CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN LESSON 3 APPRAISING PUBLIC INVESTMENT PROJECTS IN VIETNAM ROLE AND GUIDING REGULATIONS 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 1

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN CONTENT 1. Public investment project 2. Legal background for managing public investment in Vietnam 3. Current regulations on appraising public investment projects in Vietnam 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 2

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN 1. INVESTMENT PROJECT 1. 1. The concept of investment project in current regulations - Decree No. 52/1999/ND-CP: An assortment of proposals concerning the disbursement of capital to create, expand or renovate given material bases in order to achieve the quantitative growth or maintain, improve or raise the quality of products or services within a given period of time. - Law on Construction 2003: A collection of proposals relating to expenditure of capital to construct new works or to extend or renovate existing works in order to develop, maintain or improve the quality of the works or the quality of a product or service within a certain period of time. - Law on Investment 2005: A collection of proposals for the expenditure of medium and long-term capital in order to carry out an investment activity in a specific geographical area and for a specified duration. 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 3

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN Draft Law on Public Investment: A “public investment project” is a investment project that use stateowned capital to implement goals of socio-economic development for non-profit purposes. Public investment sector: : 1. Target programs, projects on developing technical, economic, social, environmental, national defense, security infrastructures; investment projects not eligible to be socialized in economic, cultural, social, healthcare, science, education and training fields as well as other ones. . 2. Target programs, projects that serve the performance of state agencies, public service delivery units, political organizations, socio-political organizations, including buying and repairing fixed assets with non-business capital. 3. Investment projects of communities, political, social and occupational organizations, social and occupational organizations that receive support from State capital as permitted by laws. . 4. Other target programs and public investment projects as decided by the Government. 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 4

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN Public investment sector under PPP modality (Decision No. 71/2010/QD-TTg dated 9/11/2010 of the Prime Minister). 1. Roads, road bridges, road tunnels, road ferries. . 2. Railways, railway bridges, railway tunnels. 3. Urban transportation. 4. Airports, sea ports, river ports. 5. Clean water supply systems. 6. Power plants. 7. Health (hospitals). 8. Environment (waste processing plants). 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 5

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN 1. 2. Project classification a) By scale and nature q Nationally important projects (Resolution No. 49/2010/QH 12 dated 19/6/2010 of National Assembly) q Group-A, B, C projects (Annex of Decree No 12/2009/NĐ-CP dated 12/2/2009) b) By capital source: v State budget; v State credit for development investment, State-guaranteed credit; v Development investment of state-owned enterprises; v Private capital; v Mixed capital. 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 6

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN Nationally important projects (Resolution No. 49/2010/QH 12 dated 19/6/2010) A. Domestic investment 1. Total capital of investment is equal or higher than 35 trillion Vietnam dong, of which the State capital is equal or higher than 11 trillion Vietnam dong; 2. Projects and works that have big impacts on environment or have potential serious impacts on environment, including : a) Nuclear power plant; b) Land using projects and works which require a change of land using purpose of national parks, natural reserves, protected landscapes, research and experimental forests’ area of 50 hectares and over; riverhead protective forests’ area of 50 hectares and over; area of forests for wind-breaking, flying sand preventing, wave-breaking and sea encroaching, environmental protection of 500 hectares and over; production forests’ area of 1000 hectares and over; 3. Land using projects and works which require a change of land use purpose of 2 course and over wet rice cultivation lands’ area of 500 hectares and over; 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 7

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN 4. Projects and works which require to emigrate and resettle 20 thousand people and over in mountainous areas or 50 thousand people and over in other regions; 5. Projects and works implemented in a location that contains national relics of special importance with regard to history and culture; national level ranked famous landscapes; 6. Projects and works implemented in a location of special importance with regard to national defense and security. 7. Projects and works which require special mechanisms and policies that must be decided by the National Assembly. B. Outward investment projects 1. Total outward investment capital is 20 trillion Vietnam dong and over, of which the state capital is 7 trillion Vietnam dong and over; 2. Projects and works which require special mechanisms and policies that must be decided by the National Assembly. 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 8

