Circular No. 19/2019/TT-BGTVT dated May 23, 2019 of the Ministry of Transport on guiding in detail investment fields and contents of feasibility study reports of investment projects in the form of public-private partnership in the transport sector

CIRCULAR

Guiding in detail investment fields and contents of feasibility study reports of investment projects in the form of public-private partnership in the transport sector^[1]

Pursuant to Construction Law No. 50/2014/QH13 of June 18, 2014;

Pursuant to November 26, 2014 Law No. 67/2014/QH13 on Investment;

Pursuant to the Government’s Decree No. 63/2018/ND-CP of May 4, 2018, on investment in the form of public-private partnership;

Pursuant to the Government’s Decree No. 12/2017/ND-CP of February 10, 2017, defining the functions, tasks, powers and organizational structure of the Ministry of Transport;

At the proposal of the Director of the Public-Private Partnership Department;

The Minister of Transport promulgates the Circular guiding in detail investment fields and contents of feasibility study reports of investment projects in the form of public-private partnership in the transport sector.

Chapter 1

GENERAL PROVISIONS

Article 1.Scope of regulation

This Circular guides in detail investment fields and contents of feasibility study reports of investment projects in the form of public-private partnership in the transport sector.

Article 2.Subjects of application

1. This Circular applies to agencies, organizations and individuals involved in the implementation of investment projects in the form of public-private partnership (below referred to as the PPP form) in the transport sector.

2. This Circular does not apply to build-transfer contracts under which land is used to make payment to investors.

Article 3.General provisions on feasibility study reports

1. A feasibility study report of an investment project in the PPP form must comprise the principal contents prescribed in Clause 1, Article 29 of the Government’s Decree No. 63/2018/ND-CP of May 4, 2018, on investment in the form of public-private partnership (below referred to as Decree No. 63/2018/ND-CP) and this Circular. In addition, a feasibility study report must have the contents prescribed in the Minister of Planning and Investment’s Circular No. 09/2018/TT-BKHDT of December 28, 2018 (below referred to as Circular No. 09/2018/TT-BKHDT).

2. For a project having construction components, a feasibility study report must contain a base design in accordance with the construction law.

Article 4.Investment in the transport sector

Investment projects on construction, renovation, operation, commercial operation and management of infrastructure facilities, and provision of public services in the following fields:

1. Road transport;

2. Railway transport;

3. Inland waterway transport;

4. Maritime transport;

5. Aviation.

Chapter 2

CONTENTS OF FEASIBILITY STUDY REPORTS

Article 5.Grounds for making feasibility study reports

Grounds for making a feasibility study report include:

1. Laws, decrees and guiding circulars on the implementation of projects in the PPP form;

2. Laws, decrees and guiding circulars on the sector or field of investment of the project;

3. Resolutions or decisions approving related master plans in accordance with the laws on national socio-economic development master plans and plans, sectoral, regional or local development plans related to projects;

4. Competent authorities’ decisions and documents on formulation and appraisal of and decision on investment policy of the project (except group-C projects);

5. Other relevant legal documents (if any).

Article 6.Necessity and objectives of investment

1. Presentation of the background:

a/ The background of socio-economic development of the country and locality in the stage of project implementation; the development of the related transport system; conditions and natural environment impacting the project;

b/ Overview of the sector or field in which the project is proposed; direct and indirect impacts of specialized regulations on the project;

c/ The conformity of the project with related master plans in accordance with the law on socio-economic development master plan and plans;

d/ Identification of expected benefits and contributions of the project to the country and the locality.

2. Analysis of the necessity of project investment and social demand:

a/ Demand satisfaction level of the work before and after making investment in the project; potential and benefits brought about by the project which serve as a basis for determination of demand, time and size of project investment;

b/ The current and future demands for use of works and services of the project shall be analyzed and forecast in a scientific manner, with forecast results based on the distribution of demands for all modes of transportation in the whole network (if any). Input data, grounds and calculation results according to specialized regulations (if any) in different scenarios throughout the project duration shall be presented in detail. The detailed dossier of demand forecast shall be enclosed with the feasibility study report;

c/ Details of the actual state of the work and issues to be solved in the project; related works and projects (support projects and competitive projects); analysis of impacts of other projects on the project implementation (impacts on revenue, profit, cost, etc.); explanation of positive impacts as well as negative impacts of such projects on the proposed project.

