Review regulations and

assess their impact on

PPP implementation in
the education - training
sector
March 2024

Copyright Castalia Limited. All rights reserved. Castalia is not liable for any loss caused by reliance on this document.
Castalia is a part of the worldwide Castalia Advisory Group.
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TABLE OF CONTENTS
Definitions

Introduction

Legislation Applicable to PPP Projects in Education-Training Sector

A. Legislation Applicable to PPP Projects

B. Sector-specific Legislation Applicable to PPP Projects in Education-Training

Sector

Section 1: Brief Overview of the Implementation of PPP Projects in the Education-

Training Sector

Section 2: Legal Framework for Implementing PPP Projects in Education-Training Sector

A. Legal Challenges and Constraints of PPP Projects in Education-Training

Sector

I. Investment sectors and types of services for PPP projects in the

education-training sector

II. Public product and service prices and fees of PPP projects in the
education-training sector

III. State capital for payment to PPP project enterprise for the provision of
public services and products under the BLT contract

IV. Investment incentives for project enterprises implementing PPP projects

B. Legal Challenges and Constraints of the Implementation of PPP Projects in

All Sectors

I. Early termination payment

II. Governing law of the PPP project contract

III. Allocation of State capital support to projects according to legal

regulations

IV. Revenue increase and decrease sharing mechanism

V. Responsibility of the PPP project contracting authority in relation to site

clearance

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Definitions
BOT Built – Operate – Transfer

BLT Built – Lease – Transfer

BT Built – Transfer

MOET Ministry of Education and Training

PC People’s Committee

PPP Public-Private Partnership

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Introduction
1. The Asian Development Bank (“ADB”), under the Knowledge and Support
Technical Assistance (“KSTA”) for Public-Private Partnerships, Private Sector
Development, and State-Owned Enterprise Reform for Vietnam, has contracted a
consortium of Castalia to support the Ministry of Education and Training
(“MOET”) in development of a circular to guide implementation of investments
in the forms of public-private partnership (“PPP”). Castalia has contracted a
subcontract to Mr. Chung Le (hereinafter referred to as “the Consultant”) to
carry out some tasks under the abovementioned consortium.

2. The Consultant is requested to carry out the following tasks:

Ÿ Task 1. Review regulations and assess their impact on PPP implementation,

including challenges and constraints in the education training sector.

Ÿ Task 3. Support MOET in developing the circular, including (i) support in

preparing the PPP contract template, (ii) comments on the outlines and
contents of the draft circular, and (iii) support the Team Leader in responding
to comments that relate to legal regulations.

Ÿ Task 4. Support MOET in organizing and facilitating the consultation

workshops during the preparation and finalization of the PPP circular,
including (i) participating in consultation workshops and (ii) presenting on the
Task 1 Report.

3. This is the Task 1 Report presenting the reviews of Castalia and the Consultant
(hereinafter referred to as “we”) of Law on PPP 2020, Decree 35/2021/ND-CP
detailing and guiding the implementation of the PPP Law, Decree 28/2021/ND-
CP on the financial management mechanism of the PPP projects and other
related legal documents in the education-training sector; identifying legal
challenges and constraints in implementing PPP projects in the sector and
recommending appropriate policies and legal provisions to address those
challenges.

4. This report is structured with the following sections:

Ÿ A list of relevant laws on PPP projects and other relevant regulations in the
education-training sector.

Ÿ Section 1 is a brief overview of the implementation of PPP projects in the

education-training sector.

Ÿ Section 2 is an assessment of the legal framework for implementing PPP

projects in the education-training sector, including:

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A. Legal challenges and constraints of PPP projects in the education-

training sector.

B. Legal challenges and constraints of PPP projects in all sectors.

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Legislation Applicable to PPP Projects in

Education-Training Sector
A. Legislation Applicable to PPP Projects

5. The implementation of the PPP project is regulated by a number of legal

documents issued by competent authorities. Below is the list of legal documents
reviewed in this Report, including:

Ÿ Law on Public-Private Partnership No. 64/2020/QH14 of National Assembly

dated 18 June 2020 (“PPP Law 2020”);

Ÿ Decree No. 35/2021/ND-CP of the Government dated 29 March 2021 Detailing

and Guiding the Implementation of the Public-Private Partnership Law
(“Decree 35/2021/ND-CP”);

Ÿ Decree No. 28/2021/ND-CP of the Government dated 26 March 2021 on the

Financial Management Mechanism of the Public-Private Partnership Projects
("Decree 28/2021/ND-CP");

Ÿ Circular No. 08/2022/TT-BTC of the Ministry of Finance dated 9 February 2022

on the Management and Use of Revenues and Expenditures in the Investor
Selection Process ("Circular 08/2022/TT-BTC"); and

Ÿ Circular No. 09/2021/TT-BKHDT of the Ministry of Planning and Investment

dated 16 November 2021 providing guidelines for the Selection of Investors
for Executing Public-Private Partnership Projects and Investment Projects
involving Land use ("Circular 09/2021/TT-BKHDT").

B. Sector-specific Legislation Applicable to PPP Projects in Education-Training

Sector

6. In addition to the PPP legal documents, a PPP project in the education-training

sector is also subject to other sectoral legal documents. Below is the list of
sectoral legal documents reviewed in this Report, including:

Ÿ Education Law No. 43/2019/QH14 of the National Assembly dated 14 June

2019 (“Education Law 2019”) and other legal guiding documents;

Ÿ Higher Education Law No. 32/2013/QH13 of the National Assembly dated 10

December 2018, amended and supplemented by Law No. 34/2018/QH14
dated 19 November 2018 ("Higher Education Law 2012");

Ÿ Decree No. 24/2021/ND-CP of the Government dated 23 March 2021 on

Management in Public Preschools and Public Primary Schools ("Decree
24/2021/ND-CP");

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Ÿ Decree No. 81/2021/ND-CP of the Government dated 27 August 2021 on the

