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Although no major build-operate-transfer (BOT) projects have been fully implemented in Vietnam to date, regulations promulgated in 1993 and a circular issued in 1994 sufficiently define the rules of the game to enable foreign investors to consider BOT contracts as investment vehicles for infrastructure projects in the country.
The regulations were promulgated on November 23, 1993, followed on February 28, 1994, by a circular from the State Committee for Cooperation and Investment (SCCI). The circular expands upon and gives guidance with respect to the regulations.
BOT CONTRACTS
BOTs are agreements between private investors and a host government whereby the investor agrees to build an infrastructural project such as a road, power plant, or port. They have been used in a number of developing countries in Asia. The investor enters into agreements, known as ancillary contracts, with third parties to construct, supply, finance, advise or invest in the project. Some of the third parties may also be investors.
After the project is complete, it is operated by the investors or an ancillary contractor for an agreed period. The government provides special incentives is sometimes a customer, and is sometimes an investor. Revenues are used to repay loans, pay outstanding obligations, maintain the facilities, and give the investors a reasonable return. Often, profits received by the investors get preferential tax treatment, as in the case in Vietnam.
Following an agreed period, the project is delivered to the government. Since financing is obtained by the investors largely from private sources, BOTs are, for a government, an obvious alternative to increasing its borrowings.
BOTs in Vietnam
On December 23, 1992, the National Assembly of the Socialist Republic of Vietnam approved 12 amendments to the Foreign Investment Law (FIL). These amendments first introduced the concept of BOT, as follows:
Build-operate-transfer contract means a document in writing signed by foreign organizations or individuals and an authorized State body of Vietnam for the construction and commercial management of an infrastructure project for a fixed period. Upon expiry of the period the foreign organizations or individuals shall, without compensation, transfer the project to the Government of Vietnam.(1)
The same amendments provided the following:
Foreign organizations and individuals investing in Vietnam for the construction of infrastructure projects may sign build-operate-transfer contracts with authorized...