As Vietnam accelerates infrastructure development, improves the quality of public services, and seeks to attract private investment, Public-Private Partnership (PPP) investment is becoming an increasingly important cooperation model for foreign investors. With their strengths in finance, technology, and management expertise, Japanese businesses are well-positioned to participate in PPP projects in Vietnam. However, before making an investment decision, businesses need to understand the relevant legal framework, contractual arrangements, investor selection requirements, as well as the mechanisms for allocating risks and sharing benefits.
1. What Is the PPP Model? Why Should Japanese Businesses Be Interested?
Public-Private Partnership (PPP) investment is an investment model implemented on the basis of a contract between a competent state authority and a private-sector investor to develop, manage, and operate infrastructure projects and provide public services.
Under this model, the State establishes service standards, while private-sector investors are encouraged to deliver services through a payment mechanism based on service quality (Clause 10, Article 3 of the 2020 Law on Public-Private Partnership Investment).
For Japanese businesses, PPP represents a market-entry opportunity worth considering for several reasons:
- Participation in large-scale infrastructure projects: Businesses have opportunities to participate in projects that support socio-economic development and improve the quality of public services.
- Leveraging technological strengths: Solutions in transportation, water treatment, waste management, information technology, and technical infrastructure are areas where Japanese businesses can apply their expertise and experience.
- Combining resources and expertise: Investors can cooperate with domestic partners to leverage local market knowledge, implementation capabilities, and project management experience.
- Engaging in long-term investment: Depending on the contractual arrangement and financial structure, businesses may participate not only in the construction phase but also in the operation and commercial exploitation of infrastructure facilities.
However, PPP does not mean that the State guarantees the entire investment capital or commits to ensuring profits for businesses. Project performance depends on the financial plan, operational capacity, demand for services, and the allocation of risks among the parties.
2. PPP Investment Sectors in Vietnam That May Interest Japanese Businesses
Under current regulations, PPP projects may be implemented in public investment sectors and fields for the purpose of investing in and constructing infrastructure facilities and systems, as well as providing public services.
This is an important point for Japanese businesses to understand: not every private investment project can be implemented under the PPP model. Projects must satisfy the conditions prescribed by law and be considered by the competent authorities in accordance with applicable regulations.
Some sectors that may be of interest to Japanese investors include:
2.1. Transportation and Transport Infrastructure
Developing Vietnam’s transportation system is one of the country’s key infrastructure priorities. Projects involving roads, transportation facilities, and transport infrastructure systems may create opportunities for businesses with experience in construction, design, management, and operation.
Japanese businesses can leverage their expertise in transportation technology, traffic management systems, safety solutions, and infrastructure operation.
2.2. Energy Infrastructure
Projects involving power grids and power plants that fall within the scope of public investment sectors may be considered for implementation under the PPP model in accordance with applicable laws.
For Japanese businesses, potential opportunities may include providing technology, equipment, and technical solutions, as well as participating in project investment and operation in compliance with current regulations. The eligibility of specific projects must also be assessed in light of electricity legislation and relevant sector-specific requirements.
2.3. Water Supply, Drainage, and Waste Treatment
Urbanization and industrial development are driving demand for investment in clean water supply systems, wastewater treatment, drainage infrastructure, and waste management.
These sectors may be particularly suitable for Japanese businesses with expertise in environmental treatment technologies, water quality management systems, and the operation of technical infrastructure facilities.
2.4. Healthcare and Education
Projects in healthcare, education, and related public services are also sectors worth examining within the PPP legal framework.
Japanese businesses may consider contributing technology, equipment, management expertise, and operational solutions for infrastructure serving these sectors. However, it is important to distinguish between public service projects implemented under the PPP model and the ordinary establishment of private hospitals or educational institutions. These two forms of investment are governed by different legal frameworks and investment procedures.
2.5. Information Technology Infrastructure
The growing demand for digital transformation in urban management, public service delivery, and infrastructure operations is creating a need for the development of information technology systems.
Japanese businesses may explore opportunities to participate in information technology infrastructure projects that fall within the scope of PPP regulations, particularly where they can provide technical solutions and long-term operational capabilities.
Note: The sectors above are presented as potential investment areas for further research. Whether a specific project qualifies for implementation under the PPP model must be assessed based on its planning status, objectives, public service characteristics, and relevant sector-specific regulations.
3. Common Types of PPP Contracts in Vietnam
One of the key aspects Japanese businesses need to understand before participating in a project is the type of PPP contract. Each contractual arrangement establishes different mechanisms for investment, operation, commercial exploitation, and transfer of infrastructure facilities.
Under the current Law on PPP Investment, the types of PPP contracts include:
BOT Contract (Build – Operate – Transfer): The investor constructs the infrastructure facility, obtains the right to operate and commercially exploit it for a specified period, and subsequently transfers it to the State in accordance with the agreement.
BTO Contract (Build – Transfer – Operate): The investor constructs the infrastructure facility and transfers it to the competent authority upon completion, after which the investor is entitled to operate and commercially exploit the facility under the contract.