Collection and Management of Tuition Fees of Education Institutions Affiliated
with the National Education Program; Policies on Tuition Fee Exemption,
Reduction, and Financing for Learning Fees; Service Fees in Education and
Training Sector; amended and supplemented by Decree No. 97/2023/ND-CP
("Decree 81/2021/ND-CP");

Ÿ Decree No. 60/2021/ND-CP of the Government dated 21 June 2021 on the

Financial Autonomy Mechanism of Public Non-business Units ("Decree
60/2021/ND-CP");

Ÿ Decree No. 32/2019/ND-CP of the Government dated 10 April 2019 on the

Assigning Task, Placing Order and Tendering for Public Products and Services
Funded by the State Budget’s Regular Expenditures ("Decree 32/2019/ND-
CP");

Ÿ Circular No. 14/2019/TT-BGDDT of the MOET dated 30 August 2019, providing

guidelines for Formulation, Appraisal, and Promulgation of Economic and
Technical Norms in the Education and Training Sector and Methods Used to
Determine Education Service Fees ("Circular 14/2019/TT-BGDDT");

Ÿ Management and Use of Public Property Law No. 15/2017/QH14 of the

National Assembly dated 21 June 2017 (“Management and Use of Public
Property Law 2017”) and other legal guiding documents;

Ÿ State Budget Law No. 83/2015/QH13 of the National Assembly dated 25 June
2015 ("State Budget Law 2015") and other legal guiding documents;

Ÿ Public Investment Law No. 39/2019/QH14 of the National Assembly dated 13

June 2019 ("Public Investment Law 2019") and other legal guiding documents;

Ÿ Prices Law No. 16/2023/QH15 of the National Assembly dated 19 June 2023
("Prices Law 2023") and other legal guiding documents;

Ÿ Investment Law No. 61/2020/QH14 of the National Assembly dated 17 June

2020 ("Investment Law 2020") and other legal guiding documents;

Ÿ Land Law No. 45/2013/QH13 of the National Assembly dated 29 November

2013 ("Land Law 2013") and other legal guiding documents;

Ÿ Corporate Income Tax Law No. 14/2008/QH12 of the National Assembly dated
3 June 2008, amended and supplemented by Law No. 32/2013/QH13 dated 19
June 2013 ("Corporate Income Tax Law 2008") and other legal guiding
documents; and

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Ÿ Fees and Charges Law No. 97/2015/QH13 of the National Assembly dated 25
November 2015 (“Fees and Charges Law 2015”) and other legal guiding
documents.

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Section 1: Brief Overview of the

Implementation of PPP Projects in the
Education-Training Sector
7. The level of PPP investment in education in Vietnam, before and after the PPP
Law 2020, remains relatively low, with fewer implemented projects compared to
other sectors, such as transportation infrastructure and energy.

8. Before promulgating the PPP Law 2020, education was first recognized as an
investment sector under the PPP form in Decree No. 15/2015/ND-CP of the
Government dated 14 February 2015 on PPP. According to information provided
by Report No. 25/BC-CP of the Government dated 30 January 2019 on the
Summary of PPP Project Status, by 2019, the number of PPP projects in the
education sector was only 06, accounting for a relatively small proportion of the
total 336 executed PPP projects (1.79%). The figure for the education sector is
also relatively modest compared to other sectors, i.e., 220 projects in
transportation; (ii) 18 projects in energy; (iii) 5 projects in the infrastructure of
industrial parks and economic zones; (iv) 11 projects in culture and sports; (v) 32
projects in technical infrastructure; (vi) 20 projects in office building construction
and other sectors. Moreover, all 6 PPP projects in the education sector were
made under the BT contract form. However, the PPP Law 2020 no longer
stipulates BT as a form of PPP project contract.

9. In addition, according to the statistics published by the Department of Planning

and Investment in Ho Chi Minh City,1 as of June 2020, Ho Chi Minh City has 7 PPP
projects in the education sector carrying out investment procedures but have not
reached the execution of contracts. They include five projects for school
construction, one project for constructing a new thematic exhibition and
experience area, and one project for constructing a multi-functional sports area.
The contract forms used in the projects include BT, BOT, and one project with an
undetermined contract form.

10. Since the promulgation and enforcement of the PPP Law 2020 until now, there
has not been much progress recorded in investment in the education sector in
PPP form. PPP projects in education-training are mainly at the stage of calling for
investment.

11. According to the Report on Researching the Scientific and Practical Basis to
Propose Investment Policy of PPP in Education carried out by the Vietnam

1
Appendix 01, List of investment projects in the form of public-private partnership - PPP,
http://www.dpi.hochiminhcity.gov.vn/TinTuc/dautubotbtbtoppp/lists/posts/post.aspx?
CategoryId=2&ItemID=58&PublishedDate=2015-11-09T08:10:00Z (last accessed on 24 March 2024).

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National Institute of Educational Sciences,2 as of 2022, in the two surveyed areas

of Quang Ninh and Hai Phong provinces, no PPP project in education had been
successfully implemented. In Quang Ninh province, Ha Long City is planning to
implement PPP at three schools, among which the PPP investment project in
Quang La Elementary School aims to construct and upgrade school infrastructure
and install new facilities and equipment.

12. In Hanoi City, the National University of Hanoi has developed a List of PPP
projects planned for investment in the 2022 – 2025 period to build the “5-in-1”
university town model. The “5-in-1” university model comprises a talent training
centre; a modern research and technology transfer centre; an innovation centre
at national and international level; a smart and modern university city; a centre
for PPP testing and research training.3

13. In Ho Chi Minh City, at the 13th session of the Ho Chi Minh City People’s Council,
a list of 41 projects to call for investment in PPP form, attached with Proposal No.
6072/TTr-UBND of the City’s PC dated 2 December 2023, was approved. Among
them, 12 projects in the education and training sector are made under BOT
contract form, mainly aiming to construct new schools and install educational
equipment.

