5. Public Private Partnership

In part to address the infrastructure gap and to improve the delivery and efficiency of public infrastructure and services, the Government of Laos (GOL) introduced the Public-Private Partnership Decree (No. 624/GOV, 21 December 2020) (“ PPP Decree ”) to regulate PPPs.

The PPP Decree consolidates investment requirements, investment structures and procedures for proposal submission, tendering and awarding of PPP projects. The PPP Decree is a key step in improving the commercial viability of PPP projects in the Lao People's Democratic Republic 1.

The PPP Decree defines a “PPP” as “ a partnership activity between the public sector and the private sector or an activity entirely invested by the private sector in public projects such as projects for new construction, rehabilitation of basic infrastructure or provision of public services including projects for the development of other activities such as tourism, agriculture, energy, mining, etc. under a partnership contract with a defined time duration for the management of the activity in accordance with the laws ”. [Article 2, PPP Decree.]

The PPP Decree provides for two broad categories of PPPs: (i) where the government is an investment partner with the private sector investor; or (ii) where the private sector investor fully finances the investment in a public project, such as projects for new construction, infrastructure rehabilitation, or provision of public services. [Articles 8-10 of the PPP Decree.]

The PPP Decree also lists eight different types of investment models for PPPs, [Articles 11-19, PPP Decree.] leaving open the possibility of other investment structures, as determined by the Lao Government. These investment models are as follows:

• Design-Build-Finance-Operate (“DBFO”);

• Design-Build-Operate (“DBO”);

• Build-Operate-Transfer (“BOT”);

• Build-Own-Operate-Transfer (“BOOT”);

• Build-Own-Operate (“BOO”);

• Build-Transfer-Operate (“BTO”);

• Build-Lease-Transfer (“BLT”); and

• Operation and Maintenance (“O&M”),

Each PPP must meet the following criteria: [Article 20, PPP Decree.]

• have a partnership agreement between the public sector investor (GOL or a state-owned enterprise) and the private investor;

• be a project for the construction or rehabilitation of infrastructure or the provision of public services, with particular attention to the results and benefits of the project;

• define the risk allocation for the project, such as construction risk, market risk, operational risk, currency risk, turnover risk and project company obligations based on the efficiency and ensuring the effectiveness of the investment;

• ensure the rights and benefits of the service provider and service users;

• have an open and transparent tender process in accordance with the PPP Decree and applicable laws of the Lao People's Democratic Republic through a public tender process for such PPP (irrespective of whether the PPP originated from a solicited proposal (i.e. from the relevant state sector and based on the strategic plan of such sector) or from a spontaneous proposal (i.e. from the relevant state sector or from the private sector for a project that is not part of a state investment plan); and

• include the handover or transfer of the project to the public sector after the expiry of the PPP agreement (except for BOO projects).

The PPP Decree does not provide guidance on determining the appropriate investment model for a given project. Instead, the Decree provides that such determination is made taking into account the efficiency, size, nature, costs and specific characteristics of the project, on the basis of the feasibility study. [Article 21, PPP Decree.]

The PPP Decree is the first regulation dedicated exclusively to PPP projects and provides a regulatory framework for the implementation of PPPs. However, the PPP Decree is itself an implementing regulation of the Investment Promotion Law (No. 14/NA, 17 November 2016) (“ Investment Promotion Law ”) and the State Investment Law (No. 72/NA, 15 December 2015) (“ State Investment Law ”), and should be read in conjunction with those laws. In addition, general regulations governing foreign investment and sectoral regulations (such as the Electricity Law (No. 19/NA, 9 May 2017)) contain various provisions on the evaluation, award and contractual conditions of PPPs.

The GOL must comply with the Law on State Investments and other regulations governing the use of state funds when the investment is financed from the state budget (as expressly provided for in the definitions for the DBFO, DBO, BLT, and O&M models). [Articles 12, 13, 18, and 19 of the PPP Decree; Articles 2 and 6 of the State Law on Investments.] In addition, where the investment model assumes that the PPP project company will provide services directly to the state (for example, as provided for in the DBFO, DBO, BTO, BLT, and O&M models), the GOL must also comply with the Law on Public Procurement (№ 30/NA, November 2, 2017) (“ Law on Public Procurement ”) and other regulations governing public procurement. [Articles 12, 13, 17, 18, and 19 of the PPP Decree; Articles 2 and 6 of the Law on Public Procurement.]

The Ministry of Planning and Investment (“ MPI ”) is the supervisory authority for PPPs, acting as the focal point for coordination with relevant sectoral authorities and negotiating and signing PPP agreements on behalf of the Government of Lao PDR. [Articles 65 and 66 of the PPP Decree.] The two PPP procurement authorities under the PPP Decree, the Committee for PPP Promotion and Management (“ CPMPPP ”) and the Partnership Office (“ PPP Unit ”), are part of the MPI 2.

The CPMPPP is responsible for, among other things: [Article 62, PPP Decree.]

• evaluation of PPP projects, including the review and approval required for PPP projects to proceed to the next stage of the development process (e.g. by examining the feasibility studies, environmental and social impact assessments and the PPP agreement and providing its positive recommendation on the PPP to the MPI or GOL (or other competent issuing authority); [Articles 24, 25, 27 and 37 of the PPP Decree.]

• formulate PPP plans and policies; and

• supervise the PPP Unit and the evaluation of PPP projects.

The PPP Unit serves as the secretariat of the CPMPPP and is responsible for, among other things:

• evaluation of PPP projects, including initial review of unsolicited proposals, feasibility studies and tender documents prior to submission to the CPMPPP for approval; [Articles 25, 26, 27, 31 and 37 of the PPP Decree.]

• manage the use of the PPP project preparation fund;

• provide tender notifications through the mass media;

• prepare the draft PPP agreement (i.e. the partnership contract) and negotiate the final PPP agreement with the winning bidder; and

• preparation of the PPP project pipeline. [ Article 64, PPP Decree .]

The PPP Unit serves as the main contact point for PPP investors. There is considerable overlap between the PPP procurement authorities under the PPP Decree and the foreign investment authorities under the Investment Promotion Law. The CPMPPP has the same composition as the Investment Promotion and Supervision Committee under the Investment Promotion Law. [Article 61, PPP Decree.] The PPP Unit has the same composition as the One-Stop Service Office under the Investment Promotion Law. [Article 63, PPP Decree.]

Depending on the total value of the investment and the nature of the project, a PPP project may require authorization from one or more of the authorities listed in the table below. [ Article 28, PPP Decree .]