PHILIPS HEALTHCARE VIETNAM & MARKETING COMMUNICATION STRATEGY IN TTMES OF CHANGE

1 TR NG I H C M TP.HCM HOCHIMINH CITY OPEN UNIVERSITY UNIVERSITEÙ LIBRE DE BRUXELLES SOLVAY BRUSSELS SCHOOL ECONOMICS & MANAGEMENT MMA6 Author Khoi, Tran Dang Tuan, Huynh Viet Anh PHILIPS HEALTHCARE VIETNAM & MARKETING COMMUNICATION STRATEGY IN TIMES OF CHANGE MASTER PROJECT MASTER IN MARKETING & AVERTISING Tutor’s Name: Serge Bywalski Ho Chi Minh City - Vietnam (2013) “Trade in health services will be affected by changes in general trade liberalization, international legislation, and international institutions; in return, it will itself impact on national economies” (Blouin & Drager & Smith, 2005 – World Bank) Acknowledgements Over the time conducting the study and writing the paper, we have encountered certain difficulties, which should have certainly caused obstacles for us in accomplishing this project if we had not received great supports Therefore, we would like to dedicate our acknowledgement to those who have offered us valuable helps during the dissertation working process First of all, we would like to express our gratitude to the all people who have contributed to this thesis and supported us We would like to give a special thank to our tutor Serge Bywalski for his patience with our questions and for giving us a valuable feedback We would like to offer our true thanks to our friend, Mr Ng, Kenneth - Manager Business Intelligence, ClusterAPAC Marketing and Mr Truong, Quoc Dung - SMIS Manager, SMIS Vietnam who is working at Philips Vietnam for giving us significant information of PHC Vietnam which we have been unable to search in other data sources Last, but not least, we want to thank our friends and families for their support We would never finish this thesis without these people Executive Summary Nowadays, one of the most challenging factors for a company to develop is future planning because the environment is changing rapidly which forces the company to deal with change almost every day The companies and theirs Board of Directors, therefore, need to have the ability to manage their current business as well as to handle unexpected changes Established since 2002, Philips has had an increasingly large focus on Vietnam and Philips Healthcare (PHC) is very successful in Vietnam as one of the market leader 2011 was started with worries of local team due to economy downtrend However, by year end, the market of PHC keeps on good growth But, there are early signs of market problem in Vietnam The market is still on the upward trend but with the global recession, there will be many changes in the economy, social policies of the Vietnam government in 2012 Healthcare is one of the sectors that suffer a lot from these changes Vietnam faces pressures with budget constraints, ageing populations and growing disease of prosperity such as obesity and diabetes In addition, many of the regions are emergent and lacking essential healthcare skills and infrastructures, creating an urgent need for reform The investment in healthcare is huge and new market participants are staking their claims by introducing new business models that are changing the competitive landscape The purpose of this study is to provide a general view about PHC Vietnam in the market, to evaluate the marketing activities of the company in the previous years and how the company should communicate with customers during times of change All things considered, we believe that we have provided PHC Vietnam a roadmap which suggests a good plan for the future to make PHC Vietnam become the market leader in term of market share in the next years Table of Contents Acknowledgements Executive Summary Table of Figures List of Abbreviations CHAPTER – INTRODUCTION 10 1.1 Company’s background 10 1.1.1 Philips Global 10 1.1.2 Philips Vietnam 11 1.2 Time of recession/time of change 12 1.3 Problem discussion 14 1.3.1 Active strategy 14 1.3.2 Or passive strategy 14 1.4 Project objective 14 1.5 Research methodology 14 1.6 Scope and limitation 14 1.7 Outline of the study 15 CHAPTER II - SITUATION ANALYSIS 16 2.1 Market overview and business situation 16 2.1.1 Vietnam 16 2.1.2 Healthcare Indicators of Vietnam 16 2.1.3 Health Care Delivery System 17 2.1.4 Medical Device Market Size 17 2.1.5 Specifics on the local healthcare market 18 2.2 Situation analysis 19 2.2.1 Macro Environment analysis 19 2.2.2 SWOT analysis 21 2.2.3 Competitor analysis 23 2.2.4 Customer analysis 25 CHAPTER III - MARKETING COMMUNICATION IN THE PAST 33 3.1 Past marketing communication campaigns 33 3.1.1 The Annual MR & CT end-users meeting (on October) 33 3.1.2 Vietnam Annual Radiology Association Conference (on April) & Customer Service Workshop (on September) 34 3.1.3 