2
Nguyen Hoai Thu (principal investigator) (2022), “Research the Scientific and Practical Basis to Propose
Investment Policy of PPP in Education”, Report summarizing ministerial-level science and technology
tasks, The Vietnam National Institute of Educational Sciences, Hanoi.
3
Hanoi National University calls for investment promotion for sustainable development,
https://foundation.vnu.edu.vn/tin-ve-quy-phat-trien/dai-hoc-quoc-gia-ha-noi-keu-goi-xuc-tien-dau-tu-
phat-trien-ben-vung.html (last accessed on 21 March 2024).

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Section 2: Legal Framework for

Implementing PPP Projects in Education-
Training Sector
A. Legal Challenges and Constraints of PPP Projects in Education-Training Sector

I. Investment sectors and types of services for PPP projects in the education-
training sector

14. The essence of public-private partnership in PPP projects is the private investors’
involvement in providing public products and services and being allowed to
recover their capital and make a profit from their investment and business
activities. From the investor's perspective, in addition to providing public
products and services, investors will be concerned about the financial feasibility
and profitability of the project. The investment sectors and types of services that
a PPP project is allowed to provide will be important factors in determining the
financial feasibility and profitability of the project.

15. Regarding PPP projects in the education-training sector, the investment sectors
are regulated in relevant legal documents, including the PPP Law 2020 and
Decree No. 35/2021/ND-CP. Specifically:

16. Article 3.9 of the PPP Law 2020 defines the PPP project as follows:

“PPP project is a set of initiatives related to the investment to provide public

products and services through the implementation of one or the following
activities:

a) Construction, operation, and business of infrastructure works and systems;

b) Renovation, upgradation, expansion, modernization, operation, and business of

available infrastructure works and systems;

c) Operation and business of available infrastructure works and systems.”

17. From the above definition of a PPP project, it can be understood that the
objective of a PPP project is to "provide public products and services" through
the “business of infrastructure works and systems." The "infrastructure works
and systems" that the project enterprise is allowed to operate are those that are
newly constructed, renovated, upgraded, expanded, modernized, or operated by
the PPP project.

18. From the understanding above, the business activities of a PPP project are
closely linked to two factors. First, those business activities are aimed at "
providing public products and services." Second, those business activities must

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be carried out through the construction, renovation, upgrading, expansion,

modernization, or operation of "infrastructure works and systems." In other
words, a PPP project must involve the construction, renovation, upgrading,
expansion, modernization, or operation of "infrastructure works and systems."

19. Article 2.5(a) of Decree 35/2021/ND-CP prescribes investment sectors of PPP

projects as follows:

“Sectors: infrastructure, facilities, equipment serving education – training and

vocational education activities;4”

20. The investment sectors of a PPP project in the education-training sector are
mainly focused on the element of “infrastructure, facilities, equipment serving
education–training activities.” Accordingly, a PPP project in the education-
training sector must include investments in “infrastructure, facilities,
equipment,” and these “infrastructure, facilities, equipment” must “serve
education-training activities.”

21. When reading together the definition of a PPP project and the investment
sectors of a PPP project in the education-training sector, as analyzed above, it
seems that a reasonable understanding of a PPP project in the education-training
sector is a project related to investment in construction, renovation, upgrading,
expansion, modernization or operation of "infrastructure, facilities, equipment"
to provide “public products and services” to “serve education-training activities”.

22. More specifically, a PPP project in the education-training sector should meet two
conditions. First, it must be carried out through investment in the construction,
renovation, upgrading, expansion, modernization, or operation of
"infrastructure, facilities, equipment." Second, it must aim to provide "public
products and services" to "serve education-training activities" through the
operation and business of such "infrastructure, facilities, equipment.”

23. According to the above analysis of PPP projects in Article 9.3 of the PPP Law 2020
and the investment sectors for PPP in the education-training sector in Article
5.2(a) of Decree 35/2021/ND-CP, it can be said that the services of a PPP must be
provided “through the implementation of one or the following activities” of
construction, renovation, upgrading, expansion, modernization, or operation of
"infrastructure, facilities, equipment”. In other words, the services a PPP project
provides must relate to the characteristics and function of the infrastructure
works and systems that are constructed, renovated, and/or operated by the PPP
project. However, in current regulations, the criteria for assessing the “degree of
relevance” seem not to be clearly defined and, therefore, will depend on the
interpretation of the relevant competent authorities.

4
This Report will only review legal provisions of PPP in education-training activities under the
management of MOET and will not review education-training activities under the management of
Ministry of Labor - Invalids and Social Affairs.

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24. If the understanding above is applied, a project that does not involve the
construction, renovation, upgrading, expansion, modernization, or operation of
"infrastructure, facilities, equipment" will not be considered a PPP project.

25. In regard to PPP projects in the education-training sector involving the

construction, renovation, upgrading, expansion, modernization, or operation of
"infrastructure, facilities, equipment", the question arises as to what types of
services such projects are allowed to provide.

26. Applying the understanding of PPP projects in the education-training sector as

presented in paragraphs 21 and 22 above, a service will fall within the
investment sectors of a PPP project in the education-training sector if that
service is considered a "public products and services" to "serve education-
training activities". In other words, a service will fall within the investment
sectors of a PPP project in the education-training sector if that service
simultaneously meets the conditions to be considered a "public service" and to
"serve education-training activities".

27. Within the scope of this Report, we have not been able to find an official legal
definition or interpretation of the above concepts in the context of PPP
investment. In the absence of definition and interpretation in legal documents,
the meaning of those terms will depend on the interpretation and application by
the competent authorities during the negotiation and execution of PPP
contracts, as well as the licensing of PPP projects in the education-training
sector. To illustrate, we present two possible interpretations of the term "serve
education-training activities". According to the first interpretation, which seems
a broad interpretation, "public products and services" to "serve education-
training activities" may include the service of "education-training" itself.
According to the second interpretation, which seems a narrow interpretation,
"serve education-training activities" only include services that are "serving", that
is, supporting and assisting the "education-training" service without including the
"education-training" service itself.