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN Project classification (according to Decree No. 12/2009/ND-CP) Total investment (bil. dong) No. 1 Type of project Group A Group B Group C > 1. 500 75 – 1. 500 < 75 >1. 000 50 – 1. 000 < 50 Belonging to the fields of security and national defense, national unlimited security, special importance in regard to socio-politics: toxic substance and dynamite production; industrial parks’ infrastructure 2 Electricity industry, oil and gas, chemicals, fertilizers, machinery, cement, metallurgy, mineral exploitation, transportation (wharf, airport, railway…), apartment block building. 3 Irrigation, transportation (different from section 1), water supply and sewerage, technical infrastructure, electricity technique, equipment production, information, electronic, informatics, pharmaceutical chemistry, health equipment, postal service, telecommunications 4 Light industrial projects, glazed terra-cotta, ceramics, glass, printing, agriculture, forestry and fishery products, agriculture, forestry and fishery product processing >700 40 - 700 < 40 5 Health, culture, education, radio broadcast and television broadcast, civil construction, warehouse, tourism, sport, science research and other projects > 500 30 - 500 < 30 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 9

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN Analyzing opportunities Appraisal Pre-feasibility study Investment preparation 1. 3. Cycle of investment project Feasibility study Appraisal Design, bidding Project finishing 3/3/2021 Project operation Project implementation Building Checking and taking over APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 10

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN 2. Legal background for managing public investment projects Law on Investment and business CONSTRUCTION WORKS Law on Construction OTHER FIXED ASSETS Non-business investment (Public investment) Decree No. 52 Decree No. 12 Decree No. 07 Law on Bidding 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 11

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN Directly related legal documents 1. 1. Law on State Budget 2002 (Law No. 1/2002/QH 11 dated 16/12 /2002) 1. 2. Law on Construction 2003 (Law No. 16/2003/QH 11 dated 26/11/2003) 1. 3. Law on Bidding 2005 (Law No. 61/2005/QH 11 dated 29/11/2005 1. 4. Law on thrift practice and waste prevention (Law No. 48/2005/QH 11 dated 29/11/2005) 1. 5. Law on Management and Use of State property (Law No. 09/2008/QH 12 dated 3/6/2008) 1. 6. Law on Land (Law No. 13/2003/QH 11 dated 26/11/2003) 1. 7. Law on amending and supplementing a number of articles of the Laws concerning capital construction investment (Law No. 38/2009/QH 12 dated 19/6/2009). . . . 1. 8 Resolution No. 49/2010/QH 12 dated 19/6/2010 on projects and works of national importance to be submitted to the National Assembly for decision on their investment 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 12

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN - Decree No. 92/2006/ND-CP dated 7/9/2006 and Decree No. 4/2008/ND-CP dated 11/01/2008 on amending and supplementing a number of articles of Decree No. 92/2006/ND-CP on elaboration, appraisal, approval and management of socioeconomic development master plans - Decree No. 08/2005/ND-CP dated 24/1/2005 on construction planning. - Decree No. 52/1999/ND-CP dated 08/7/1999 promulgating the regulation on investment and construction management - Decree No. 12/2009/ND-CP dated 12/02/2009 on management of investment projects on the construction of works; Decree No. 83/2009/ ND-CP dated 15/10/2009 on amending and supplementing a number of articles of Decree No. 12/2009/ND-CP - Decree No. 112/2009/ND-CP dated 14/12/2009 of the Government on management of work construction investment expenses - Decree No. 85/2009/ND-CP dated 15/10/2009 on guiding the Bidding Law and the selection of construction contractors under the Construction Law - Decree No. 108/2009/ND-CP dated 27/ 11/ 2009 of the Government on investment in the form of build-operate-transfer, build-transfer-operate or build-transfer contract - Decree No. 131/2006/ND-CP dated 09/11/2006 on management and use of Official Development Assistance capital - Decree No. 113/2010/ND-CP dated 15/12/2010 providing for the determination of environmental damage. - Decree No. 15/2013/ND-CP dated 06/02/2013 on quality management of construction works (replacing Decree No. 209/2004/ND-CP dated 16/12/2004 ; Decree No. 49/2008/ND-CP dated 18/4/2008 on amending and supplementing a number of articles of Decree No. 209/2004/ND-CP) 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 13

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN 3. APPRAISING PUBLIC INVESTMENT PROJECT UNDER CURRENT REGULATIONS 3. 1. Authority on investment deciding and public investment project appraisal 3. 2. Procedures on investment project appraisal 3. 3. Contents of public investment project appraisal 3. 4. Methods of public investment project appraisal 3. 5. Organizing public investment project appraisal 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 14

