Public – Private Partnership (PPP) in solid waste management in Japan, lessons for Vietnam (LV thạc sĩ)

MINISTRY OF EDUCATION AND TRAINING
FOREIGN TRADE UNIVERSITY

DISSERTATION
PUBLIC – PRIVATE PARTNERSHIP (PPP) IN SOLID WASTE
MANAGEMENT IN JAPAN, LESSONS FOR VIETNAM

Major: International Trade Policy and Law

Full name: Nguyen Thi Hong Ly

Ha Noi - 2017


MINISTRY OF EDUCATION AND TRAINING
FOREIGN TRADE UNIVERSITY

DISSERTATION

PUBLIC – PRIVATE PARTNERSHIP (PPP) IN SOLID WASTE
MANAGEMENT IN JAPAN, LESSONS FOR VIETNAM

Major: International Trade Policy and Law

Full Name: Nguyen Thi Hong Ly
SUPERVISOR: Dr. Vu Van Ngoc

Ha Noi - 2017


DECLARATION

I hereby declare that the dissertation entitled “Public – Private Partnership (PPP) in
solid waste management in Japan, lessons for Vietnam” was written by myself and all

information in this thesis has been studied and presented in accordance with
academic rules and ethical conduct that I have fully cited and referenced in
appropriate manner. I further declare that the dissertation has not been submitted, in
whole or in part, in any previous documents for a degree.

Student: Nguyen Thi Hong Ly

i


ACKNOWLEDGEMENT
First of all, I would like to express my indebtedness to my Professor, Dr. Vu
Van Ngoc for his kind direction and proper guidance. Without his supervision and
instruction in every step, my dissertation could not be completed positively.
This is also a good chance to convey my sincere gratitude and especial thanks
to all Professors and Lectures participating in the Master course of International
Trade Policy and Law for their valuable lessons and useful knowledge that helped
me a lot in practical works and life.
It is also my great pleasure to thank Faculty of Graduate Studies, Foreign
Trade University for providing me such an opportunity to complete this Master
course and for their continuous support in all my time taking part in the course.
Finally, my strong appreciation and attitude granted for my family, my
colleagues, my bosses and friends for all of their enthusiastic support,
encouragement and assistance during the period of this thesis’s preparation.

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TABLE OF CONTENTS
INTRODUCTION ................................................................................................ x
CHAPTER 1 .......................................................................................................... 1
OVERVIEW OF PPP IN SOLID WASTE MANAGEMENT ......................... 1
1. 1. Definition, characteristics and types of PPP ...................................................1
1.1.1. Definition of PPP ......................................................................................1
1.1.2. Main characteristics of PPP ......................................................................4
1.1.2.1. General characteristics of PPP ..........................................................4
1.1.2.2. Advantages and Challenges of PPP ..................................................6
1.1.3. Types of PPP ............................................................................................9
1.2. Solid waste and role of solid waste management in the socio-economic
development ..........................................................................................................12
1.2.1. Definition and overview of solid waste management ............................12
1.2.1.1. Definition ........................................................................................12
1.2.1.2. Overview of solid waste management ............................................14
1.2.2. Role of solid waste management in the socio-economic development ..16
1.2.2.1. Social aspects (Public health)..........................................................17
1.2.2.2. Economic aspects ............................................................................18
1.2.2.3. Environmental protection aspects ...................................................19
1.2.3. Challenges of solid waste management in developing countries and in
Vietnam ............................................................................................................19
1.2.3.1. Technical Constraints ......................................................................20
1.2.3.2. Financial Constraints .......................................................................20
1.2.3.3. Institutional Constraints ..................................................................21
1.2.3.4. Economic Constraints .....................................................................21
1.2.3.5 Social Constraints.............................................................................22
1.2.3.6. Vietnam ...........................................................................................22
1.3. Necessity of PPP application in solid waste management ............................24