28. To further clarify the question of what types of services PPP projects in the
education and training sector are allowed to provide, we will analyze three
groups of public services as follows:

(i) Group 1 – Public services directly related to infrastructure, facilities, and

equipment serving education – training activities: such as business of
lecture halls to provide classrooms; dormitories to provide accommodation
for students; gyms, stadiums for physical education; cafeteria for day-
boarding; laboratories, high-tech rooms for research and practice activities;
equipment such as computers, technological machineries, office supplies to
serve education-training activities, etc.

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(ii) Group 2 – Public auxiliary services such as sanitation, security and

guarding, providing day-boarding meals, student transportation, etc.

(iii) Group 3 – Public teaching-training services such as curriculum design,

education initiative provisions, or providing teachers to teach subjects in
schools.

29. First, Group 1 comprises services directly related to the characteristics and
function of the infrastructure works and systems constructed, renovated, and/or
operated by the PPP projects. Second, Group 1 services have a characteristic of
“serving” to “education-training activities”. With this argument, regardless of
whether the term “serve education-training activities” is interpreted broadly or
narrowly, as analyzed in the paragraph 27 above, it is reasonable to view that
Service Group 1 may be considered as meeting the investment sector of PPP
project in the education-training sector as stipulated in Article 2.5(a) Decree
35/2021/ND-CP.

30. Regarding Group 2, it can be argued that some services within Service Group 2,
such as maintenance, security and guarding, environmental sanitation, etc., are
necessary auxiliary services closely related to the operation of the infrastructure
works and systems, ensuring the normal functioning of the facilities. Thus, these
services in this Group may be considered “public services” to “serve education-
training activities.” However, there is no provision specifying whether the scope
of services allowed to be provided includes these services.

31. Regarding the remaining auxiliary services in Service Group 2, such as providing
boarding meals, food and drinks for students, and student transportation
services, it can be argued that these services have no direct relation to the
characteristics and function of the infrastructure works and systems constructed,
renovated, and/or operated by the PPP projects. Therefore, it remains unclear
whether such services meet the definition of a PPP project as stated in Article 3.9
of the PPP Law 2020 and the investment sector under Article 2.5(a) of Decree
No. 35/2021/ND-CP.

32. Similarly, regarding Group 3 related to teaching–training services, the services in

this group are no longer directly related to the characteristics and function of the
infrastructure works and systems constructed, renovated, and/or operated by
the PPP projects; thus, they seem not to fall within the investment sectors for a
PPP project in the education-training sector. However, the conclusion on this
issue still depends on the interpretation of the criteria to evaluate the "degree of
relevance" of the infrastructure works and systems constructed, renovated,
and/or operated by a PPP project as analyzed in paragraph 23 above.

33. In addition, for the activity of "teaching", since this is an "educational-training

activity", it would not be reasonable to argue that this is a service that "serves"
“educational and training activities”. Therefore, only when the term "public

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products and services" to "serve education and training activities" is interpreted

in a broad sense, that is, including the "education-training" service itself, then
"teaching" can be considered a service within the investment sectors of the PPP
project in the field of the education-training sector.

34. Lastly, a question that may arise is whether the investor or the PPP enterprise
holding the ownership of the infrastructure works and systems constructed,
renovated, or operated by the PPP project affects the scope of services that the
project is allowed to provide. In other words, in terms of the services that a PPP
project in the education-training sector is allowed to provide, is it different from
those in the case that the infrastructure works and systems constructed,
renovated, or operated by the PPP project are public properties under the
management of the State?

35. From the Management and Use of Public Property Law 2017 perspective, if
infrastructure works and systems are recognized as public properties under
Article 4.1 of the Management and Use of Public Property Law 2017, the use of
those infrastructure works and systems will also be subject to the regulation of
the Management and Use of Public Property Law 2017.

36. However, from the perspective of the PPP Law 2020 and Decree 35/2021/ND-CP,
the scope of services that a PPP project in the education-training sector is
allowed to provide depends on how the project in the education-training sector
is defined, as well as related terms such as "public products and services" to
"serve education and training activities," as analyzed above.

37. In a PPP project in the education-training sector, the fact that investors and
project enterprises own the infrastructure works and systems, or those
infrastructure works and systems are public properties under the State’s
management, will neither directly affect the definition of PPP project in the
education-training sector, nor related terms such as “public products and
services” to “serve education-training activities”. In other words, in our opinion,
there is no reasonable basis to conclude that the ownership of investors or
project enterprises over the infrastructure works and systems constructed,
renovated, or operated by the PPP project affects the scope of public services
that the PPP project is allowed to provide.

38. Recommendation: Consider providing a comprehensive definition of a PPP

project in the education-training sector and criteria to evaluate the required
"degree of relevance" between a service and the infrastructure works
constructed, renovated, or operated by the PPP project in order to establish the
basis for determining the services that PPP project is allowed to provide, as well
as explaining related terms such as "public products and services" to "serve
education-training activities".

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II. Public product and service prices and fees of PPP projects in the education-
training sector

39. The prices and fees applicable to the products and services provided by a PPP
project will be an important factor in considering the financial feasibility and
profitability of the project. In the education-training sector, the regulations on
service prices are relatively complex; however, there has been no specific
guidance for determining the prices of these services for PPP projects.

40. First, prices and fees for public products and services as prescribed in Article 65.1
and Article 65.3 of the PPP Law 2020 as follows:

“1. Prices or fees of public products and services, conditions, procedures, and
adjustments shall be specified in PPP contracts according to the principle of
ensuring the interests of investors, the PPP project enterprises, the users, and the
State facilitating investors or PPP project enterprises to recover capital and make
profits. The pricing plan and price of public products and services, according to the
terms of a PPP project contract, must specify the initial price and the price
variations for each specific period to ensure accuracy, completeness, public
disclosure, and transparency of the price determinants.

….

3. The agreement on and adjustment of public product and service prices and fees
for each period in a PPP project contract must comply with the law on prices and
fees.”