Marketing focus to community 34 3.1.3.1 Simply Healthy @ School Program (SHS) 34 3.1.3.2 World Heart Day Vietnam: once/year 35 3.1.4 3.2 Others: 36 Evaluations of the past campaigns 36 3.2.1 The annual MR & CT end-user meeting 36 3.2.2 Vietnam annual Radiology Association Conference & Customer service workshop 36 3.2.3 Marketing focus to community (CSR) 37 3.3 Summary 37 3.4 Recommendations for the times of change 38 3.4.1 Strategy 38 3.4.2 Conclusion 39 CHAPTER IV - MARKETING COMMUNICATION STRATEGY IN TIMES OF CHANGE 42 4.1 Brand strategy 42 4.1.1 Vision 42 4.1.2 Mission 42 4.1.3 Target customer 42 4.1.4 Positioning and pricing strategy 42 4.1.5 Customer insights 42 4.2 KPIs 43 4.2.1 Business objective 43 4.2.2 Marketing objective 43 4.3 Marketing communication 43 4.3.1 Campaign idea 43 4.3.2 Key visual 44 4.3.3 Communication strategy 45 4.3.3.1 Project – Boosting the brand (new concept) 45 4.3.3.2 Project – Events (keep from the past campaign) 46 4.3.3.2.1 The Annual MR & CT end-users meeting 46 4.3.3.2.2 Vietnam Annual Radiology Association Conference & Customer Service Workshop 47 4.3.3.3 Project – CSR (new concept modified from the past campaign) 48 4.3.3.3.1 Activity 1: Community health check for remote area 48 4.3.3.3.2 Activity 2: World Heart Day Vietnam 49 4.3.3.4 Project – Philips healthcare online Center (new concept) 49 4.3.3.5 Other projects 50 4.3.3.6 Choosing the right media 50 4.4 Action plan 53 4.5 Budget 54 Appendix A 55 Questionnaires for the market research 55 Appendix B 57 PPP Projects in Vietnam Basic Understanding, Implementation and Challenges 57 References 59 Table of Figures Figure - Philip Healthcare’s products family (Source: Philips Global) 11 Figure - Philip Healthcare Vietnam’s products family (Source: Philips Vietnam) 12 Figure – Vietnam economy indexes (Source: TNS Vietnam) 13 Figure – Vietnam healthcare indicators (Source: Frost and Sullivan analysis) 16 Figure – Vietnam healthcare delivery system (Source: Vietnam Ministry of Health; Frost and Sullivan analysis) 17 Figure – Medical device market (Source: Espicom) 18 Figure – Competitors map (Source: Frost and Sullivan analysis) 23 Figure – Revenue of PHC Vietnam (Source: Philips Vietnam) 26 Figure – Market research (drivers for promotion) (Source: Philips Vietnam) 29 Figure 10 - Market research (causes for detraction) (Source: Philips Vietnam) 30 Figure 11 – Competitors (Source: Philips Vietnam) 31 Figure 12 - Competitive NPS Performance (Source: Philips Vietnam) 31 List of Abbreviations ANGIO: Angiography AOP: Annual Operation Plan CEO: Chief Executive Officer CME: Continuing Medical Education CR: Computed Radiology (equipment) CSA: Customer Support Agreements CT: Computed Tomography (equipment) CV: Cardio Vascular (equipment) DR: Digital Radiology (equipment) DSA: Digital Subtraction Angiography (equipment) ENT: Ear Nose and Throat specialist EU: European Union FDA: US Food and Drug Administration FMCGs: Fast Moving Consumer Goods GMP: Good Manufacturing Practices certification KOLs: Key of Leaders HCMC: Ho Chi Minh City HIS: Hospital Informatics System IMS: International Medical Statistics MOH: Ministry of Health MR: Magnetic Resonance (equipment) MR: Medical Representative ODA: Official Development Assistant OIT: Order in take OTC: Over the Counter PACS: Picture Achieving Communication System OOH Order on hand CVD Cardio Vascular Disease PO: Purchase Order Rep Office: Representative Office of Pharmaceutical R&D: Research and Development RIS: Radiology Informatics System SOP: Standard of Procedure SWOT: Strengths Weaknesses Opportunities and Threats US: Ultrasound (equipment) WTO: World Trade Organization 10 CHAPTER – INTRODUCTION 1.1 Company’s background 1.1.1 Philips Global Royal Philips Electronics of the Netherlands is a diversified Health and Well-being company, focused on improving people’s lives through meaningful innovations As a world leader in healthcare, Philips integrates technologies and design into peoplecentric solutions, based on fundamental customer insights and the brand promise of “sense and simplicity” Headquartered in the Netherlands, Philips employs over 122,000 employees with sales and services in more than 100 countries worldwide With sales of EUR 22.6 billion in 2011, the company is a market leader in cardiac care, acute care and home healthcare, energy efficient lighting solutions and new lighting applications, as well as lifestyle products for personal well-being and pleasure with strong leadership positions in male shaving and grooming, portable entertainment and oral healthcare Philips is a global leader across its healthcare, lighting and lifestyle Philips simplifies healthcare by focusing on the people in the care cycle – patients and care