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- A simplified PPP toolkit that is replicable, scalable, and efficient.
- It is being applied to provide an investment model to fund conservation and research through tourism in the City of Danang
- With high Investment Rate of Return (IRR), the public sector can be incentivized to yield stronger, expedited support
Provincial governments in Vietnam have many social and environmental projects and needs which seek private sector involvement. The City of Danang, for instance, seeks to involve more SMEs and other private players in the provision of public services.
However, the projects prove most challenging to implement, despite a strong business case and availability of funds. That is often because the public sector needs to look to Public-Private Partnership (PPP) regulations, which were designed for large scale infrastructure investments. Those regulations are simply too onerous for smaller scale social and environmental investments.
The Toolkit Approach
Frontier Law and Advisory has been working closely with the City of Danang, supported by the Mekong Business Initiative (www.mekongbiz.org), to develop a streamlined methodology for the City to involve SMEs, impact investors and NGOs in smaller scale PPP projects.
Our approach has been to design a toolkit of simplified guidelines, checklists and template documents that fill in the gap where the regulations leave off. With these tools (which are consistent with the PPP regulations and international PPP norms), the public authorities are equipped to analyze projects, engage transparently with the private sector, and enter fairly balanced contracts. The toolkit is designed to be replicable, scalable and efficient, and comprises the following elements:
|Small Scale PPP Guidelines||A plain language explanation of the key principles, steps and criteria to implementing small scale PPPs.|
|Project Proposal Template and Checklists||A simplified feasibility study template guiding the parties on the core issues to be addressed.|
|Bidding Document Template||Sample documents for use by the public authority to introduce transparent competition amongst potential investors.|
|Concession Contract Template||A simplified PPP contract template suitable for small scale PPPs.|
Toolkit Application: Proposed Conservation Tourism in Danang
For several years, environmental and civic groups have pushed the City government to focus on the conservation of the endangered Red Shanked Langur (Pygathrix nemaeus) on City’s Son Tra Peninsula.
This summer, the Frontier team applied the feasibility study template from the toolkit to provide the City a proposed investment model, which would fund conservation and scientific research through tourist dollars. While the project is still in the early design (and City approval) stages, it has already benefited from the systematic approach of the toolkit.
As a PPP, the investor enjoys an exclusive concessionary right to develop and commercialize the environmental center while being obliged to ensure specified outputs, such as primate research funding, are achieved. The public sector provides the land for the center and grants the needed authorizations to build and operate the center, as agreed in the PPP contract. The investor is permitted to charge various user fees (particularly entrance fees and tour charges) and earn addition revenue through services and merchandizing at the center.
Issues addressed through the simplified PPP model
- Managing access and traffic in the Son Tra Nature Reserve, which is predicted to receive 1.4 million visitors a year by 2030;
- Demonstrating a viable alternative, sustainable commercial use of the Reserve;
- Developing alternative sources of funding for conservation and research that do not require State budget allocations.
The initial financial model suggests that the Conservation PPP would yield 45% IRR and full investment recovery within 3 years. (By comparison, in 2015 the San Diego Zoo earned 41% or USD 114 million of its revenue from services and merchandizing). With the unusually high IRR of this project, the public sector can be incentivized to yield stronger, expedited support if the upside is shared via revenue sharing.
In short, the initial analysis of this project has yielded very positive results and attracted significant attention within the City government. Two workshops were held with the Department of Tourism, Department of Planning and Investment, and Son Tra Reserve Management Board. The next step will be to elevate the discussion of this potential PPP to the People’s Committee and then to engage with private sector players – ideally, impact investors – who may have an interest in investing in the project.
 PPP means an approach to public procurement that leverages private sector financing and innovation (while passing risk to the private sector) to develop infrastructure and social services that would otherwise need to be procured from public funding.