Tue, 07 Apr 2020

Vietnam Turns to Private Companies for Public Services Needs

Voice of America
16 Feb 2020, 04:05 GMT+10

Last year companies like Coca Cola and Tetra Pak, an international food packaging and processing company, collaborated with Vietnam's biggest city to lower garbage levels. Their work included putting recycling bins around Ho Chi Minh City and investing in the waste management system.

Garbage collection is still a local government responsibility.

The collaboration, though, shows how Vietnam is increasingly looking at private companies to fulfill its national development needs.

Vietnam is at a turning point. The country used to rely on aid from nations such as Sweden and Canada, and that foreign funding helped Vietnam improve education, health care, and other public goods, and transform into a lower middle-income nation.

Foreign governments are cutting aid budgets globally, though, and Vietnam no longer qualifies for as much aid, so it is trying a new approach to development, making it a business.

It matches marketing strategy to a need for investment dollars.

That means getting more companies involved in activities traditionally performed by government, with the intention of reaching Vietnam's development goals."

A series of ongoing market reforms is giving Vietnam a market-leading status in Southeast Asia, making it an increasingly attractive place for investors," Nirukt Sapru, who is the chief executive officer for Vietnam, Southeast Asia, and South Asia at Standard Chartered Bank, said.

He added that in Vietnam, the United Nations Sustainable Development Goals present "opportunities for private sector investors looking to invest with impact and improve the lives of millions over the next decade."

Water is one example. The change in approach means officials are discussing the provision of clean water not just as a right or a development goal, but also as a potentially profitable investment. This hybrid approach is visible across Vietnam, with companies selling wind power as part of a national energy security agenda, building toll roads whose fees are collected by both government and companies, and laying internet cables as part of efforts toward universal connectivity.

Standard Chartered estimates these and other goals in Vietnam provide companies with a $45.8 billion investment opportunity.

The country is looking at public-private partnerships, which allow companies to participate in what are usually public services, sometimes for a limited time. For instance a city government could let a company build it a hospital, and run facilities until it recoups its investment. Vietnam must strike a balance, making the partnership profitable for companies, without the government getting in too much debt, according to Asian Development Bank consultants Sanjay Grover and Donald Lambert."

If it is too generous, governments can be saddled with millions of dollars in contingent liabilities," they wrote in an ADB analysis. "If it is too conservative, investment stalls."

However, partial privatization is not without its drawbacks. Last year Vietnamese drivers protested against paying road tolls that went in part to private investors and that they felt had become unfairly high.

Elsewhere in the region, Malaysia struggled to introduce a fee to clean septic tanks when privatization occurred because residents had gotten used to that being a public service, already covered by tax dollars. Citizens globally have resisted when governments move to sell assets they think should be kept for public benefit, from airports in France to the oil business in Mexico.

One major donor, the U.S. Agency for International Development, though, thinks it's a good idea for Vietnam to move toward more private sector involvement. In recent years it has promoted U.S. companies to work on Vietnamese development projects, such as energy and smart cities."

USAID provides development assistance for market-oriented reform and trade facilitation, including implementing a program to reinvigorate the public-private-partnership business model here in Vietnam," said U.S. Ambassador to Vietnam Daniel Kritenbrink last year.

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