1.3.1. Reduction in management cost ...............................................................25
1.3.2. More waste collection & treatment ........................................................25
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1.3.3. Awareness raising and better public participation in environmental
protection activities...........................................................................................26
1.4. Factors influencing the success of a PPP project...........................................26
1.4.1. Exogenous factors ..................................................................................27
1.4.1.1. Legal environment ..........................................................................27
1.4.1.2. Socio-economic environment..........................................................28
1.4.2. Endogenous factors ................................................................................29
1.4.2.1. Market demand assessment .............................................................29
1.4.2.2. Quality of investors .........................................................................29
1.4.2.3. Contract coherence ..........................................................................29
1.4.2.4. Management, supervision and support of investors by the public
sector ............................................................................................................30
CHAPTER 2 ........................................................................................................ 31
PPP IN SOLID WASTE MANAGEMENT IN JAPAN AND IN VIETNAM31
2.1. PPP in solid waste management in Japan ......................................................31
2.1.1. Overview of PPP in Japan ......................................................................31
2.1.1.1. History of PPP .................................................................................31
2.1.1.2. Differences between PPP projects and conventional projects ........33
2.1.1.3. Classification of PPP .......................................................................34
2.1.1.4. Project scheme of PPP ....................................................................37
2.1.2. Legal and institutional framework of PPP in Japan ...............................38
2.1.2.1. Outline of PPP Law .........................................................................38
2.1.2.2. Implementation progress of PPP projects in Japan .........................42
2.1.3. Overview of solid waste management in Japan .....................................43
2.1.3.1. Legal system of waste management in Japan .................................43

2.1.3.2. Institutional framework ...................................................................45
2.1.3.3. Municipal Solid Waste Management in Japan ................................47
2.1.4. PPP in solid waste management in Japan ...............................................50
2.1.4.1. Types of PPP applicable in solid waste management .....................50
2.1.4.2. Procedures of PPP in solid waste management in Japan ................51
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2.1.4.3. Case studies .....................................................................................58
2.2. PPP in solid waste management in Vietnam .................................................64
2.2.1. General socio-economic and legal background of Vietnam in application
of PPP in solid waste management ...................................................................64
2.2.1.1. Socio-economic environment..........................................................64
2.2.1.2 Legal and institutional environment ................................................67
2.2.1.3. Overview of PPP application in Vietnam .......................................74
2.2.2. Current status of PPP in solid waste management in Vietnam ..............78
2.2.2.1. Necessity for PPP application in solid waste management in
Vietnam ........................................................................................................78
2.2.2.2 Status of PPP implementation in solid waste management in
Vietnam ........................................................................................................81
2.2.2.3 Existing solid waste management related PPP Projects...................88
CHAPTER 3 ........................................................................................................ 93
LESSONS LEARNT FROM JAPAN AND RECOMMENDATION FOR VIETNAM
............................................................................................................................... 93
3.1. Lessons learnt from Japan..............................................................................93
3.1.1. Enhance and complete the legal framework for PPP application in solid
waste management ............................................................................................93
3.1.2. Improve investment conditions with better transparency.......................95
3.1.3. Develop and strengthen the capacity of independent management
authorities especially in solid waste management ............................................97

3.1.4. Goodwill cooperation between public and private sectors .....................99
3.2. Recommendations for Vietnam ...................................................................100
REFERENCES.................................................................................................. 107

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LIST OF FIGURES
Figure 1: Process of operating and managing solid waste ........................................14
Figure 2: Differences between PFI and PPP .............................................................33
Figure 3: Comparison of Public Works under Conventional Delivery Method and
PFI .............................................................................................................................34
Figure 4: Three types of PPP Project in Japan ..........................................................36
Figure 5: General Project Scheme of PPP ................................................................37
Figure 6: Organization of PFI governmental authorities ..........................................42
Figure 7: Implementation progress of PFI projects in Japan (as of 09/2013) ...........43
Figure 8: Concept of sound material-cycle society of Japan ....................................44
Figure 9: Legal system for Establishing a "Sound Material-Cycle Society" ............45
Figure 10: Outline of Waste Management and Public Cleansing Law .....................46
Figure 11 Municipal Waste Treatment Methods in Japan ........................................49
Figure 12: Procedures for contractor selection .........................................................55
Figure 13: Organizational arrangement Ohdate BOO incineration ..........................59
Figure 14: Organizational arrangement Narumi BTO incineration plant .................62
Figure 15: State Budget for environmental protection activities (Unit: billion VND)
...................................................................................................................................65
Figure 16: State Budget Deficit comparing to GDP .................................................66
Figure 17: Procedures of PPP in Solid Waste Treatment Project .............................87