41. Pursuant to Article 65.1 of the PPP Law 2020, prices and fees of public products
and services will be agreed upon in the PPP contract based on the principle of
ensuring the interests of investors, the PPP project enterprises, users and the
State, facilitating investors or PPP project enterprises to recover capital and
make profits. However, under Article 65.3 of PPP Law 2020, the agreement on
and adjustment of public product and service prices and fees must comply with
the law on prices and fees.

42. In the education-training sector, service prices are subject to the Prices Law
2023, Decree 81/2021/ND-CP, and other related legal guiding documents.

43. Article 22.1(c) of the Prices Law 2023 stipulates the principle for adjusting prices
of public products and services in PPP projects as follows:

“c) Considering and adjusting prices upon changes to price determinants.

Adjusting the prices of public products and services in investment projects in
public-private partnership form shall be carried out for each period specified in the
contracts.”

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44. Thus, the Prices Law 2023 recognizes the principle of price adjustment by, and in
accordance with, the contract for the prices of public products and services the
PPP project provides.

45. Decree 81/2021/ND-CP stipulates the service prices in the education-training

sector with a general principle of pricing in Article 5 as follows:

“1. Prices for services in the education and training sector are determined
according to provisions of the law on prices and regulations of the Government on
financial autonomy of public non-business units.

2. Prices for services in the education and training sector shall be revised
according to an appropriate roadmap corresponding to the quality of education
and training services, but the rate of increase in service prices must not exceed
15% per year.

46. Decree 81/2021/ND-CP does not provide separate provisions guiding the service
prices applicable to PPP projects in the education-training sector.

47. The following issues may arise when applying the provisions on service prices in
the education-training sector under current legal documents to the services of a
PPP project.

48. First, regarding Decree 81/2021/ND-CP, this Decree only regulates prices for
services in education and training in the cases of assigning tasks, placing orders,
and tendering using the state budget from regular expenditure sources pursuant
to Decree 32/2019/ND-CP.5 Therefore, there are no specific regulations to
determine the educational service prices in PPP projects that are not funded by
the state budget from regular expenditure sources, e.g., PPP projects are not
funded by the state budget.

49. Second, regarding Decree 60/2021/ND-CP on the Financial Autonomy

Mechanism of Public Administrative Units, this Decree only regulates the prices
and fees of public services funded by the state budget.6 For the public-private
partnership form, Article 25.6 of Decree 60/2021/ND-CP only refers to PPP laws
without providing any further detailed regulations.

“6. The borrowing capital or mobilization of capital by joint venture, cooperation,

or association activities in the form of public-private partnership shall comply with
the regulations of the law on investment in the form of public-private
partnership.”

50. Third, regarding Circular No. 14/2019/TT-BGDDT guiding on economic and

technical norms and methods to determine educational service prices, this
5
Article 27.1 of Decree 81/2021/ND-CP.
6
Article 3.3 and Article 5 of Decree 60/2021/ND-CP.

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Circular only provides guidance to entities participating in the forms of tenders,

placing orders, and assigning tasks to provide education and training services
funded by the state budget.7 Therefore, this Circular does not apply to PPP
projects in the education-training sector that do not use funds from the state
budget.

51. Based on the relevant legal provisions reviewed above, no explicit provisions in
sector-specific legislation in the education-training sector guide the
determination of public educational services prices provided by PPP projects.
Current regulations on service prices in the education sector are diverse and
complex, different between educational levels and project funding sources, and
provided in different legal documents.

52. Recommendation: Consider supplementing provisions guiding the education-

training service prices in PPP projects.

III. State capital for payment to PPP project enterprise for the provision of public
services and products under the BLT contract

53. In some countries, BLT is a popular form of contract for implementing PPP
projects in education. However, implementing PPP projects in BLT contracts in
Vietnam will encounter several issues relating to the State capital for payment to
PPP project enterprises.

54. Pursuant to Article 7.3 of Decree 28/2021/ND-CP, State capital allocated for
payment under this form of contract includes:

(i) Public investment capital allocated in the medium-term and annual public
investment plans to pay for investment costs of PPP projects; and

(ii) Regular expenditure capital of State budget allocated in annual budget

estimates and revenues (if any) of the PPP project to pay for operating
costs of the PPP project enterprise.

55. Regarding the payment by public investment capital, Article 74.4 of the PPP Law
2020 prescribes that public investment capital used in a PPP project shall be
integrated into the annual and medium-term public investment plans. Pursuant
to Public Investment Law 2019, a medium-term public investment plan is usually
made for a period of five years.8 Thus, the payment to PPP project enterprises
under BLT contracts will be approved based on both the five-year and annual
plans. In case the project contract lasts longer than a five-year period of the
initial medium-term plan, the public investment capital may be allocated in the
next medium-term periods.
7
Article 1.2(c) of Circular 14/2019/TT-BGDDT.
8
Article 46.1 of the Public Investment Law 2019.

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56. The term of BLT contracts usually lasts from 20 to 30 years, longer than the five-
year period of the approved initial medium-term public investment plan. As a
result, public investment capital used in a PPP project will be subject to the
approval of the competent authorities every five years. Meanwhile, pursuant to
Article 47.1 of Public Investment Law 2019, the mid-term public investment plan
made in the previous stage is only one of the bases for developing mid-term
public investment plans for the next periods. PPP legislation does not provide a
mechanism to guarantee that the public investment capital for payment to PPP
project enterprises will continue to be allocated and paid in the next medium-
term periods throughout the contract term.

57. In addition, the adjustment of the public product and service prices and fees
under the BLT contract in the middle of a medium-term period seems
complicated because it is subject to the approval of the five-year medium-term
public investment plan.

58. Recommendation: Consider supplementing provisions allowing the approval and

allocation of public investment capital to pay PPP project enterprises providing
public services under BLT contracts appropriate with the approved and agreed
project contract term.

IV. Investment incentives for project enterprises implementing PPP projects

59. Investment incentives are an important factor investors consider and evaluate
when making investment decisions. Investment incentives can help PPP project
enterprises reduce costs, enhancing the project's financial feasibility and
profitability, especially given the characteristics of PPP projects in the education
sector, where the revenue from public products and services prices and fees may
still be limited.