3. Objectives of the project include:

a/ General objectives: benefits brought about by the project for the national as well as local socio-economic development; contributions of the project to the achievement of the general objectives of the transport sector and the project field;

b/ Specific objectives: specific and quantifiable targets (in terms of quantity, quality and time); explanation of issues which are addressed; benefits from the project; required project capacity suitable to user need, and other specific objectives.

Article 7.Advantages of investment in projects in the PPP form and consultation with agencies and organizations

1.To analyze advantages of investment in a project in the PPP form (including study of change of the form of investment, for projects funded with public investment capital sources), clearly analyzing the possibility of attracting capital, technology and management experience from the private sector; practical survey results on the ability to implement the project in the private sector; plan on division of risks between related parties.

2. To fully present the limitations of investment in the project in the PPP form compared to other forms of investment, including project implementation management capacity of related parties; complexity of the elaboration and implementation of project contract terms and clauses.

3. For a project proposed by an investor, a feasibility study report must clearly analyze the advantages of capital sources, capital allocation capacity of the investor; capacity to balance the State’s contribution; management capacity and experience of the investor; capital retrieval, investment efficiency and risk tolerance and handling.

4. When making a feasibility study report,one or all of the following agencies and organizations: People’s Council, People’s Committee, and National Assembly deputies’ delegation in the province or city where the project is implemented, and professional associations in the field of investment, shall be consulted aboutinvestment in the project
implementation.

Article 8.Conformity of projects with development master plans and plans

1. To explain the conformity of the project with related master plans in accordance with the laws on national socio-economic development master plans and plans, sectoral, regional or local development plans; level of conformity with approved master plans in case of investment phasing or limitation on technical standards.

2. To explain the suitability of the project with the investment fields specified in Articles 4 of this Circular.

3. When necessary to phase out investment in order to reduce the complexity of the project, increase the feasibility and attractiveness of the project, to make a detailed explanation about the size of the project and a general plan on project implementation in order to analyze difficulties in the project implementation.

Article 9.Project size, implementation location and demand for use of natural resources

1. Analysis of demand for use of infrastructure facilities on the basis of planning, practical survey data or forecast data; explanation about investment size and capacity and technical grade of project works in conformity with regulations and standards promulgated by competent authorities; investment plans suitable for demand growth forecasts and investment phases (if any).

2. Project implementation location: description of project location and scope (starting point, ending point and control points); main landmarks on the project implementation location. In case there are other projects or works that are being or will be implemented in the project area or surrounding area, impacts of such projects on the proposed project shall be analyzed.

3. Land use demand: the scope (boundary) of land use for project ground allocation; total land area occupied by the project (temporary occupation, permanent occupation), advantages of the project location, protection corridor (if any), classification of land plots by current land use purposes for use as a basis for determining compensations and ground clearance plans.

4. Natural resource use demand based on the collection of data and assessment of natural resources in the project location; usability of natural resources as construction materials (reserves and quality) and feasibility of natural resource exploitation.

Article 10.Natural conditions in construction sites and actual state of works

1. Natural conditions: To present in detail natural conditions in construction sites, and assess impacts of natural conditions on the construction of works or projects based on collected survey data.

2. To assess actual state of works based on the technical criteria upon making project investment; specific state of works and level of satisfaction of the operation requirements; usability of the whole or part of existing works.

3. To assess the actual state of works and valuate remaining assets of transport infrastructure facilities under current regulations applicable to transport infrastructure projects.

Article 11.Presentation of techniques, technologies and major solutions

1. To clearly present and explain the list of principal technical regulations and standards applicable to the project, and principal technical specifications.

2. To present the basic design made in accordance with the construction law, covering construction locations, directions, list, sizes, types and grades of works suitable to the scope of investment, technical standards and grades of project works; technical analysis of the investment phasing plan (if any).

3. To present in detail investment items, major technical solutions, technological and technical plans and equipment selected for each work item; the usability of and connection with existing works; architectural solutions, site plan, cross-sections and elevations of works, and dimensions of main structures of construction works. When applying new technical, technological and material solutions, to explain and clarify the possibility of satisfaction of assessment indicators in terms of technique and efficiency.