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LIST OF TABLES

Table 1: History of Law and Guidelines of PFI ...............................................................32
Table 2: PFI Procedure of Solid Waste Treatment Facilities Development in Japan ....52
Table 3: Example of Risk Allocation in a Solid Waste Treatment Facilities Project ..100
Table 4: Results of Corruption Perceptions Index (CPI) in Vietnam .............................67
Table 5: PPP-related Laws and Decrees in Vietnam .......................................................68
Table 6: PPP-Related Decision and Circulars in Viet Nam.............................................69

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LIST OF ABRREVIATIONS
ADB

Asian Development Bank

AFD

Agence française de développement

ASEAN

Association of Southeast Asian Nations

AUSAID

Australian Agency for International Development

BCC

Business Cooperation Contract

BOO

Build - Own – Operate

BOT

Build - Operate - Transfer

BT

Build – Transfer

BTO

Build - Transfer - Operate

CBO

Community – based Organizations

CPI

Corruption Perceptions Index

DBFO

Design - Build - Finance – Operate

DFID

The Department for International Development

EFW

Energy from Waste

EIA

Environmental Impact Assessment

FDI

Foreign Direct Investment

GDP

Gross Domestic Product

IDB

Inter-American Development Bank

IPSI

Institute for Strategic Studies and Industrial Policy

JBIC

Japan Bank for International Cooperation

JICA

Japan International Cooperation Agency

MARD

Ministry of Agriculture and Rural Development

MIC

Ministry of Information and Communications

MOC

Ministry of Construction

MOF

Ministry of Finance
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MONRE

Ministry of Natural Resources and Environment

MOT

Ministry of Transportation

MPI

Ministry of Planning and Investment

MSW

Municipal Solid Waste

NGO

Non-Governmental Organizations

ODA

Official Development Assistance

OECD

Organization for Economic Cooperation and Development

PDF

Project Development Fund

PFI

Private Finance Initiative

PM

Prime Minister

PPP

Public – Private Partnerships

RO

Rehabilitate – Operate

SOE

State-Owned Enterprise

SPC

Special Purpose Company

USAID

United States Agency for International Development

VEPF

Vietnam Environmental Protection Fund

VFM

Value for Money

VGF

Viability Gap Fund

WB

World Bank

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INTRODUCTION
1. The rationale of the thesis
Public private partnership (PPP) is a new investment form between public
sector and private sector in the development of public services including
environmental section. Though ODA loan accounted for more than 50% of capital
investment for environmental protection activities, this is not a sustainable financial
source, especially when Vietnam is moving toward a high-income country in the
near future. From 2010 up to now, Vietnamese Government has made many PPP
law initiative and reform which shows the political goodwill to promote PPP
investment form in Vietnam. PPP model is one of the effective means to address the
capital shortage issue, to provide and to develop public services, especially in
environmental sector. Japan is a developed country and applied PPP in a quite long
time ago; it will be good opportunity for the author to research on PPP in solid
waste management in Japan in order to draw some lessons for Vietnam. In
principal, the necessity and urgency of the thesis is developed based on the

following main aspects:
Firstly, from the view of scientific aspect, urgency and significance of PPP
study derives from the needs of PPP theoretically standardize into Vietnamese
language due to PPP originally comes from western countries; moreover, it’s
necessary to finalize and unify the concept of PPP, to develop comprehensive
system of PPP in Vietnam (such as establishment of PPP economics subject;
development of PPP policies in Vietnam etc...).
Secondly, from the view of reality, PPP study will find out effective solutions
to overcome the separation issue between private and public sector, ensuring the
combination of both sectors into effective single unit of social-economic system;
making public sector become more dynamic; improving equality between private
and public sectors in the implementation of national strategies and policies;
contributing to efficiently improvement of economic and social development

