Ho Chi Minh City, 25 February 2009 - According to Andrew Chan Yik Hong, PricewaterhouseCoopers Executive Director of Corporate Finance leading the Infrastructure, Government and Utilities practices in Vietnam, Malaysia, Thailand, Cambodia and Laos, the private sector will lead the way in the development of infrastructure in Vietnam. Andrew was speaking at a seminar yesterday organised by the British Business Group Vietnam (BBGV) in Ho Chi Minh City.
Despite the global economic slowdown, infrastructure development remains a very important topic in Vietnam and foreign interest in the sector remains strong. The strong correlation between the growth of a country’s economy and the investment in infrastructure development is well known. In the case of Vietnam, infrastructure investment as a percentage of gross domestic product (GDP) has been averaging three percent higher than the growth rate in Vietnam’s GDP since 1996. However, much more needs to be done to improve the quality of infrastructure when Vietnam compares itself to more developed countries. Vietnam will need to increase the levels of infrastructure investment at twice the growth rate of GDP to leap-frog up the “quality of infrastructure” curve to increase its overall national competitiveness.
The funding for Vietnam’s infrastructure investment is likely to gradually evolve. Vietnam would not be able to rely on Official Development Assistance (ODA) as much as it had in the past as the economy grows and the GDP per capita increases. New sources of long-term finance will need to be developed as alternatives to ODA so as not to over-rely on public sector funding. The demand for infrastructure in emerging economies like Vietnam continues to put intense pressure on government budgets whilst the Vietnamese Government is having a higher priority on the development of other important sectors including education and health.
In the context of ensuring that infrastructure projects are delivered as efficiently and cost-effectively as possible, Andrew highlighted the growing importance of Public Private Partnerships (“PPPs”) in government procurement around the world. The Government needs to decide what use they wish to make of PPPs, identify appropriate projects and ensure that they have the capabilities to procure them in an efficient and effective way.
In connection with a question from the audience, Andrew highlighted, that the quality of long term projections of government revenues and expenditures are also crucial in facilitating public private partnerships.
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