4. A feasibility study report of a transport infrastructure project must contain calculation sheets for main load-bearing structures or application of new structures; techno-economic calculations and comparisons in the selection of technical plans and design solutions to ensure the selection of the optimal plan.

5. To present related technical infrastructure facilities; plan on connection of technical infrastructure facilities inside and outside works; fire and explosion prevention and fighting, traffic safety, environmental sanitation and occupational safety solutions.

Article 12.Implementation plan, progress and period of the project contract

1. To present a general plan on project implementation (scheduling the project implementation), specifying the time of commencing and completing main jobs of the project, including making of the feasibility study report, approval of project investment, bidding for investor selection, signing of the project contract, construction stage, operation stage, time limit for transfer, and other time limits (if any). The plan must suit the conditions for implementing the project to ensure the project implementation progress.

2. For projects having construction components: to make a general construction schedule based on the construction volume, topographic and geological conditions and weather characteristics of the project location so as to determine the project implementation duration, calculate costs and allocate investment capital in conformity with the project implementation progress.

3. The duration of commercial operation of the project shall last from the date on which project works are commissioned or handed over from the management agency to the date of expiration of the commercial operation duration according to the financial plan. This duration must be counted in days.

Article 13. Ground clearance and resettlement

1. A ground clearance and resettlement plan must conform to the land use demand prescribed in Clause 3, Article 9 of this Circular, comply with state regulations on land recovery, compensation, resettlement support and other current regulations, and have the following contents:

a/ Scope of ground clearance;

b/ Plan on performance of ground clearance, payment of compensations and provision of resettlement support (clearly differentiating dispersed resettlement from concentrated resettlement). In case of concentrated resettlement, to determine the location and construction size of the resettlement zone, and expenses for covering resettlement cost difference (if any);

c/ Funds for implementation: tentative plan on payment of compensations in conformity with the general plan on project implementation to serve as a basis for making the capital plan and determining loan interest;

d/ Assessment of impacts of the ground clearance and resettlement and recommendation of solutions to mitigate these impacts; in case of necessity, surveys and community consultation shall be conducted to make an appropriate implementation plan.

2. General plan on ground clearance and resettlement shall be approved in writing by a competent authority of the locality where the project is located.

3. Contents of plans on ground clearance and resettlement must comply with the Government’s Decree No. 47/2014/ND-CP of May 15, 2014, on payment of compensations, provision of support and resettlement, and other relevant regulations.

Article 14.Total investment level, total investment capital and financial plans

1. Total investment level must be fully determined, ensuring its accuracy in compliance with the law on management of construction investment costs and Decree No. 68/2018/ND-CP, Circular No. 09/2018/TT-BKHDT of December 28, 2018, and this Circular, and calculating and clarifying the following:

a/ Expenses for compensation, resettlement support (if any); construction costs; equipment costs; project management costs; construction investment consultancy costs; contingency expenses for unexpected work volume and inflation and other expenses in accordance with law;

b/ Contingency and loan interest expenses and necessary law-prescribed expenses for capital raising (guarantee costs, commitment charge, credit insurance, brokerage) to be paid in the course of construction which shall be determined on the basis of disbursement progress in conformity with the protect implementation progress (cash flow in the project implementation shall be determined).

2. The total investment capital shall be fully determined, ensuring its accuracy in compliance with Decree No. 63/2018/ND-CP and other relevant regulations, and calculating and clarifying the following:

a/ The total investment level as prescribed in Clause 1 of this Article;

b/ The minimum equity and loans and the State’s contribution to the project (if any);

c/ The grounds for, and necessity of, calculating expenses related to initial working capital for the project operation (if any).