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Thirdly, from the view of institutional-policy, PPP is really a new concept,
not many existing legal framework and policies dealing with this issue, therefore it
is needed to study PPP in order to overcome shortcomings and gaps of our
institutional-policy system. Through studying PPP, social awareness on PPP will
established, lacked institutional – policies will be supplemented and backward
policies will be updated following the new changes of social & economic situation.
Application of PPP model in enhancing environmental quality is the key
importance trend of worldwide countries nowadays. In Vietnam, not many
researches, reports on PPP model especially in solid waste management are public
and studied, therefore the author hope this thesis can partly contribute and suggest
policies to be undertaken for Vietnam in order to encourage and promote PPP
application for solid waste management projects in Vietnam.
2. Literature review

The PPP related topics have been gaining attention from not only
Vietnamese but also foreign media, researchers and enterprises. Currently, there are
a number of papers, research and reports addressing PPP – related issues from
different perspectives and following documents are some main documents which
relevant to the author’s thesis topic:
 The report “Assessment of Public–Private Partnerships in Viet Nam,
Constraints and Opportunities” published by ADB, July 2012. This report includes
3 main purposes: (i) review overall environment and business context for PPP in
Vietnam, project development support and financing issues; (ii) identify PPP
challenges and opportunities in Vietnam; (iii) identify potential areas and activities
that ADB and/or AFD would further support and/or cooperate. Through this report,
a broad overview of PPP situation and issues in Vietnam was provided. The
methodology to develop this report consists of desktop review, focused meetings
and interviews, and analysis of Public–Private Partnership Decree 108 Details. The
report presents some key findings as: (i) few PPP transactions; (ii) recognition that
PPP is vital to address huge infrastructure financing gap; (iii) rationale for PPP and
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appropriate risk sharing arrangements; (iv) strong champion at the MPI; (v) an
evolving PPP framework. Although the report is a detailed assessment of PPP status
of Vietnam at the time of 2012, it is considered as the view from ADB, a donor
which was seeking chances to cooperate and support Vietnam in carry out PPP
projects effectively. The report did not mention on solid waste management sector
and the legal framework was not up to date as currently the Decree 15/2015/NĐ-CP
is applied to all PPP-related projects.
 The book “Public – private partnership (PPP): International Experience
and Institutional Framework in Vietnam” published in 2013 in Vietnamese
language which included in the list of macroeconomic researches that have been
carried out under the framework of project “Support for enhancing capacity in

advising, examining, and overseeing macroeconomic policies” implemented by
Economic Committee of National Assembly (ECNA) and funded by UNDP. The
book covers four (4) main contents: (i) introducing the nature and characteristics of
PPP model and requirements for the management of PPP projects; (ii) reviewing the
practical application of PPP model in a number of countries (in specific projects)
and lessons learned for Vietnam; (iii) assessment of institutional environment and
the application of PPP in Vietnam, especially the shortcomings and the amendments
to the Decree No. 108/2009 / ND-CP and Decision 71; (iv) recommendations are
made to improve the institutional framework for PPPs in Viet Nam. The outcome of
this book is to answer for the question “How to design the PPP institutional
framework in Vietnam to attract potential investors to invest in Vietnam’s
infrastructure under the current legal environment and capability of Vietnam”. This
book provides PPP case studies (projects) in several countries such as: United
Kingdom, Australia, German, Korea, China, India and Thailand except Japan and
mainly in transportation sectors (tunnel, bridge etc...), not in solid waste sector.
 The report “National Public – Private Partnership Frameworks in ASEAN
member countries” published by Economic Research Institute for ASEAN and East
Asia (ERIA) in 2015. This report describes the current PPP frameworks of 10
ASEAN countries including Vietnam. There are two main parts under this report;
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one is country profile that describes country status of institutional and/or regulatory
frameworks together with recent highlighted issues, as an introduction to PPP in the
individual country; the second is comparative table which compiles a summary
illustrating cross-country differences in key components such as government
support, law on land acquisition, and treatment of unsolicited proposals. Besides,
the report also presents two PPP case studies in Lao PDR (hydro power plant) and
in Philippines (Mactan–Cebu International Airport) with summary analysis of
aspects such as scope of project, concession agreement, financing issue

