PPP Investment in Vietnam: Sectors and Investor Selection

An expressway, a wastewater treatment plant and a public hospital share one trait: each needs far more capital than a budget can release in a single tranche, while the public needs the facility now rather than after years of saving. The public-private partnership model, universally shortened to PPP, connects the two ends of that equation. The State orders infrastructure and public services, the private investor finances and builds them, operates the asset, and recovers its money from user charges or from revenue generated by the project itself. In Vietnam the dedicated statute is the Law on Public-Private Partnership Investment No. 64/2020/QH14, in force since 1 January 2021 and amended by Law 57/2024/QH15 from 15 January 2025 to widen the sector list and streamline procedures.

Six eligible sector groups and the minimum size threshold

Article 4 of Law 64/2020/QH14 enumerates the fields open to PPP projects: transport; power grids and power plants, excluding hydropower and the segments reserved to the State monopoly under electricity law; irrigation, clean water supply, drainage, wastewater and waste treatment; healthcare; education and training; information technology infrastructure; and any further field the Prime Minister designates on a competent authority proposal. The list is closed by sector, so a purely commercial property scheme or a resort cannot dress itself as a PPP merely because visitors would benefit. The project must sit squarely inside a listed field and must deliver a public product or public service.

Article 5 adds a size screen: total investment capital must reach at least VND 200 billion, dropping to VND 100 billion for healthcare and education projects and for projects located in areas with difficult or especially difficult socio-economic conditions under investment law. The screen has a practical logic. Running a PPP procurement, appraisal and contract negotiation is expensive, and a project that is too small sees its economics eaten by transaction costs alone. A foreign sponsor screening the published project call list should test both gates together, the Article 4 sector fit and the Article 5 capital floor, before spending a dong on an expression of interest.

Seven PPP contract types and how each one allocates revenue risk

Article 45 of Law 64/2020/QH14 sets out the contract menu, and the organising question behind the menu is who carries demand risk. Under a BOT contract (build, operate, transfer) the investor recovers its outlay from the revenue of the facility during the operating term and then hands the asset back. A BTO contract (build, transfer, operate) transfers the works immediately after construction while the investor keeps the right to run them for the agreed period. A BOO contract (build, own, operate) contains no hand-back at term end. BTL (build, transfer, lease) and BLT (build, lease, transfer) reverse the cash flow: the State pays rent or service fees measured against output quality, which sharply reduces market risk for the sponsor but commits the budget to long-term payments. An O&M contract hands a private operator an existing State asset to run, and a mixed contract blends several mechanics inside one project. Picking the wrong type at preparation stage is a recurring cause of mid-course restructuring, because lenders price a user-fee BOT and a budget-paid BLT as entirely different credits.

Project preparation: from proposal to investment policy approval

On the State side, a PPP project starts with a pre-feasibility study report or an investment policy proposal, with the approving level ranging from the National Assembly and the Prime Minister down to ministers and provincial People Councils depending on scale. At this stage the sponsoring authority must demonstrate project necessity, why the PPP route beats conventional public investment, the preliminary total investment, the intended contract type and the proposed split of risks between the parties. Once the policy is approved, a full feasibility study is prepared and appraised, the investment decision issues, and only then may the project go out for investor selection. Investors may themselves propose projects, yet a private proposal travels through exactly the same appraisal and policy approval track as a State-originated one, and the proposer earns no automatic award advantage beyond the tender preferences the law itself grants.

Investor selection: open bidding as the rule, direct appointment as the exception

Article 29 of Law 64/2020/QH14 makes competitive bidding the default route for choosing a PPP investor, run domestically or internationally according to the project. The sequence covers approval of the investor selection plan; a prequalification round where the project needs a shortlist of capable sponsors; issuance of bidding documents whose scoring covers financial capacity, comparable project experience and the financial and technical proposal; bid evaluation; preliminary contract negotiation with the top-ranked bidder; appraisal and approval of the selection result; and signing of the project contract. Direct appointment survives only for the narrow cases the statute lists, such as urgent national defence and security projects or a project where a single investor registers and qualifies. Foreign bidders most often under-score on two items: audited financial statements in an accepted format as proof of financial capacity, and comparable project experience at equivalent scale, because the evaluation panel scores strictly against the published criteria and cannot rescue late supplementary filings.

The project company, equity ratios and the revenue-sharing mechanism

After award, the investor incorporates a project company as a limited liability company or a joint-stock company to sign and perform the PPP contract, and that company may operate only within the approved project scope. The investor equity share of total investment must meet the minimum ratio the Government prescribes in Decree 35/2021/ND-CP, with the balance raised from credit institutions or other lawful sources. A signature device of Law 64/2020/QH14 is revenue sharing in both directions: when actual revenue beats the contract financial plan beyond the statutory band, the surplus is shared with the State; when revenue falls sharply because of changes in law or planning, the State absorbs part of the shortfall through price or fee adjustments or an extension of the contract term. Together with the foreign currency balancing and conversion assurances available to major projects, these clauses cap the risk envelope of the whole financial model, which is why foreign sponsors should read them in the bidding documents rather than discovering them at financial close.

Frequently Asked Questions

Which sectors can use PPP investment in Vietnam?

Article 4 of Law 64/2020/QH14 lists transport; power grids and plants (excluding hydropower and State-monopoly segments); irrigation, clean water, drainage, wastewater and waste treatment; healthcare; education and training; information technology infrastructure; and other fields designated by the Prime Minister. The project must deliver a public service and meet the Article 5 minimum size of VND 200 billion, or VND 100 billion for healthcare, education and disadvantaged-area projects.

What are the steps for selecting a PPP project investor?

The steps are: approval of the investor selection plan; prequalification where a shortlist is needed; issuance of bidding documents scored on financial capacity, experience and the financial-technical proposal; bid evaluation; preliminary contract negotiation with the first-ranked bidder; appraisal and approval of the selection result; and signing of the project contract. The full sequence sits in the investor selection chapter of Law 64/2020/QH14 and is detailed by Decree 35/2021/ND-CP.

What types of PPP contracts exist and how do they differ?

Article 45 of Law 64/2020/QH14 provides seven types: BOT, BTO, BOO, BTL, BLT, O&M and mixed contracts. They differ in when the asset transfers and where the money comes from: BOT and BOO rely on operating revenue from the facility; BTL and BLT are paid by the State as rent or service fees against output quality; O&M only outsources operation of an existing State asset; BOO carries no hand-back obligation at expiry.

Must PPP projects select investors through bidding?

Yes. Open competitive bidding is the mandatory default under Article 29 of Law 64/2020/QH14, conducted domestically or internationally depending on the project. Direct appointment is an exception confined to cases the law lists, such as urgent defence or security projects or a project with only one qualifying investor. There is no mechanism for awarding a PPP project by private negotiation outside those listed exceptions.