Zone X4 - Hoa Hai 2 Resettlement Area).
Previously, in late 2016, the Da Nang City's People's Committee issued an official dispatch agreeing to a payment method involving investor self-funding of the project. In exchange, the city government would allocate land to the investors without requiring a public auction.
However, a review of Decree 160/NQ-CP dated December 28, 2018 revealed that the proposed adjustment of the payment method from cash to land allocation without auction did not meet the necessary legal criteria. Therefore, Da Nang City’s People’s Committee consented to the modification of the payment method for the projects, reverting to the original cash payment terms as outlined in the contracts signed between the Department of Construction, the Department of Transport, and relevant investors.
The investors, having agreed to a cash payment method, proposed adding profits and interest to the project in order to minimize their losses.
However, legal documents related to determining financial indicators have expired but policy-makers have not issued new ones to replace the old files; as a result, the implementation of the application bumped into bottleneck.
Due to the failure to reach an agreement, Da Nang - Central Investment Company and Traffic Construction Company filed a petition in May 2022 suing the Da Nang City People's Committee over a dispute regarding the BT contract. After more than two years of litigation, the case remains stalled, leaving the businesses facing significant difficulties as substantial capital is tied up in the projects.