BOO Contract (Build – Own – Operate): The investor constructs, owns, and operates the infrastructure facility for the duration of the project in accordance with the contractual terms.
O&M Contract (Operate – Manage): The investor is granted the right to operate and manage part or all of an existing infrastructure facility or system under the contract.
BTL Contract (Build – Transfer – Lease): The investor constructs the infrastructure facility, transfers it to the competent authority, and receives payments based on the provision of services under the contract.
BLT Contract (Build – Lease – Transfer): The investor constructs the infrastructure facility, provides services under a contract with the competent authority, and transfers the facility after the agreed period.
BT Contract (Build – Transfer): The investor constructs the infrastructure facility and transfers it to the competent authority. Payment is made in accordance with the legally prescribed mechanism and the contractual terms.
In addition, the law allows the application of hybrid contracts in accordance with relevant regulations.
For Japanese businesses, selecting an appropriate contractual arrangement should be based on the project’s characteristics, capital recovery potential, operational plan, implementation period, and operational capacity. Investors should not make their decisions solely based on the initial investment amount but should assess their overall financial obligations throughout the project’s lifecycle.
4. Requirements for Japanese Businesses to Participate in PPP Projects
Foreign investors are permitted to participate in PPP investment activities in Vietnam, provided that they satisfy the requirements concerning legal eligibility, financial and technical capacity, and market access.
Under the provisions on investor eligibility in the Law on PPP Investment, basic requirements include:
- Being legally established and operating in accordance with the laws of the country or territory where the investor is based.
- Maintaining independent financial accounting and ensuring fair competition throughout the investor selection process.
- Not being in the process of dissolution or falling into a state of insolvency as prescribed by law.
- Not being prohibited from participating in PPP investment activities.
- Foreign investors established under foreign laws must satisfy market access conditions applicable to conditional market access business sectors under Vietnam’s Law on Investment.
In addition, businesses must demonstrate their financial capacity, project implementation experience, and technical proposals in accordance with the requirements of the bidding documents.
Are Japanese Businesses Required to Form Joint Ventures with Vietnamese Companies?
It should not be assumed that every PPP project requires Japanese investors to establish joint ventures with Vietnamese businesses. Investors may participate through arrangements permitted under the investor selection regulations and the specific requirements of each project.
The Law on PPP Investment provides for international investor selection, under which both foreign investors established under foreign laws and domestic investors may participate. However, international bidding is subject to certain exceptions, including projects in sectors and industries that are not open to foreign investors, projects requiring domestic bidding for national defense and security reasons, and projects equivalent in scale to Group B or Group C projects under public investment legislation, except for certain PPP projects in science and technology.
Therefore, Japanese businesses should verify the applicable investor selection method for each project before preparing their participation documents.
5. The Process of Implementing a PPP Project in Vietnam
Compared with ordinary business investment models, PPP projects follow a separate preparation and approval process involving multiple competent state authorities.
In general, Japanese businesses should familiarize themselves with the following steps:
Step 1: Identify and Assess Investment Opportunities
Businesses research projects announced by state authorities or consider proposing projects in accordance with applicable regulations. At this stage, investors should assess the project’s consistency with relevant planning documents, investment needs, eligible PPP sectors, and its potential to attract private capital.
Step 2: Project Preparation and Appraisal
Depending on the applicable circumstances, projects are prepared through a pre-feasibility study report or a proposal for investment policy approval. The competent authority then organizes the appraisal process and carries out the procedures for investment policy approval where required.
This is followed by the preparation, appraisal, and approval of the feasibility study report or the construction investment economic-technical report, as applicable.
Step 3: Investor Selection
The competent authority organizes the investor selection process in accordance with the procedures and methods prescribed by law. Investors must prepare bidding documents demonstrating their financial capacity, experience, financial proposals, and proposed project implementation solutions.
Step 4: Establishment of the Project Enterprise and Contract Signing
After being selected, the investor completes the procedures for establishing a PPP project enterprise in accordance with applicable regulations, while negotiating, finalizing, and signing the project contract with the competent authority.
A PPP project enterprise is a legal entity established by the investor for the purpose of signing and implementing the PPP project contract.
Step 5: Capital Mobilization and Project Implementation
The project enterprise contributes equity capital, raises debt financing, and mobilizes other lawful funding sources in accordance with the project contract. The project is then constructed, operated, and used to provide services in compliance with the agreed standards.
Step 6: Supervision, Settlement, and Transfer
Throughout implementation, the project is subject to supervision regarding construction progress, facility quality, financial activities, and public service delivery.
Upon completion, project finalization, infrastructure transfer, and contract liquidation are carried out in accordance with the relevant contract type and applicable legal provisions.
Japanese businesses should note that the procedures and approval authorities may vary depending on the project’s scale, nature, and type. Decree No. 243/2025/ND-CP, which took effect on September 11, 2025, is an important legal document providing detailed regulations on certain aspects of authority, project preparation, approval procedures, and PPP investor selection.
6. Capital, Profit, and Risk-Sharing Mechanisms in PPP Projects
For foreign investors, the financial structure is one of the key factors that must be carefully evaluated before deciding to participate in a PPP project.