providers Through combining human insights and clinical expertise, Philips aim to improve patient outcomes while lowering the burden on the healthcare system Advanced healthcare solutions are a fundamental part of the portfolio for both healthcare professionals and consumers, to meet the needs of patients in hospitals and at home Philips Healthcare employs approximately 35,500 people worldwide In 2011 the Healthcare business accounted for approximately 40 percent of Philips’ overall sales, the company’s largest contributor to sales Facts and Figures €8.9 billion sales in 2011 37,000+ people employed worldwide in 100 countries % of sales invested in research and development in 2011 450+ products and services offered in more than 100 countries 45 4.3.3 Communication strategy 4.3.3.1 Project – Boosting the brand (new concept)  Objective PHC strength is brought out and to be recognized by stakeholders Differentiate PHC to other competitors with its top quality  Content Show up print ad and TVC on the healthcare facilities and public places  Target audience Target consumers Public who interesting in healthcare in general as well as interesting in PHC  Communication channel Display newly design print ad on the public places Broadcast new TVC on LCD channel of healthcare facilities and in the relevant websites, Youtube …  TVC concept 46 4.3.3.2 Project – Events (keep from the past campaign) 4.3.3.2.1 The Annual MR & CT end-users meeting  Objective Introduce new face of PHC Vietnam in times of change and update the latest technology Sharing clinical experience for diagnosis and treatment  Content PHC Vietnam cooperates with large hospitals in region to organize MICE event (meetings, incentives, conferencing, exhibitions) in tourist destinations 47  Target audience Dealers and distributors Doctors/ Radiologist/ Radiographers (decision makers, Influencers) Government Officers (MOH, MOF, Health Service Department) Media attendant  Communication channel PR articles in main media 4.3.3.2.2 Vietnam Annual Radiology Association Conference & Customer Service Workshop  Objective Enhance the government & hospital acknowledgement to the importance of service & maintenance to equipment Promote the service activity of Philips Healthcare Vietnam and introduce new face of PHC Vietnam in times of change  Content PHC Vietnam cooperates with big hospital in region to organize the events The theme of the events will change accordance with the innovation technology  Target audience Dealers and distributors Doctors/ Radiologist/ Radiographers (decision makers, Influencers) Media attendant  Communication channel PR articles in main media 48 4.3.3.3 Project – CSR (new concept modified from the past campaign) 4.3.3.3.1 Activity 1: Community health check for remote area  Objective Enhance the Cardiology Leadership of Philips in public education to support First Aid for heart stroke Build up the Philips Brand name in community Introduce new face of PHC Vietnam in times of change  Content Philips’ community health check program will be executed times/year (04 days/trip) at the remote area located in remote area of Vietnam Philips’ staff and doctors from collaborate hospitals will provide: Free medical diagnosis, dental treatment, medicine Contribute time and effort to teach the people healthy tips for First Aid for Heart stroke  Target audience People from remote area of Vietnam who lack of medical support Media  Communication channel PR articles in main media 49 4.3.3.3.2 Activity 2: World Heart Day Vietnam  Objective Enhance the Cardiology Leadership of Philips in public education to support the World Heart Day Reinforce the growth and commitment of Philips Healthcare Business worldwide and in Vietnam  Content World Heart Day program will be executed once a year Philips is committed to reeducate general public and especially women about their misconception of CVD as a man’s disease, and to take notice of the condition early CVD is the number one killer of women globally and outnumbers the lives taken by cancer, tuberculosis, malaria and HIV/AIDS combined PHC collaborate with The Medical and Pharmacy University of HCMC (UMPH) Hospital for the “CVD – from understanding to action together”  Target audience Vietnamese woman and public Media  Communication channel PR articles in main media 4.3.3.4 Project – Philips healthcare online Center (new concept)  Objective The reason to build up Philips Healthcare online Center is to satisfy the rising demand in healthcare based on deep understanding about their awareness This philosophy go along with PHC’s brand promise which is people oriented Reinforce the growth and commitment of Philips Healthcare Business worldwide and in Vietnam Meanwhile, this website