etc…Through this report, the reader may aware of PPP overview situation in
Vietnam comparing to the other countries in region. All 10 ASEAN countries have
started to apply the PPP model in recent years; therefore, in most of countries, the
national legal or institutional frameworks are still at a transitional stage. In this
report, the description about PPP in Vietnam is just summary and comparable to
other countries, not mention detail on specific sector or case studies in Vietnam or
Japan.
 The article “The Japanese private finance initiative and its application in the
municipal solid waste management sector” written by Torsten Kleiss and Hidefumi
Imura published in International Journal of Project Management in 2006 was one of
the very few documents that describe the possibility of PFI application in solid
waste management in Japan. Under this article, the summary of legislative and
administrative framework of the Japanese PFI model and its application in the
municipal solid waste management sector was presented through analysing two case
studies of solid waste treatment plant. The conclusion in this paper indicates that
application of PPP helps to reduce total cost in solid waste management project
thanks to life-cycle integration, output specifications and capitalisation of scale
economies. On the other hand, the paper also points out the necessity of
improvement of the inconsistencies between the existing fiscal system and the
legislative PFI framework to increase the benefits from the PFI procurement
strategy. Even this paper mentioned the application of PFI in solid waste
management, it did not analyze detailed the legal basis of PFI, of solid waste
xiii


management in Japan. This paper just provided two case studies and gave the
findings based on these case studies.
 The Master Dissertation “Risk Management and Governance for PFI
Project: Technology Policy Lessons from the Case of Japan” written by Takuji
Matsumoto, Massachusetts Institute of Technology in 2012. The thesis analyze

experience of Japanese PFIs and propose policy recommendations for better PFI
implementation in Japan through five Chapters as below:
• Chapter 1 introduces PPP policy in Japan, describing some failure case
studies then draw lessons learned from those cases.
• Chapter 2 clarifies general description of PFI in Japan which has been
improved from the failure of previous stage. Besides, this chapter points out the
potential expansion of PFI market in Japan through introducing new PFI law and
considers the idea of further activation.
• Chapter 3 brings in some actual and successful PFI case studies in Japan and
in UK and points out effective use of private sector’s advantages. Besides, the
chapter provides three failed case studies and explains the reasons of failures from
the view of risk management.
• Chapter 4 presents an overview of risk management of PFI projects in Japan,
analyzes detailed the issues of risk management in Japanese PFI based on the
lessons learned from the failed case studies in chapter 3.
• Chapter 5 analyzes the problems that may occur at the decision-making step
of PFI projects especially the limitations and issues of Value for Money (VFM)
indicator which is normally used for PFI project decision.
Although this master dissertation provides an overview of PFI situation and
recommendations for better PFI implementation, it did not present detailed PFI in
solid waste management sector and some experiences related to PFI implementation
in this field.

xiv


 The book “The public – private partnership Law review”, third edition,
published in March 2017, reproduced with permission from Law Business Research
Ltd, edited by Bruno Werneck and Mario Saadi. The book summarize PPP
implementation in 23 countries all over the world including developed and

developing countries, also includes Japan countries. For each country, the following
contents are presented: (i) Overview; (ii) The year in review; (iii) General
framework (Types of public-private partnership, The authorities, General
requirements for public-private partnership contracts); (iv) Bidding and award
procedure (Expression of interest, Call for proposals, Evaluation and grant); (v) The
contract (Payment, State guarantees, Distribution of risks, Adjustment and revision,
Ownership of underlying assets, Early termination); (vi) Finance; (vii) Recent
Decisions; (viii) Outlook. With all above eight contents, the overall PPP
implementation in Japan is summarized as: total 527 PPP projects approximately to
¥4.9 trillion as of 31 March 2016 were implemented in Japan. As Japanese
government always show a proactive and encouraging support for PPPs activities,
PFI Act concessions and other PPP projects will keep growing, expanding and more
diversified.
With reference to the above-mentioned reports and documents, most of them
presented overall one side of the issues (PPP in Japan or Vietnam or PPP in
general). Among them, only the article “The Japanese private finance initiative and
its application in the municipal solid waste management sector” analyzed PFI
application in solid waste management in Japan. However, the analysis had
limitations and did not fully evaluate the situation of the PPP in solid waste
management in Japan, and the relevant content was very briefly.
In general, most of the documents focused on the overall of PPP status in Japan
or Vietnam and did not cover detailed analysis of possible application on solid
waste management sector or present the lessons learnt for Vietnam to take
advantages or overcome challenges. This is one of the reasons which the author
would like to select the topic “Public-private partnership (PPP) in solid waste
management in Japan, lessons for Vietnam” as the master dissertation.
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3. The objectives of the thesis