60. Based on our review, we suggest that several provisions regarding investment
incentives for PPP projects in the education sector need to be clarified further.

61. First, regarding the investment incentives for higher education, Article 16.1(i) of
the Investment Law 2020 on business lines eligible for investment incentives
stipulates as follows:

“1. Business lines eligible for investment incentives:

i) Pre-school education, primary education, vocational education, higher

education;”

62. Accordingly, the business lines eligible for investment incentives under this Law
include (i) preschool education, (ii) primary education, (iii) vocational education,
and (iv) higher education.

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63. However, section B of Appendix II Decree 31/2021/ND-CP guiding the Investment

Law 2020 stipulates on business lines eligible for investment incentives as
follows:

“1. Investment in the infrastructure of educational and vocational institutions;

investment in the development of non-public preschool, primary and secondary
education educational institutions, and vocational education institutions.”

64. Thus, the question arises whether investment incentives for PPP projects in the
higher education business line should comply with Article 16.1(i) of Investment
Law 2020 or Section B of Appendix II Decree 31/2021/ND-CP. In the case of
complying with section B of Appendix II to Decree No. 31/2021/ND-CP, whether
"higher education" is a business line eligible for investment incentives. These
questions need to be clarified as higher education is an important business line
with significant potential for PPP projects.

65. Second, the regulation on financial incentives for project enterprises

implementing PPP projects in the education-training sector needs further
clarification.

66. The PPP project model in the education-training sector involves cooperation
between educational institutions, which are public non-business units, and
private investors to provide public products and services serving educational and
training activities.

67. Currently, public non-business units receive financial incentives such as (i) paying
licensing fees at the rate of 1,000,000 dong/year pursuant to Article 4.1(c) of
Decree 139/2016/ND-CP; (ii) calculating corporate income tax by the rate of 5%
on the revenue of goods and services pursuant to Article 11.5(a) of Decree No.
218/2018/2013/ND-CP detailing and guiding the implementation of Law on
Corporate Income Tax (amended and supplemented by Decree 12/2015/ND-CP);
and (iii) being allocated land without land use levy pursuant to Article 54.3 of the
Land Law 2013.

68. The financial incentives mentioned above apply to public non-business units .
However, in the case of a PPP project in the education-training sector involving
cooperation between a public non-business unit and a private investor, it is not
clear whether the PPP project enterprise is entitled to similar financial incentives.

69. Recommendation: Clarify the investment incentive provided to higher education

business lines under the law of investment, such as the Investment Law 2020 and
Decree 31/2021/ND-CP. Besides, clarify whether a PPP project enterprise in the
education-training sector is eligible for financial incentives similar to those
applicable to public non-business units and, if so, what conditions for receiving
these financial incentives are.

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B. Legal Challenges and Constraints of the Implementation of PPP Projects in All

Sectors

I. Early termination payment

70. In implementing an investment project, all the investors and related parties aim
for successful completion as outlined in the project contract. However, for
subjective and objective reasons, a PPP project may be terminated early. In such
instances, the payment mechanism and method may become important for the
investors to protect their interests.

71. The PPP Law 2020 has foreseen and stipulated several cases for early
termination. However, there appear to be no clear provisions on the mechanism
and method for making payments to the investors and the project enterprises in
some specific cases.

72. Article 52.2 of the PPP Law 2020 provides a list of cases for early termination of a
PPP project contract as follows:

“a) The project is affected by a force majeure event, and the parties took remedial
actions but could not continue to perform t the PPP contract;

b) For the national interests; to meet the requirements concerning national

defence, security, and protection of state secrets;

c) The PPP project enterprise becomes insolvent in accordance with the law on
bankruptcy;

d) Either party commits a serious breach of contractual obligations;

dd) Other cases due to fundamental changes in circumstances in accordance with

civil law and the contracting parties agree to terminate the contract.”

73. Meanwhile, Article 52.6 of the PPP Law 2020 and Article 82.2 of Decree
35/2021/ND-CP only stipulate an early termination payment for the case under
point (b) – to ensure the national interests and for the case where the
contracting authority is the party who seriously violates the contract under point
(d)

Article 52.6 of the PPP Law 2020 provides:

“6. In case where the PPP contract is terminated before expiration of the term
specified at point b, clause 2 of this Article or due to the contracting authority’s
serious breach of the performance of the contractual obligations specified at point
d of clause 2 of this Article, funds for acquisition of the PPP project enterprise or
compensation for contract termination shall be allocated from the state capital
according to the provisions of law; in case the termination occurs at the investor’s
fault specified at points c and d clause 2 of this Article, the investor shall be

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responsible for transferring shares or capital contribution to the alternative

investor.”

Article 82.2 of Decree 35/2021/ND-CP provides:

“2. In case the contract is terminated early because the contracting authority
commits a serious breach of contractual obligations, compensations shall be paid
to the investor and the PPP project enterprise as follows:

a) Establishment of the project funded by public investment capital. Procedures

for approving decisions on investment policies and decisions on investment in
projects shall comply with the Public Investment Law;

b) Use of reserve source of public investment capital;

c) Other lawful sources of funding.”

74. Article 82 of Decree 35/2021/ND-CP provides a general mechanism for

determining payments in case of early termination of the contract. Specifically,
the parties shall agree on and specify, in the PPP project contract, the formula or
method for determining payments in case of early termination,9 thereafter, the
contracting authority shall report to the competent authorities to consider and
decide on which cases will be paid when early terminating the contract.10 Based
on the above provisions, it can be understood that determining the eligibility for
early termination payment is subject to the decision of the competent authority.

75. Under the current regulations, there are no clear provisions on the mechanism
and method of making payments to the investors in cases of (i) termination is
due to objective reasons as prescribed under point (a), i.e. a force majeure
event), and as prescribed under point (dd) (i.e., fundamental changes in
circumstances; or (ii) termination of a PPP project is due to serious breaches of
contractual obligations by the investor as prescribed in point d of Article 52.2 of
the PPP Law 2020.

