Recently, the Government issued Decree 28/2021/ND-CP on financial management of investment projects under the public-private partnership (PPP) mode. Decree 28 is believed to address some limitations and remove obstacles for PPP projects.

Decree 28 stipulates financial management of PPP-based investment projects, including financial plan for a PPP project, bond issuance for a PPP project company; management and use of State-funded capital in a PPP project; financial settlement for completed works and infrastructure systems; order and procedures for property handling and transfer of infrastructure works and systems to competent governmental agencies; and share of increased and decreased revenue.

Compared with previous regulations, the new ruling has many new contents: Cash flow in the financial plan of PPP projects is the after-tax cash flow. This regulation aims to fully reflect project costs (tax costs) and ensures consistency in project financing projection.

At the same time, Decree 28 removes the upper limit capped lending interest rates as prescribed in previous regulations so as to bring lending rates closer to actual rates in the credit market and really reflect investment costs.

The decree also stipulates the funding source for PPP projects by PPP investors and enterprises, in which the equity of PPP investors is the equity of an independent legal entity or a consortium of independent legal entities.

Regarding bond issuance for PPP projects, companies may only issue bonds after they sign PPP contracts and must comply with the PPP Law, the law on offering and trading corporate bonds in private placement in the domestic market and offering bonds to the international market. Decree 28 stipulates conditions for bond issuance of PPP companies in a stricter direction, helping minimize risks for bond buyers.

Decree 28 was designed to improve PPP investment policies, gradually approach international practices and Vietnam's conditions to create a favorable and attractive environment for financially capable investors. Accordingly, contracting parties are responsible for confirming the volume and value in payment documents for State capital to support construction, infrastructure and payment for enterprises that provide public products and services. This new regulation ensures the principle that contracting parties are fully responsible to the government and PPP project companies. In addition, payment provisions are built to respect PPP contracts.

In particular, to draw capable investors for PPP projects, Decree 28 specifically provides the sharing of increased and decreased revenue in PPP companies and the State Budget; order and procedures for competent authorities to consider and decide on the use of the budget reserve to settle payment for PPP project enterprises; and payment order and procedures for the sharing of reduced revenue from State budget reserves.