- Studying and analyzing theoretical and practical basis on public private
partnership related issues, on socialization and diversification of resources for solid
waste management;
- Studying and evaluating experiences on public private partnership
mechanism for solid waste management in Japan and drawing lessons for Vietnam;
- Developing and recommending mechanisms as well as policies to
encourage and promote public private partnership application for solid waste
management projects in Vietnam.
4. Subjects and scope of thesis
4.1. Research Subjects:
- Direction, mechanism, policies and current legal framework of PPP in the
field of solid waste management in Japan (focus on solid waste management
treatment facilities);
- Direction, mechanism, policies and current legal framework of PPP and
resources socialization and diversification for solid waste management in Vietnam.
4.2. Research scopes
- Conceptual:
•

Literature review on PPP for solid waste management.

•

PPP projects in Japan and Vietnam for solid waste management.

- Geographic scope: Japan and Vietnam
- Timing: issues are reviewed and analyzed during the period from 2005 to
2016 and propose recommendations/solutions for the upcoming years.

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4.3. Research stages
Development of thesis outline
(Problem Statement)

Objective Identification
(Research objective)

Japanese experiences
review

Secondary information
(Internet, books, researches,
journals, reports etc…)

Literature Review

Data analysis

Vietnamese
experiences review

Secondary information
(Internet, books,
researches, journals,

Lessons learnt &
Recommendations

5. Methodologies
The thesis is developed on the basis of synthesis and analysis methodologies
which utilize secondary information for data analysis. The secondary information is
compiled from internet, books, researches, journals, reports etc… and own analysis
of the author.
6. The structure of dissertation
Except the introduction, conclusion and references, the dissertation is divided into 4
chapters as below:
-

Chapter 1: Overview of PPP in solid waste management

-

Chapter 2: PPP in solid waste management in Japan and in Vietnam

-

Chapter 3: Lessons learnt from Japan and recommendation for Vietnam

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CHAPTER 1
OVERVIEW OF PPP IN SOLID WASTE MANAGEMENT
1. 1. Definition, characteristics and types of PPP
1.1.1. Definition of PPP
Public Private Partnership (PPP), though not a new concept, has not been
defined unitedly, fully, accurately and clearly in nature; in reality, depending on the
context, history, culture, policy, legislation and development of each nation, the

model, method and content of public private partnership is developed and
approached differently. Later in this chapter, some worldwide common concepts on
PPP are going to be presented for a broad overview on PPP.
In the Public-Private Partnerships Reference Guide version 2.0, 2014 of World
Bank (WB), the Asian Development Bank (ADB) and the Inter-American
Development Bank (IDB), PPP is considered broadly as “A long-term contract
between a private party and a government entity, for providing a public asset or
service, in which the private party bears significant risk and management
responsibility, and remuneration is linked to performance”. (PPP Reference guide
2014, P.14). By the definition, contracts providing new services/assets as well as
existing services/assets could all be PPP contracts. These include the types of PPP
in which the private party is paid fully by the users and/or paid partly or fully by the
Government. Depending on different contracts, the private party will take on
different tasks (e.g. design, construction, finance, operation, maintenance), and in
all circumstances take responsibility for project management, outputs and large
proportion of risks. This definition includes contracts in many sectors and for many
services, as long as there is a public interest in the provision of the service, and the
project involves long-life assets tied with the long term of the PPP contract.
Similar like World Bank, in Public Private Partnership Handbook, 2008, Asian
Development Bank (ADB) provided very common definition “PPP describes a
range of possible relationships among public and private entities in the context of
infrastructure and other services” (ADB PPP Handbook, 2008, P.1). PPP indicates
1