76. Recommendation: Supplement provisions specifying the mechanism and method

of making payments to the investors in case of termination due to objective
reasons or serious breaches of contractual obligations by the investors.

II. Governing law of the PPP project contract

77. One important document that forms a PPP project is the PPP project contract
amongst the investor, the project enterprise, and the relevant Vietnamese state
authorities.

9
Article 82.1 of Decree 35/2021/ND-CP.
10
Article 82.4 of Decree 35/2021/ND-CP.

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78. The choice of law governing the PPP project contract will be significant in
considering and interpreting its contents.

79. However, the current regulations on the choice of governing law for the PPP
project contract are relatively restrictive compared to the common practice in
several other countries.

80. Article 55 of the PPP Law 2020 prescribes as follows:

“PPP project contract, its appendix and other relevant documents signed between
a Vietnamese state authority and an investor, PPP project enterprise shall be
governed by Vietnamese law. With respect to the matters that are not regulated
under Vietnamese law, the parties may agree specifically in the PPP contract on
condition that such agreements are not in breach of fundamental principles of the
law of Vietnam.”

81. Accordingly, it can be understood that pursuant to the PPP Law 2020, the parties
shall choose Vietnamese law and are not allowed to choose the law of other
jurisdictions as the governing law of the PPP project contract.

82. This provision is entirely appropriate if the PPP project investor is a Vietnamese
entity. Besides, the choice of Vietnamese law may also create legal convenience
for relevant Vietnamese state authorities to review, negotiate, and sign a project
contract. However, in some cases, foreign investors have expressed a desire to
use a different legal system to govern the PPP contract. Typically, the proposed
legal systems may be English law or Singaporean law. If investors are allowed to
negotiate and choose the governing law for the PPP project contract, it could
enhance the attractiveness to the investors and encourage their participation in
the PPP investment.

83. Recommendation: Consider amending provisions on the governing law to allow

the parties to negotiate and choose the governing law for the PPP project
contract.

III. Allocation of State capital support to projects according to legal regulations

84. An important characteristic of the PPP investment form is the cooperation

between the investors and the state authorities during the project
implementation. Some PPP projects will receive support in the form of State
capital in addition to investor capital. In such projects, State capital support will
contribute to the financial feasibility and profitability of the project.

85. However, currently, there are some unclear and inconsistent provisions between
the PPP Law 2020 and Decree 28/2021/ND-CP related to the method of
allocation of State capital to support the PPP project.

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86. Article 70.5 of the PPP Law 2020 regulates the use and management of State
capital to support the construction of infrastructure works and systems.
Accordingly, there are two methods for allocating State capital as follows:

(i) Splitting the relevant part into a subproject within the PPP project. The use
and management of State capital shall be subject to laws on public
investment;

(ii) Allocating into specific items according to the rates, value, progress, and
conditions specified under the contract.

87. Thus, with respect to the second method, it could be understood that State
capital to support the PPP project could be allocated according to “the rates,
value, progress, and conditions” as provided in the contract.

88. However, Article 8.3 of Decree No. 28/2021/ND-CP prescribes the allocation of
State capital to support the construction of work items and infrastructure
systems as follows:

“3. Public investment capital for assistance in the construction of work items and
infrastructure systems prescribed in point b clause 5 Article 70 of PPP Law may
only be used to pay for completed items that have been confirmed by the
contracting authority and according to the ratios of financing sources, values,
schedules, conditions specified in the PPP project contract, the medium-term and
annual public investment plan approved by competent authorities.”

89. The above provision requires that public investment capital to support a project
be paid only for items that have been completed and confirmed by the
contracting authority. In other words, payment for an item of work will be made
only after it has been completed.

90. On the one hand, applying Article 8.3 of Decree 28/2021/ND-CP may take
significant time for the investors to receive State capital to support the project.
On the other hand, the investors have to arrange their own investment capital to
implement and complete the project before receiving support.

91. Recommendation: Amend Article 8.3 of Decree 28/2021/ND-CP to comply with

Article 70.5 of the PPP Law 2020, which permits State capital allocation to
support the PPP projects based on “the rates, value, progress, and conditions”
specified in the project contracts.

IV. Revenue increase and decrease sharing mechanism

92. One of the risk-sharing measures for the PPP project is the mechanism for
sharing revenue increases and decreases. However, to apply this mechanism in
practice, it is necessary to clarify some provisions on the time limit for

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considering its application and the measures in the case where the budget
reserve is insufficient to cover the revenue decrease.

93. Article 82 of the PPP Law provides the revenue increase and decrease sharing
mechanism for the PPP project, which is guided by Decree 28/2021/ND-CP.
However, there are constraints in applying these provisions, specifically as
follows:

94. First, one condition for applying the sharing mechanism is that the project has
taken measures to adjust prices and fees of public products and services and
contract terms according to Articles 50, 51, and 65 of the PPP Law 2020.

95. Pursuant to Article 65.3 of the PPP Law 2020, the adjustment of prices and fees
of public products and services for each period in the PPP project contract must
comply with the law on prices and fees, and the PPP project contract needs to be
amended accordingly.

96. Pursuant to Articles 50 and 51 of the PPP Law 2020, the parties must negotiate
and sign a contract appendix on the amendment or the adjustment of terms of
the PPP project contract. The current regulations in the PPP Law 2020 and
Decree 28/2021/ND-CP do not set a time limit for negotiating the contract
amendment and adjustment. Therefore, in practice, the process of negotiation
and signing of the contract appendix to amend the content of the contract or
adjust the contract term may be prolonged. In addition, with respect to a BLT
contract, the adjustment of prices and fees for public products and services also
depends on the approved five-year medium-term public investment plan, as
analyzed in paragraph 57 above.