also builds up a good brand image of PHC which is “most innovation technology for caring people health” 50  Content Philips Healthcare online Center (www.careforhealth.com.vn/www.suckhoelavang.vn) is a website for community health and medical treatment equipment, it will provide: Health consulting base on image diagnose Information about general healthcare and hospital Basic and advance knowledge about image diagnoses and update latest information about this field, this website also include a forum for interaction  Target audience Vietnamese people Target/potential customers Media 4.3.3.5 Other projects  Build up a system that collect and manage data for CRM  Develop e-newsletter for PHC  Brand audit: times / year  Other miscellaneous activities 4.3.3.6 Choosing the right media  Criteria The selection of media is very important because no matter how skillfully a marketing communication may be crafted, if it does not reach the right audience, it is not worth much Today, in times of change, the main types of media, such as TV, newspaper, radio… still play a major part in forming brand impression; they are not as influential as they once were It is now difficult than ever before to break through all the media clutter in the market place To be successful in this environment, brand concepts must be more focused and media choices must be more imaginative 51  Media selection:  Television: VTV: Vietnam Television This is a national channel of Vietnam which broadcast nationwide VTV now is the largest television network in the nation, broadcast in nine FTA (free to air) channels and available internationally via satellite HTV: Hochiminh Television This is the second large TV station after VTV which broadcast in the Mekong delta of Vietnam HTV broadcasts in FTA channels: entertainment on HTV7; information, propaganda-trend on HTV9 HTV also has several specific cable channels (Source: Ministry of Information and Communications)  Print newspaper/magazine Thanh nien daily newspaper: Thanh Nien is one of the most prestigious and influential newspapers in Vietnam with the circulation of 460.000, nationwide Tuoi tre newspaper: with a circulation of around 400,000, Tuoi Tre’s daily Vietnamese-language newspaper is the most widely read in the country Tuoi Tre’s motto is to “bring the latest news to readers” with focus on education and culture, business, economic reforms, social welfare as well as other matters such as health, environmental issues, unemployment, urban development and life styles Hanoi Moi newspaper(New Hanoi): with circulation of 40,000, Hanoi Moi is the capital's premier newspaper It provides general news and political coverage from the capital Its readers are predominantly older Hanoians, state government Suc Khoe gia dinh magazine (Family Health): with the circulation of 52.000, Family Health magazine is the top magazine on line of healthcare and beauty Thuoc va suc khoe magazine (Medicine and Health): circulation 50.000, nationwide Suc Khoe va doi song magazine (Health and Life): circulation 45.000, nationwide (Source: Ministry of Information and Communications) 52  Online newspaper: The top popular news websites are Vnexpress (vnexpress.vn), Dan Tri (dantri.com.vn) and Tuoi tre (tuoitre.com.vn) However, there are large differences by region Dan Tri is favored in the North, not in the South Vnexpress is favored amongst Hanoi and HCMC, less in smaller city Tuoi Tre is the preferred news site in the South, not in the North (source: Cimigo NetCitizens report)  LCD display and digital poster Hospital is one of the most interesting "focus" place of public audiences on screen advertising According to studies, with a wide-open space, more seating rows, hospital is an ideal environment for developing advertising model on the LCD screen This location is also suitable for advertising of drug products, functional food, and medical care locations The 32-42 inch LCD screens of the Goldsun Focus Media are the only choice for this kind of media Put some PHC ad on digital poster on top offices buildings in Vietnam like: PetroVietnam, MelinhPoint, Kumho Asia, Diamond Plaza, Vincom plaza… 53 4.4 Action plan Marketing activities Project – Boosting the brand Project – CRM The Annual MR & CT end-users meeting Vietnam Annual Radiology Association Conference & Customer Service Workshop Project – Event Activity 1: Community health check for remote area Activity 2: World Heart Day Vietnam Project – Philips healthcare online Center Other projects Build up a system that collect and manage data for CRM Develop e-newsletter for PHC Brand audit: times / year Other miscellaneous activities (Holiday gift, kick-off meeting, Editorial/Advertorial PR) Jan Feb Mar Production phase Apr May Jun Jul