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN 3. 1. Authority on investment decision and public investment project appraisal (Decree No. 52/1999/NĐ-CP dated 8/7/1999, Decree No. 12/2009/NĐ-CP dated 12/2/2009) a) Authority on public investment decision v For projects using State capital § The Prime Minister shall decide on nationally important projects in accordance with National Assembly’s resolution and other important projects; § Ministers and Head of ministerial-level agencies shall decide on Group -A, B, C projects; grant authority to or allow subordinate agencies to make investment decisions on Group - B, C projects § Chairman of People’s Committee at all levels shall decide on investment projects of Groups A, B, C within the limits and balancing capacity of local budgets; § Chairman of provincial-or district-level people's committee may authorize or decentralize their subordinates to decide on investment projects of groups B and C; § Depending on certain conditions, chairman of provincial-level people's committee shall assign chairman of district- or commune-level People's Committee to decide on investment projects funded with budgets of superior levels. 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 15

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN v For projects funded with capital of other sources or mixed sources: Investors shall themselves decide on investment and take responsibility v Credit-funded projects: capital lenders shall, before competent persons issue investment decisions, appraise financial and debt payment plans before approving or disapproving the provision of loans. Persons with the investment-deciding competence may issue investment decisions only when project evaluation results are available 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 16

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN b) Authority on appraising public investment project 1. Persons with the investment-deciding competence shall organize project appraisal 2. The Prime Minister shall set up the State Council for Appraisal of Investment Projects to appraise projects under his investment-deciding competence 3. For state budget-funded projects : - Ministerial-level agencies shall appraise projects under their investment-deciding competence (In charge of project appraisal are professional units under investment deciders) - Provincial-level People's Committees shall appraise projects under their investment -deciding competence (In charge of project appraisal is Department of Planning and Investment) - District- or commune-level People's Committees shall appraise projects under their investment-deciding competence(In charge of project appraisal are their affiliated units with the budget plan-managing function) 4. For other projects, investment deciders may themselves manage to appraise 5. The appraisal of specific investment projects will follow on specific regulations 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 17

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN 3. 2. Procedures on investment project appraisal a) Goals and requirements: - Goals: Foundation for investment decision - - Requirements : - Professional aspect : - Don’t implement bad projects - Don’t ignore beneficial investment opportunities - Management aspect : - Compliant with current regulations on investment management - Ensure time limit as regulated - 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 18

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN b) Tasks of appraisal • Check the contents of dossier • Appraise • Make conclusions ____________ 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 19

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN c) Foundation for project appraisal § Project dossier - Domestic projects - Projects under special modes (BOT, BTO, etc) - Investment projects under PPP mode § Legal document system - Laws - By-law documents - Standards, norms § Other related information - Daily economic, cultural, social, scientific, technology news - International practices, real domestic and foreign experiences 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 20

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN d) Project appraisal dossier § Investor’s statement + pre-feasibility study report § The National Assembly and the Government’s approval on investment projects (applied for those as required) § Documents on legal entity status and ability of investor § Opinions, in writing, of related agencies (credit organizations, state management agencies, localities) § International agreements or treaties (for ODA capital funded projects) § Other documents (architectural plan, specific characteristics of project, etc) 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 21

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN 3. 3. Contents of investment project appraisal a) Public investment project in general (Article 27, Decree No. 52/1999/NĐ-CP) - The compatibility with the planning - The regime on natural resources exploitation and us; - The State’s preferences and/or supports - Technological options and production scale, usage capacity - Architectural options, the application of construction criteria and standards - The use of land, protection of ecological environment, the plan on resettlement - Fire and explosion prevention and combat, labor safety and social aspects of the projects - The project’s risks - The overall assessment of the project’s feasibility 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 22

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN b) Contents of appraisal of an investment project on the construction of works (Article 11, Decree No. 12/2009/ND-CP) 1. Examination of elements assuring the project efficiency: The necessity of investment; input elements; size, capacity, technologies, implementation duration and schedule; financial analysis, total investment, and socio-economic benefits. 2. Examination of elements assuring the project feasibility: Compliance with planning; demands for use of land or natural resources (if any); ground clearance and capital-raising capabilities according to the project schedule; the investor's managerial experience: loan repayment ability; fire prevention and fighting measures; factors affecting the project, such as defense, security and environment, and other relevant regulations. . 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 23

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN c) Examination of the basic design c) (Decree No. 12/2009 /NĐ-CP and Decree No. 83/2009/NĐ-CP) a) The appraisal of a basic design shall be conducted simultaneously with the evaluation a) of an investment project b) State management agencies are responsible for giving opinions, including: b) - Ministries managing specialized construction works, for group-A projects - Departments managing specialized construction works, for projects of groups B - and C c) Content of appraisal on basic design : § The compatibility of the connection to the region's technical infrastructure; § The rationality of the technological plan or chain, for works subject to technological requirements; § The application of regulations and standards on construction, environment and fire prevention and fighting; § Construction capability conditions of consultant organization or practicing capability of individual who make basic design. 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 24