a framework with the participation of the private sector but recognizes and
establishes the role of the Government, ensuring the fulfilment of social obligations
and successful reforms of the State sector and public investment. A close public
private partnership defines properly the responsibilities, obligations and risks borne
by the state partner and the private partner. The state partner is governmental

organizations, including ministries and local governments or state businesses. The
private partner is possibly local or foreign partners, and might be entrepreneurs or
investors specialized in project-relevant finance or techniques. The public private
partnership

may

involve

non-governmental

organizations

(NGO)

and/or

community-based organizations (CBO) representing the organizations and
individuals directly subject to the project.
Organization for Economic Cooperation and Development (OECD) shows
their own definition “Public-Private Partnerships (PPPs) are long term agreements
between the government and a private partner whereby the private partner delivers
and funds public services using a capital asset, sharing the associated risks. PPPs
may deliver public services both with regards to infrastructure assets (such as
bridges, roads) and social assets (such as hospitals, utilities, prisons)” 1. This
definition on PPP by OECD bears high resemblance to the definition by WB, but is
of more details.
Due to the differences in culture, history, economic context, institutional &
legal framework, the concept of PPP within ASEAN member countries is rather
specific comparing to WB and ADB. According to ASEAN Public Private

Partnership Guidelines, 2014, “A public-private partnership (PPP) is a specialized
procurement method employed by government for the delivery of public goods and
infrastructure services”. (ASEAN PPP guidelines, 2014, P.1). As such, its major
difference from the normal procurement method is that PPP contracts are long-term
agreements whereby the private sector engages and shares risks, including the
responsibilities for the project life-cycle cost.
1

/>
2


To Japan, PPP is a concept derived from a specific partnership method
between the state and private sectors called Private Finance Initiative (PFI). PFI has
been long formed in Japan and recently defined in White Paper on Land,
Infrastructure, Transport and Tourism in Japan, 2014, P.72 as “Public Private
Partnership is the concept that captures a wide range of private sector participation
in some form of public service provision. It is the method of using the private
sector’s capital and know-how to improve efficiency in developing public facilities
and raise the standards of public services. Some of the primary methods are, the
PFI method, the designated manager system, and the comprehensive work
consignment to private sector”. As such, public private partnerships are construed
as part of the reform of the public sector in order to resolve financial shortage,
maximize benefits, and better provide public services at the lowest cost. The key
content of public private partnerships is to share risks and responsibilities between
the State and the private sector, in which risks are incurred primarily by the latter.
The State is also responsible for supporting the private sector financially in order to
guarantee the project feasibility and eliminate difficulties for the private sector. The
partnership mechanism has changed and transformed from using laws to using
contracts.

Philippines is considered as one of the South-eastern nations which has
introduced quite successfully the public private partnership model recently. The
country offered their definition on PPP in line with the world tendency, “PublicPrivate Partnerships (PPPs) are contractual arrangements entered into by the
government with the private sector. Under a PPP scheme, the private sector can
build, operate and maintain public infrastructure facilities and provide services
traditionally delivered by government. Examples of these are roads, airports,
bridges, hospitals, schools, prisons, railways, and water and sanitation projects” 2.
As such, legal realities have shown that PPP are defined in a vast variety of
ways depending on different perceptions on PPP. Most generally, PPP is construed
as a legal agreement executing an investment method to mobilize capital from the
2