Launching Aug Preparation phase Sep Oct Nov Launching Dec Event Event days days days days Event Website development Software design Publish Launching, Running Launching, Updating Publish Publish Publish week Notice MR/CT end-user meeting event will take place on the 2nd week of Sep (3 days) Vietnam Annual Radiology Association Conference & Customer Service Workshop will take place on 2nd week of November (1 day) World Heart Day Vietnam: on Sunday, September 29th Brand building, website & CRM software development will be out source by a third party company week 54 4.5 Budget Marketing activities Price (US$) Quantity Sub Total Project – Boosting the brand part 1: designing (visual, brand elements, TVC) 18.000,00 18.000,00 part 2: launching 35.000,00 35.000,00 Project – CRM The Annual MR & CT end-users meeting Vietnam Annual Radiology Association Conference & Customer Service Workshop 180.000,00 180.000,00 8.000,00 8.000,00 Project – Event Activity 1: Community health check for remote area (4 times/year) Activity 2: World Heart Day Vietnam Project – Philips healthcare online Center 10.000,00 40.000,00 3.500,00 3.500,00 12.000,00 12.000,00 Other projects Build up a system that collect and manage data for CRM Develop e-newsletter for PHC (4 times/year) Brand audit (2 times / year) Other miscellaneous activities (Holiday gift, kick-off meeting, Editorial PR) TOTAL 4.000,00 4.000,00 500,00 2.000,00 7.000,00 14.000,00 25.000,00 25.000,00 341.500,00 55 Appendix A Questionnaires for the market research NPS score: likelihood to recommend on a scale from -10 Driven reason: primary reason to recommend Philips (if score is or 10) Root cause: what should Philips to make the customer more likely to recommend Philips (if score is or lower) Example: Q1) Based on your experience with Philips Healthcare, how likely are you to recommend Philips Healthcare to a friend or colleague on a scale of to 10? If respondent also participate in the previous wave: In the last wave of this survey you gave a { }; how likely are you to recommend Philips Healthcare to a friend or colleague now, based on a scale from to 10? Extremely unlikely ………………………….10 extremely likely Drivers for promotion If Q1= 9, 10 Q2A)What is the primary reason you would recommend Philips Healthcare? Please first write down what respondent exactly says – probe fully – get as much detail as possible Root causes for neutral & detraction If Q1= 0-8 Q3A)What is the primary area Philips should improve upon to make you more likely to recommend Philips Healthcare? Ad1) May we ask you additional questions: in order to benchmark Philips vs other Healthcare suppliers? Yes, respondent is willing to participate in survey including questions on competition No, respondent is only willing to answer questions regarding Philips Ask If Ad1=1 otherwise go to the end of the questionnaire Ad2) Who of the other suppliers of Medical Equipment you view as our main Competitor (INT.: DO NOT READ OUT LIST – ONLY ONE ANSWER ALLOWED) 56 Ad3) Based on your experience with COMPETITOR , how likely are you to recommend COMPETITOR to a friend or colleague on a scale of to 10? Extremely unlikely ………………………….10 extremely likely Drivers for promotion If Ad3= 9, 10 ad3A)What is the primary reason you would recommend COMPETITOR? Please first write down what respondent exactly says – probe fully – get as much detail as possible Root causes for neutral & detraction If Ad3= 0-8 ad3A)What is the primary area COMPETITOR should improve upon to make you more likely to recommend COMPETITOR? 57 Appendix B PPP Projects in Vietnam Basic Understanding, Implementation and Challenges By: Oliver Massmann The Ministry of Finance estimated that a total capital of 15 – 16 billion US dollars per year will be needed to modernize the Vietnamese infrastructure until 2020 to meet the demands of the emerging economy Unfortunately, experts also anticipate that the government and the official development assistance (ODA) will not be able to set aside this amount of money to meet the demand To address the social and economical needs, especially capital deficiency, the Vietnamese Government introduced the Public Private Partnership (PPP) investment model On November 2010 the Prime Minister issued Decision No 71/2010/QDTTg to encourage investment through PPP This strategy, however, has not been successful, since foreign companies are still hesitant to invest in Vietnam This article discusses the introduction, the challenges and possible successful implementation of PPPs in Vietnam, according to Decision No 71 Development of the Legal Framework of PPP Before Decision 71, BOT (BTO or BT) contracts and joint ventures were the two common investment forms for infrastructure projects in Vietnam