6.1. Investment Capital and Financial Arrangements
Under the Law on PPP Investment, investors and PPP project enterprises are responsible for contributing equity capital, raising debt financing, and mobilizing other lawful funding sources to implement projects in accordance with the project contracts.
Notably, Article 77 stipulates that investors must contribute equity capital equivalent to at least 15% of the project’s total investment, excluding the portion of state capital contributed under relevant provisions. Capital contributions must be made according to the schedule agreed upon in the project contract.
This requires Japanese businesses to develop a clear financing plan, determine the proportions of equity and debt financing, and ensure their ability to meet financial obligations throughout the project’s implementation period.
6.2. Revenue Increase and Decrease Sharing Mechanisms
One notable feature of Vietnam’s PPP legal framework is the revenue risk-sharing mechanism between the State and investors.
Under Article 82 of the current Law on PPP Investment, when actual revenue exceeds the revenue specified in the project’s financial plan by a percentage within the applicable threshold range of above 110% to above 125%, the investor and PPP project enterprise must share 50% of the difference between actual revenue and the revenue stated in the financial plan with the State. The specific threshold is determined by the competent authority during contract negotiations.
Conversely, when actual revenue falls below the revenue specified in the financial plan by a percentage within the applicable threshold range of below 90% to below 75%, the State shares 50% of the difference with the investor in accordance with the law.
However, the revenue reduction-sharing mechanism does not automatically apply to every project. Its application is subject to statutory conditions, including the causes of the revenue decline, the implementation of necessary adjustment measures, and the auditing and determination of revenue in accordance with applicable regulations.
Therefore, Japanese businesses should not regard this mechanism as a guarantee of revenue or profit. It is a conditional risk-sharing arrangement that must be carefully analyzed when developing financial plans and negotiating project contracts.
6.3. Foreign Currency Balance Guarantee
For Japanese investors, exchange rate fluctuations and foreign currency convertibility are important considerations when calculating cash flows and capital recovery.
Article 81 of the Law on PPP Investment stipulates that the Government decides whether to apply the foreign currency balance guarantee mechanism to projects falling under the investment policy approval authority of the National Assembly or the Prime Minister, based on foreign exchange management policies and the foreign currency balancing capacity in each period.
Where statutory conditions are satisfied, the project enterprise may be guaranteed foreign currency balance of up to 30% of the project’s revenue in Vietnamese dong, after deducting expenditures in Vietnamese dong.
This mechanism is not an automatic foreign currency guarantee applicable to all PPP projects. Businesses should determine whether their projects fall within the scope of those eligible for consideration.
7. Important Considerations for Japanese Businesses Investing in PPP Projects
In addition to understanding the legal framework, Japanese businesses should proactively assess factors that may directly affect project timelines and investment performance.
First, verify the project’s legal status and planning compliance. Businesses should determine whether the project falls within an eligible PPP sector and is consistent with relevant planning documents and development plans. Investment decisions should not be based solely on initial cooperation proposals.
Second, carefully assess financial capacity and capital recovery potential. PPP projects often have long implementation periods, require substantial capital, and depend on stable operational plans. Businesses should develop multiple financial scenarios that account for fluctuations in costs, interest rates, exchange rates, and demand for services.
Third, clearly define the responsibilities of all parties in the contract. Key provisions, including site clearance and handover schedules, construction responsibilities, technical standards, service prices and fees, contract adjustment mechanisms, maintenance obligations, and contract termination conditions, should be clearly stipulated.
Fourth, examine dispute resolution mechanisms. Under the Law on PPP Investment, disputes between competent authorities or contract-signing authorities and foreign investors or project enterprises established by foreign investors are resolved by Vietnamese Arbitration or Vietnamese Courts, unless otherwise agreed in the contract or provided for under an international treaty to which Vietnam is a party.
Therefore, businesses should carefully review dispute resolution clauses from the early stages of contract negotiations.
Fifth, select suitable consulting firms and domestic partners. For projects involving complex technical, financial, and legal requirements, cooperation with experienced consulting firms in Vietnam can help businesses better understand applicable regulations, prepare the necessary documentation, and manage risks throughout project implementation.
8. Conclusion: PPP Creates Long-Term Cooperation Opportunities for Japanese Businesses in Vietnam
Public-Private Partnership (PPP) investment is one of the mechanisms Vietnam uses to mobilize private-sector resources for infrastructure development and public service delivery. With their technological expertise, financial capabilities, and project management experience, Japanese businesses can explore participation in various sectors aligned with Vietnam’s development priorities.
However, PPP is an investment model that requires strong implementation capabilities, financial responsibility, and strict legal compliance. Selecting the right project, choosing an appropriate contractual arrangement, evaluating the financial plan, and clearly defining risk-sharing mechanisms are essential factors in determining investment performance.
For Japanese businesses planning to expand their operations in Vietnam, gaining a thorough understanding of the PPP legal framework and preparing a cooperation strategy with domestic partners are necessary steps toward accessing investment opportunities in a structured and sustainable manner.
