According to Parker and Hartley (2002), public-private partnerships have become popular in a number of countries in recent years. The eagerness to reduce government spending, loan, and awareness of the private enterprise to provide necessary capital investment, has introduced PPP programmes as an alternative for investment in infrastructure development.
Most of the times the public sector retains responsibility for deciding on the nature of service to be provided, the quality and performance standards of these services to be attained, and taking corrective action if performance falls below expectation (Smith, 1999).
Mr. Nguyen Tuan Nghia made a research regarding the condition in Vietnam where its existing infrastructure facilities are inadequate to meet the requirements of the growing population, modernizing and industrializing country, integrating into the global economy. Therefore, the government has the prime responsibility, to develop infrastructure. In this way some projects have been started in the past and finished or in progress and some are planned to start soon. However, the problems of projects in Vietnam can be briefly described as follows:
- Lack of coordination between public & private sectors;
- Urgent needs for infrastructure development, especially Road Systems in Vietnam. But limited government financial resources.
- Lack of management experience in planning, managing, implementing, risk allocating, etc. development projects in general and BOT projects in particular.
The problems mentioned above can be attributed to one of the important problems, that is, the inaccurate identification of the critical risks of BOT projects. If there had been a proper identification and allocation of the risks, many of these problems could not have been arisen. The problem statement now becomes as stated below:
The BOT projects in Vietnam are suffering from many problems due to inaccurate identification and allocation of risks in the projects. This problem is a major hindrance for future prospects of these projects and the economic development of Viet Nam.
Mr. Nghia set five objectives for his study such as:
- Understand the BOT structure, its applications & limitation in highway projects in Vietnam.
- Identify risks in highway projects under BOT system in Vietnam.
- Investigate the risk allocation arrangement used by the public sector agency & private sector concern.
- Finding potential risk allocation practice through case study.
- Propose recommendations for public & private partnership in developing human resources in order to build proper risk allocation strategies, leading to control risks occur in future highway projects speed road system under BOT scheme more effectively.
The concept of BOT is relatively new in Vietnam, especially for transportation infrastructure construction industry. The government now has taken steps to initiate projects. These projects meet different challenges under different phases of life cycle from pre-investment to operation phase.
All of study objectives have been achieved: (1) The BOT structure, its application & limitation in highway projects in Vietnam was sketched, (2) major risks in there were determined, (3) The risks allocation attitude between public and private sector have been determined. (4) Allocation practice has been implemented through case study. (5) Recommendations for the shareholder to cope with risks as well as control effectively through proper allocation are made.
Major risks in BOT highway projects in Vietnam
In the order to determine the major risks, total weighting score, which is product of frequency of occurrence and degree of impact, has been calculated. The risks were then ranked according to the total weighting score. The top-ten risks from public respondent attitude, private, and whole were determined in the table below.
Beside, the survey results showed risk allocation opinion base on the percentages of total counts of participant responses such as risk should be allocated to the public sector, to private sector, shared between them, or strongly depend on individual project circumstances.
Hypothesis testing also revealed that risks allocation attitude by the public and private sectors in Highway projects under BOT scheme in Vietnam is not different.
Finding risk allocation in BOT AnSuong-AnLac highway project
“BOT project of improving and upgrade 1A highway for stretch of road AnSuong-AnLac” is selected as case study in this project, because it meets criteria as follows: (1) It has enough number of stakeholders; (2) It is recently completed and open for public use.
General respondents’ perception of risk allocation in AnSuong-AnLac project base on percentages of total counts of participant responses showed that participants accepted risk allocation is important to the success of project, but they have never allocated risk properly and systematically by paying most attention to other important things.
From the point of view of all the parties discussed and retransmitted by Managing director, significant risks as potential risks in this project were identified are: land acquisition and compensation, unstable material prices, change in traffic planning, and inflation rate.
The factors limiting the application of risk identification was ranked and listed based on the result of total weighting score in the table. It is necessary of reason explanation for impact level of those factors to risk identification in this project.
Finding out potential risks proper allocation approaches in this project is the most important in this chapter. The risk allocation opinions in BOT highway project in Vietnam is really useful in risk allocation practice between shareholders. Specifically in land acquisition and compensation, compensation was assigned to the private sector; acquisition thus should be allocated to the public sector. For unstable material prices, the project cost should be adjusted since it is accepted that this risk may be from external factors. There is no choice for the investor if host government changes traffic network planning in future, they are forced to sell the project to the government if they do not want to lose in the project if operational revenues are below expectation. It is seemingly accepted that the government will adjust toll in future if inflation rate volatility at that time.
The potential problems in the risk allocation strategies were evaluated and listed by interviewees in this project base on total weighting score. As the factors limiting the application of risk identification, it is essential for explaining impact level of those factors to risk allocation strategies in this project.
Both the public and private sector has different goals and purposes for the project, thus they have different level of willingness to accept the risks if they are allocated to them. Moreover, the willingness for undertaking those risks of each participant in each factor is unready by their responsibility. The risk allocation manners in two sectors are deemed to be very much behind those in developed or even other developing countries. These originate primarily from human resources. Considering the policy is in need for solving these problems by the feasibility in mind, three fundamental recommendations are given:
(2) An education and training policy and framework should be established to bring out the best of current human resources. It must help encourage responsibility, knowledge sharing, continuous improvement in coping with risks in BOT projects.
His thesis abstract is copied and posted.
This study focusing on highway projects under BOT scheme in Vietnam in term risk and risk allocation is deemed to be beneficial to stakeholders. This research comprises of two distinct parts. The first part is determining the major risks and allocation opinion between stakeholders in BOT highway project through a survey on practitioners in public sector agency and private sector in Vietnam. The second part is finding out a proper risk allocation potential through using case study method.