/>
3


private sector for financing and trading infrastructure projects which are inherently
under the responsibility of the State. This reduces the burden of over-spending in
state budgets and creates a useful mechanism in private investment to serve public
benefits. It can be said that developing a correct and complete definition on PPP is
not an easy work. There is a wide range of approaches to PPP in the aspect of
economy, finance, legislation and society, and each of them may bring about
different legal consequences.
In Vietnam, the definition on PPP is stipulated in Article 2 Regulation on pilot
investment in the public private partnership form enclosed with Decision No.
71/2010/QD-TTg dated 9 November 2010 of the Prime Minister. Accordingly, PPP
means the state and the investor jointly implement projects on infrastructure
development and public services based on the project contract. The project contract
is signed by and between the competent state agency and the investor, whereby the
state franchises to the investor the right to invest, run the works or provide public

services in a certain period of time. Based on specific features of each project, the
contract regulates commitments on responsibilities, obligations and rights of the
investor and the competent state agency, and the relation between the state and the
investor.
With the definition mentioned-above, the State of Vietnam perceived PPP as
an investment process of investors (with emphasis on the investors ‘construction,
operation, and ir-refundable transfer of the infrastructure to the State of Vietnam)
and the related partners relationship. In addition, franchise and project financing
are the two recognized significantly important components in PPP and integral in
the definition on PPP.
1.1.2. Main characteristics of PPP
1.1.2.1. General characteristics of PPP
PPP generally has four main characteristics as follows: (i) long-term process;
(ii) asset-forming financing, responsibilities by life-cycle and ownership; (iii)
performance-based benefits; and (iv) risk allocation among the parties involved.
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(i) Long-term process
PPP indicates a framework with the participation of the private sector but
recognizes and establishes the role of the Government, ensuring the fulfillment of
social obligations and successful reforms of the State sector and public investment.
As a long-term model (mainly lasting 20 to 30 years), it is best suited to the fields of
infrastructure, environment and some other areas of long-term stability.
(ii) Asset-forming financing, responsibilities by life-cycle and ownership
Asset-forming financing or project financing, partly or wholly by the public
sector or the private sector, sometimes requires complex mechanisms with the
involvement of many different stakeholders, where the asset ownership is often
transferred to the public sector at the end of the mechanism. The private sector is in
charge of asset maintenance during the useful life-cycle of the asset, thus they are

motivated to form such assets that minimize the periodic maintenance costs
throughout the assets' life-cycle.
(iii) Performance-based benefits
Effective public private partnerships note that the public sector and the private
sector have their own certain relative advantages over the other to perform specific
tasks. The contributions of the Government to public private partnerships may take
the form of investment capital (acquired through taxation), asset transfer, or other
commitments or in-kind contributions. The Government also makes contribution in
social responsibility, environmental awareness, local knowledge and political
mobilization. The role of the private sector in these partnerships is to utilize their
expertise in commerce, management, administration and creativity to operate
business activities in an effective manner. The focus here is to determine the
detailed specification and provide services for the procurement of asset rather than
the asset itself, thus good public-private partnership mechanism often stipulates that
payment condition is whether the operation unit manages to satisfy a range of
standards on performance during the provision of services. One of the most

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important benefits of public-private partnerships is the efficiency and risks mostly
allocated to the private sector, not just the access to their capital.
(iv) Risk allocation among the parties involved
The partnership structure should be established to allocate risks to the partner
who has more capability to solve such risks in the best way and thereby reduce
costs and improve performance. Risks generally incurred by the public sector in
turnkey contracts or traditional construction contracts are currently allocated among
the public partner and the private partner. However, public-private partnerships
(PPP) do not mean that the private sector must bear all or a large proportion of risks
related to the project. The exact allocation of risks is determined in each specific

case, depending on the accessibility, risk control and handling of the public partner
or the private partner. The most significant principle of risk allocation in publicprivate partnerships is risks are divided, quantified and allocated to the party with
the best risk management capability.
1.1.2.2. Advantages and Challenges of PPP
(i) Advantages
Basically, the benefit of introducing PPP is to utilize the advantages and the
strength of the State and the private sector, which is beneficial for both the State, the
private sector and the users of the services and products generated by public-private
partnerships, particularly:
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More investments in infrastructures: With PPP mechanism, the State

will relieve the burden of seeking, arranging and allocating the investment capital
from the state budget to infrastructures. Therefore, the State can carry out many
more investment projects or increase the scale of infrastructure investment
projects.
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Stability and growth of the private sector: By participating in the PPP

mechanism, the private sector has obtained more long-term and possibly less
risky investment opportunities, and commitments and sharing from the State,
thereby achieving the stability and growth, promoting the development of the
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