3. A financial plan must present at least the contents prescribed in Section VI of Appendix III to Circular No.09/2018/TT-BKHDT of December 28, 2018, of which:

a/ Sufficient bases for identifying parameters of the project financial model; and on that basis, to calculate and assess the financial feasibility and feasibility of capital mobilization for the project and determine the duration of capital retrieval and profit generation;

b/ Detailed explanation about expenses in the financial model: the total investment capital of the project enclosed with the project financial plan (the plan to mobilize capital for the project), expected interest rate, loan-borrowing conditions and other expenses;

c/ Revenue of the project: details about prices and charge rates expected to be applied according to the type of the project contract, common prices and charge rates and current regulations, and at the same time based on demand analysis and forecast results prescribed at Point b, Clause 2, Article 6 of this Circular to explain and produce in detail different scenarios on the revenue of project (at the fundamental, minimum and maximum levels);

d/ To analyze the relationship between the insecure input factors and the output factor (sensitivity) appropriate to input factors of the financial model (including analysis in case optimal and non-optimal financial plans are available);

dd/ To analyze in detail output parameters of the financial model to ensure the ability to get loans of the project, at least including: loan to equity ratio; debt service coverage ratio (DSCR); net profit to minimum equity ratio or equity internal rate of return; internal rate of return (IRR); net present value (NPV) and time of capital recovery.

4. In case a project requires the State’s contribution to increase its financial feasibility, to base on the financial model and results of financial analysis of the selected project contract type to explain in detail the contents related to the State’s contribution to the project under Clause 1, Section IX of Appendix III to Circular No.09/2018/TT-BKHDT of December 28, 2018, including:

a/ The necessity to have the State’s contribution to the project;

b/ Determination of the maximum value and capital allocation ability; disbursement method, plan and schedule of the investor;

c/ Requirements on the State’s contribution to the project such as different plans and selected plan, value, proposed instruments, and disbursement and payment mechanisms;

Article 15.Selection of project contract types

1. On the basis of explanations about technical plan, demand forecast and financial plan of the project, possibility of the State’s contribution and payment plan, a feasibility study report must identify the project under the investment model with business activities or payment to investors on the basis of quality of provided services, and analyze the conformity of the contract type with the project conditions.

2. To analyze strengths and weaknesses of the selected project contract type, from the aspect of division of risks and other factors related to the feasibility of the project implementation.

3. To clearly define the responsibility of competent state agencies, investors and project enterprises and other related organizations (lenders, input suppliers, contractors, etc.) for the implementation of the project contract (covering engineering, construction, operation and capital allocation).

Article 16.Investment capital, plans and feasibility of capital mobilization

1. Detailed information about project investment capital sources and specific assignment of capital plans for different capital sources (including equity, loans and the State’s contribution to the project) as appropriate to the project implementation progress.

2. The assessment of feasibility of the capital mobilization for project implementation; the demand and payment capacity of the market, service users’ ability to pay, and interest of investors and lenders in the project.

Article 17.Management on project implementation and operation and maintenance of construction works

1. The state competent agencies’ capacity and organizational structure to manage the project implementation in each particular stage of project implementation since the making and appraisal of feasibility study reports.

2. To elaborate the Key Performance Indicators (KPI) of transport infrastructure facilities in the following aspects: technique, operation, environment, society, finance, progress, etc. in the course of operation and use to serve as a basis for parties to conduct the project monitoring. Based on specific characteristics of the project, to identify contents that need to be monitored during the project implementation and requirement on meeting such contents so as to identify KPIs related to the project; for each indicator, to clearly state the basis for measuring, units providing information for assessment of such indicator, and the order of monitoring.

3. The management, operation and maintenance of construction works must comply with relevant regulations on management, operation and maintenance of construction works.

Article 18.Analysis of project risks and proposals on investment incentives and assurance

1. To identify risks throughout the project duration and assess impacts on the project in case risks occur in order to propose an appropriate method of risk division to competent state agencies and investors in accordance with law, and at the same time propose measures to minimize risks and responsibility of parties for risks management during the project implementation. These contents shall be tabulated to assign the responsibility for the project risks, including:

a/ To systematically identify such major risks of the project as legal risks; social risks; risk in land use rights; environmental risks; engineering, construction, technique, technology and production risks; financial risks; macroeconomic risks; market demand risks; operational risks; contract termination risks and other risks (if any);

b/ To describe major risks of the project and at the same time analyze the possibility of such risks to occur as well as their impacts on the project (in terms of cost, implementation progress, design change and capital allocation, etc.); to assess financial impacts on the project in case risks occur, and when necessary, to experiment different plans in the financial model to assess such impacts;

c/ Based on specific technical, economic and financial conditions of the project, financial analysis results must assess impacts of risks on the project as well as costs and advantages of measures to minimize risks. The feasibility study report must clarify the expected division of risks and responsibility of parties to manage risks during the project implementation; and propose specific levels of support to be provided by competent state agencies and mechanism of risk sharing between competent state agencies and investors.

