New decree on BT projects: Clearly reciprocal rights

After a long wait, the localities and investors of BT projects (Build - transfer, also known as exchanging land for infrastructure) finally breathed a sigh of relief when the Prime Minister had just signed the promulgation Decree 69/2019/ND-CP.

Decree 69 was created to help open congestion for many BT projects. Photo: Dung Minh

Exit for BT project

According to Mr. La Van Thinh, Director of the Department of Public Administration (Ministry of Finance), Decree 69/2019/ND-CP stipulates the use of public assets to pay investors when implementing investment projects. Construction of works in the form of Build - Transfer contract that takes effect from October 1, 2019 is expected to thoroughly overcome violations in the use of public land in exchange for previous infrastructure.

The time before Decree 69/2019/ND-CP came into being, one of the most difficult problems for state management agencies was to solve so that investors and businesses could still develop works. The infrastructure is completed according to the goal, but it must also be strictly regulated so that the State avoids losses. Because in reality, once the status of BT works and allocated land has occurred, the price is not equal.

“When the investor constructs a BT project, it is the edge of a deserted beach, but then it is invested, even with planning information, immediately the market price increases. In this case, if the lack of skillful handling will cause damage to investors. But if not considered specifically will cause loss to the State if the BT project must be paid. In this case, it is necessary to harmonize the rights and interests of the State, but not to eliminate the motivation of investors”, Mr. Thinh gave example.

Also according to Mr. Thinh, in principle of payment of BT projects by public assets, the use of public assets to pay to investors of BT projects is implemented on the principle of parity. The value of the BT project is equivalent to the value of the public assets paid. In particular, the value of public assets is determined according to the market price as prescribed by law at the time of payment, the value of BT project is determined according to the bidding results.

“When the locality needs to build a bridge worth 200 billion dong, the exchanged land must have the same value. In case the land value is higher than the work value, the investor must pay the difference to the budget. In case the value of the land is lower than the value of the work, the budget will compensate investors. When implementing the principle of price parity, it is impossible for investors to build a 200 billion VND bridge and hand over a piece of land worth VND 2,000 billion” Mr. Thinh said.

Another noteworthy point of Decree 69/2019/ND-CP is that the delivery of public assets for payment to BT project investors is done after the BT project is completed, or payment is made. according to the schedule based on the law on investment and construction.

“Before the Decree 69/2019/ND-CP, many investors promised to build bridges to exchange land, but there were cases where investors themselves did not build bridges, but were absorbed in taking land to go into real estate business. All due to incomplete legal system. When Decree 69/2019/ND-CP takes effect, there will be no more promising scenes. With very clear regulations on land use, it is difficult for investors to bring land to the business market. Investors must have a clear financial plan and investment plan to choose”, Mr. Thinh said.

Talking to reporters of Real Estate Investment Newspaper, representative of Ho Chi Minh City, Thai Nguyen (Thai Nguyen province), the locality that is implementing many investment projects in the form of BT, said Decree 69 was issued as an outlet for BT projects.

Another noteworthy point is that Decree 69 stipulates that investors must completely allocate funds to clear ground for reciprocal projects, the State only stands for site clearance. Therefore, in order for the construction project to deploy and quickly recover capital, the enterprise must have the finance to make reciprocal land plots. That also reduces projects that are behind schedule, "dead projects", which adversely affect local investment.

Previously, on May 31, 2019, to explain to the National Assembly, Minister of Finance Dinh Tien Dung said that the investment method in the form of BT was actually implemented before the National Assembly promulgated the Law on Management using public property. The development of a decree on using public properties to pay for BT projects poses a requirement to harmonize the interests of the State and investors and overcome existing shortcomings and limitations in the past. The Government has scrutinized and carefully considered many aspects to ensure that the goal is strict, lawful, and not retroactive, and at the same time, to handle and harmonize the above benefits.

The key is enforcement

Decree 69 has been issued with many clear regulations, which are expected to help pave the way for many currently blocked BT projects. However, the question is how to implement this Decree soon.

According to the provisions of Decree 69, for BT contracts paid by land fund, the office for investors implementing BT projects was signed in accordance with the law before January 1 2018, if the investor has not completed payment, it will continue to make payment according to the contents of the signed BT contract.

This provision affirms the principle of respecting signed contracts, reinforcing investor confidence when participating in investment projects in the form of public-private partnership (PPP) in general and under BT contracts in particular.

However, according to a PPP expert, BT projects that signed contracts before January 1 2018 were mainly contractors. Although the contract is respected, it should continue to be conducted under the guidance in Resolution 160/NQ-CP dated January 28 2018 of the Government. Competent state agencies and investors should review BT contracts signed and in progress, ensuring publicity, transparency and compliance with the law, without causing loss of public assets, do not let corruption, interest groups happen.

In case of detecting violations but not causing loss of state assets, the BT contract must be readjusted; If violations are found (violations of the law on state budget, construction, land management, bidding, public investment, management of public assets ...), they must adjust or cancel BT contracts, promptly recover lost state properties, and strictly handle violating collectives and individuals strictly according to law provisions.

In addition, sharing with the report of Real Estate Investment Newspaper, a representative of Department of Planning and Investment of a locality with many BT projects said that Decree 69, though stipulating the project to sign contracts before January 1 2018 will follow the contract, but at the same time add more regulations: “In case the contents related to payment have not been clearly specified in the BT contract, the provisions of the Land Law 2013, Investment Law 2014, Construction Law 2014, Law on State Budget 2015, Law on Management and Use of Public Assets 2017 and relevant laws take effect at the time of payment”.

According to this position, the phrase "not yet clearly specified" will cause confusion in implementation, determining how is clear or unclear, can generate psychology of hesitation in implementation.

"There is no bidding law in the Land Law, but only the auction, so it can make the implementation of the above content difficult" the representative said.

According to Nhat Nam