97. Second, the procedure for applying the revenue increase and decrease sharing
mechanism is stipulated in Article 82 of the PPP Law 2020 and Decree
28/2021/ND-CP as follows:

(i) Within ten days from the date on which the PPP project enterprise submits
the tax finalization dossiers as prescribed by the law on tax, the PPP project
enterprise shall submit the contracting authority a report on actual
revenue in the fiscal year;11

(ii) The contracting authority, the PPP project enterprise, and the investor will
review and compare the actual revenue with the revenue specified in the
contract and then make the adjustment of prices and fees of public
products and services and terms of the contract;

(iii) In cases where conditions for applying the revenue-sharing mechanism

arise, the contracting authority shall request the State Audit Office to audit
the actual revenue increase and decrease as the basis for the
determination of the shared revenue value;
11
Article 20.1 of Decree 28/2021/ND-CP.

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(iv) The shared revenue value will be paid within 60 days from the date the
State Audit Office issues the audit report that recognizes the revenue
increase, or in case of revenue decrease, within 60 days from the date that
the financial authority receives sufficient application dossiers for sharing of
revenues.

98. The abovementioned procedure is considered complicated and time-consuming

because there is no time limit for carrying out steps (ii) and (iii), such as the time
limit for the revenue review and comparison, the time limit for the negotiation
and amendment of the contract, the time limit for making a request to State
Audit Office and the time limit for State Audit Office to complete the audit.

99. Especially in the case of a revenue decrease, the procedure is strictly regulated
and requires more steps (compared to the case of a revenue increase). After
obtaining the audit report, the competent authority or the contracting authority
shall continue to submit dossiers to the financial authority (i.e., Ministry of
Finance or Department of Finance, depending on each project 12) so that the
financial authority will review and decide to use the state budget reserve to pay
for the share of revenue decrease within 60 days.13 As such, the current
regulations do not specify a time limit for the competent authority to submit
dossiers.

100. Third, Article 82 of the PPP Law 2020 stipulates that costs for applying the
revenue decrease sharing mechanism shall be covered by the central budget
reserve or local budget reserve. However, the budget reserve may be insufficient
to cover the revenue gap. In some cases, the local budget reserve is relatively
low and is prioritized for emergency assignments as stipulated in Article 10 of the
State Budget Law 2015. Meanwhile, dealing with the decrease of revenues in the
PPP project, which is specified in the PPP project contract, may be considered
not to be an emergency assignment. It seems that the current regulations do not
provide a mechanism for dealing with circumstances where the local budget
reserve is insufficient to cover the abovementioned revenue gap.

101. Recommendation: Supplement provisions on the time limit for completion of

steps in the procedure for applying the revenue increase and decrease sharing
mechanism and develop a flexible financial mechanism to deal with
circumstances where the budget reserve is insufficient to cover the revenue gap
of PPP projects, such as using other financial measures, such as other reserve
funds, insurance, etc.

V. Responsibility of the PPP project contracting authority in relation to site

clearance

12
Article 17.4(a) and Article 17.4(b) of Decree 28/2021/ND-CP.
13
Article 17.4(c) of Decree 28/2021/ND-CP.

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102. As analyzed above, a PPP project normally involves the construction, renovation,
upgrading, expansion, modernization, and/or operation of “infrastructure works
and systems”. In order to implement PPP projects, especially projects for newly
constructed infrastructure works and systems, the preparation and handover of
the project site plays an important role in the implementation of construction
activities.

103. The current regulations stipulate that the competent administrative authority,
rather than the contracting authority, is responsible for clearing the site for PPP
projects. However, there is no specific guidance on how the contracting authority
should cooperate with the competent administrative authority or on remedies in
case of a delay in compensation, support, or resettlement.

104. First, regarding the contracting authority of the PPP project contract, it is
stipulated in Article 5.2 of the PPP Law 2020. Specifically, Article 5.2 states that
contracting authorities include (a) competent authorities prescribed in Clause 1
of this Article; and (b) entities and units authorized by competent authorities to
sign contracts as provided in Clause 4 of this Article.

105. Article 5.1 of the PPP Law 2020 prescribes as follows:

“1. Competent authorities, including:

a) Ministries, Ministry-level agencies, governmental agencies, central bodies

affiliated with political organizations, Supreme People’s Procuracy, Supreme
People’s Court, State Audit Office, Office of the President, Office of the National
Assembly, and central bodies of Vietnam Fatherland Front and socio-political
organizations (hereinafter referred to as Ministries, central authorities);

b) Provincial People’s Committees;

c) Agencies and organizations set up by the Government and the Prime Minister,
and assigned to make state budget estimates according to the provisions of law
on state budget (hereinafter referred to as other authorities).”

106. Article 5.4 of the PPP Law 2020 prescribes as follows:

“4. Competent authorities may authorize their directly controlled authorities or

units to act as authorities signing contracts to execute PPP projects within their
competence.”

107. Second, regarding the authority presiding over the compensation, site clearance,
support, resettlement for PPP projects, it is specified in Clause 4, Article 93 of the
PPP Law 2020.

108. Specifically, Article 93.4 of the PPP Law 2020 stipulates the authorities and
responsibilities of Provincial People’s Committees as follows:

“Article 93. Responsibilities and authorities of the Provincial People’s Committees:

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4. To preside over and coordinate with the PPP project enterprise to organize
compensation, site clearance, support, and resettlement for PPP projects falling
under the latter’s remit; to preside over and cooperate with Ministries, central
authorities, other agencies, and PPP project enterprises in performing the tasks of
compensation, support, and resettlement for PPP projects falling under the latter’s
authority.”

109. Thus, the contracting authority of the PPP project contract is not the authority
presiding over compensation, site clearance, support, and resettlement but only
has the responsibility to coordinate with the Provincial People’s Committees
during these activities.

110. Meanwhile, the current regulations do not provide clear guidance on how the
contracting authority should cooperate with the local administrative authority
and what their authorities and responsibilities are during compensation and site
clearance. The coordination between the two authorities will be closely related
to the progress of site clearance and handover to implement the PPP project
according to the set schedule.

111. Recommendation: Supplement provisions specifying a mechanism for

coordination between the contracting authority and the local competent
administrative authority and detailing their responsibilities and obligations
during compensation and site clearance for the PPP project.

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