2. Based on results of the assessment of project risks and current financial market developments in the country and the world, to explain in detail proposals on investment incentives and the Government’s investment guarantee and assurance forms specified in Chapter IX of Decree No. 63/2018/ND-CP, and accompanying requirements as well as necessary contingency obligations of parties during the project implementation.

3. To explain in detail handling plans in case actual revenues of the project are much different from estimated revenues, and forecasts for shortening the duration of capital retrieval through charge collection.

Article 19.Socio-economic efficiency and impacts of projects

1. Analysis of socio-economic efficiency of projects

A feasibility study report must have the contents prescribed in Section V of Appendix III to Circular No. 09/2018/TT-BKHĐT of December 28, 2018, accordingly:

To generally determine the cost and socio-economic benefit factors of the project (including quantifiable benefits, quantifiable and qualitative benefit factors that cannot be valued). On that basis, to analyze socio-economic benefits of the project, including: qualitative assessment on major impacts of the project that cannot be quantified or can be quantified but cannot be presented in the monetary form and clearly quantify impacts that can be monetarily quantified; calculation, quantification and analysis of users’ benefits in the case of project presence (covering charge payment) and the case of project absence, and assessment of socio-economic benefit indicators of the project. Calculation results must at least bring out the following parameters: economic net present value (ENPV); economic internal rate of return (EIRR); and benefit cost ratio (BCR).

Conclusion on the socio-economic efficiency of the project: on the basis of the above analysis, to conclude on the socio-economic efficiency of the project. In case of lack of conditions for determining cost and benefit factors that can be quantified and monetized for use as a basis for calculating the criteria for analyzing the socio-economic efficiency of the project, to conclude on the socio-economic efficiency of the project on the basis of the remaining groups of elements.

2. Environmental impacts of the project: The feasibility study report must include an environmental impact assessment report made, appraised and approved in accordance with the environmental law.

3. Social impacts of the project: The feasibility study report must explain factors that exert impacts on the society in the course of project implementation, such as resettlement support, gender equality, labor and employment, etc., and measures to minimize negative impacts in the project implementation process in compliance with current regulations.

4. Other impacts: The feasibility study report must explain factors that exert impacts on national defense and security and other impacts (if any) of the project in the implementation process.

Article 20.Conclusions and recommendations

1. In the section of conclusions, to briefly present the principal contents of the feasibility study report, at least including:

a/ Project name; name of the competent state agency; name of the project-preparing unit or-proposing investor;

b/ Project implementation location and land area for use (if any);

c/ Size, capacity and principal technical standards of the project;

d/ Expected total investment capital and level (clarification of the State’s contribution to the project, if any);

dd/ Type and duration of project contract (expected schedule of project implementation and duration of commercial operation);

e/ Financial targets of the financial plan;

g/ Investment incentives and assurance;

h/ Other contents.

2. In the section of recommendations, to make recommendations and proposals (if any).

Chapter III

ORGANIZATION OF IMPLEMENTATION

Article 21.Effect

1.This Circular takes effect on July 10, 2019, and replaces the Minister of Transport’s Circular No. 86/2015/TT-BGTVT of December 31, 2015, detailing investment fields and contents of feasibility study reports of investment projects in the form of public-private partnership in the transport sector.

2. In case the legal documents referred to in this Circular are revised or replaced, the revising documents or the new documents shall apply.

Article 22.Organization of implementation

The Chief of the Office, the Chief Inspector, directors of departments of the Ministry of Transport, the General Director of the Directorate for Roads of Vietnam and directors of project management units of the Ministry of Transport, heads of related agencies and units, and related individuals shall implement this Circular.

For the Minister of Transport
Deputy Minister
NGUYEN NHAT