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN d) For investment project on the construction of works in urban area which are approved by an authorized state agency, investment deciding person has to ask the authorized state agency to give opinions on basic design before approving the project. đ) For other projects, investment deciding person shall decide on collecting opinions about basic design if needed. e) Project appraisal unit is responsible for sending project dossier to and receiving opinions from the organization managing specialized construction works. g) Organization giving opinion on basic design shall receive 25% of project appraisal fee. Ministry of Finance issues instructional document on implementing this regulation. 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 25

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN 3. 4. Methods of project appraisal 3. 4. 1 Points of view on appraisal and assessment a) Aspects : • Finance • Economic aspect • Social aspect • Environment • … b) Points of view: u Total capital (bank) u Investor u Budget u The State (nation) 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 26

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN Aspects and points of view on appraising projects Aspects under appraisal Points of view Finance Economic Total capital (bank) Investor Budget The State (nation) highly interested in 3/3/2021 Social . . . interested in to some extent APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 27

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN 3. 4. 2. Methods of project appraisal a) General method Contents in project dossier - Laws - Normative standards - International practices - Reality b) Specific methods : - Optimal analysis - Experiment - Specialist, . . . 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 28

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN 3. 5. Organizing implementation of investment project appraisal 3. 5. 1. Responsibility of organizing appraisal a) Investment deciding person is responsible for organizing implementation of investment project appraisal before approving. b) In charge of project appraisal are professional units under investment-deciding authorities. Project appraisal units shall seek opinions of sectorial management agencies; state management agencies specialized in construction and other concerned agencies in order to appraise projects. c) Investment-deciding authorities can hire consultants to examine partly or fully the content 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 29

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN 3. 5. 2. System for organizing investment project appraisal National important projects National Assembly The Government The Prime Ministers, head of ministeriallevel agencies Groups A, B, C projects Head of authorized or decentralized agencies Chairman of enterprise’s board of directors Chairman of provincial and city people’s committees 3/3/2021 Ministries and agencies Decentralized agencies The State Council for appraisal of Investment Projects Project appraisal units enterprises Provinces and cities directly under the Central Government APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 30

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN 3. 5. 3. Procedure of organizing investment project appraisal Receiving project dossier Leading unit of project appraisal agency Independent evaluation consulting agency Reports of consultants/ appraisal specialists Independent evaluation specialist/group of specialists Management units (professional departments, services Appraisal report/docu ment submitted to the head of appraisal agency 3/3/2021 Evaluation consult workshop Head of appraisal agency Concerned ministries, agencies, localities Invesment deciding authority APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 31

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN 3. 5. 4. Time limit for appraising a project : 3. 5. 4. - 90 working days, for projects of national importance , - - 40 working days, for group-A projects ; - - 30 working days, for group-B projects ; - - 20 working days, for group-C projects v; - Time limit of consideration of concerned agencies, starting from the day of receiving project dossier : - 45 working days, for projects of national importance; - 20 working days, for group-A projects; - 15 working days, for group-B projects; - 10 working days, for group-C projects. Exceeding the above-mentioned time limits, if concerned agencies have no opinions, it is supposed that they agree and are responsible for their field of management. 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 32

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN 3. 5. 5. Appraisal on project adjustment a) Circumstances in which projects can be adjusted: Investment projects on construction works of which State capital accounts for 30% and over can be adjusted in following cases: a) Being affected by natural disasters such as earthquake, storm, flood, tsunami, fire, enemy-inflited destruction and inresistible events; b) Factors that can bring about higher benefit for the project arise; c) Changes in construction planning that have direct impacts on location, size and goals of the project. 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 33

CAPACITY BUILDING PROGRAM FOR IMPROVING PUBLIC INVESTMENT APPRAISAL IN VN b) Authority on project modification : a) If changes in location, size and goals of the project lead to an exceed in total investment, investor must ask for approval of investment deciding authorities ; b) For other circumstances, investor can decide themself In case that project modification is not suitable with sector planning, construction planning approved by authority State management agencies, investor needs to collect opinions from those agencies. c) Implementation of project modification : a) Modified contents must be re-evaluated; b) Decision makers must be legally responsible for their decisions 3/3/2021 APPRAISAL OF PUBLIC INVESTMENT PROJECTS IN VN 34