Recognizing the potential of the PPP concept, Decree 62 was issued in 1998 and shortly after amended by Decree 02 in 1999 Aiming to unify the legal framework for both domestic and foreign investors, Decree 78 was issued in 2007 and later replaced by Decree 108 in 2009 This new framework supported investments in large projects that play a significant role for the nation and that benefit public’s interest The cooperation with the government remained unpopular and the Decree did not sufficiently boost the investment in infrastructure This is due to numerous requirements imposed upon investors, such as strong financial capability and a good relationship with the competent authorities Also joint venturing, although popular for small and mid-sized projects, did not lend itself to large-scale projects Foreign investors that choose to establish joint ventures are subject to restrictions under investment and enterprise laws and the multi- and bilateral treaties, such as Vietnam’s WTO commitments Also the lacking government support, aside from the general investment incentives, weighs heavily on large scale projects in the form of a joint venture According to a study of Asian Development Bank (ADB), capital from the private sector still plays an insignificant role in the infrastructure sector Nearly 18 BOT and BCC projects were implemented in the country with foreign partners during the last 12 years, which makes up 15% of the total capital invested in this sector Due to these constraints, it was suggested to introduce a new pilot project concerning PPP to facilitate risk sharing of government and private investors, which in turn encourages foreign investment Vietnam Content of Pilot PPP Regulations There has not been a comprehensive framework on PPP investment form Decision 71 is considered a “trial/pilot regulation” on selected projects, which are supposed to be implemented via PPP In the absence of detailed, guiding legal documents, many issues remain unclear under Decision 71 and shall be resolved and decided by the Prime Minister on case-by-case basis According to the Decision, a PPP project must concern the nation’s “fundamental infrastructure”, such as traffic and transportation (roads, bridges, tunnels, ferries, railways, railway bridges and tunnels, urban transportation), power, environment and healthcare (hospital) The Decision only leaves room for other projects providing public services if the Prime Minister approves Those projects are selected based on the criteria of significance, scale, economy-development urgency, profit, technology transfer, managerial experience, and effective application of the investor’s capital Due to the absence of definitions, it is vital to interpret the scope of the listed sectors of “fundamental infrastructure” If an investor proposes a PPPproject in Vietnam, it is necessary to determine whether the PPP sectors comprise the proposed project (e.g transportation, healthcare, environment projects) From a Vietnamese legal perspective e.g., “healthcare” deems to cover activities of medical examination and treatment rather than ancillary/complementary services, such as administration or management services Currently, the Hanoi People's Committee has proposed two hospital projects: “Phu Xuyen General Hospital” and “Gia Lam General Hospital”, the capital being around USD 161 million These projects target the development of buildings, patient beds, medical equipment and technology For other projects, it may e.g be necessary to confirm whether the proposed project relates to the traffic and transportation sector Other projects may touch upon several PPP-sectors at once Investors must thoroughly research the applicable laws to reach a reasonable interpretation of the PPP-sectors, before classifying their project under corresponding sector Otherwise, an ad-hoc decision by the Prime Minister, approving the PPP investment form for the project, should be obtained Decision 71 introduces a new application and selection process concerning PPP projects The project proposal of the competent authority or the investor must be sent to the Ministry of Planning and Investment This Ministry will preside over the assessment of the relevant competent ministries and branches (superordinate to the competent authorities) on the proposed projects and submit the appraisal to the Prime Minister The Prime Minister will then issue his decision by including the proposed project in a list of eligible PPP-projects or not The list will be published in a newsletter on the website of the Ministry of Planning and Investment or via other forms of mass media Based on the list of projects, the State competent authority will hold a competitive tender to select independent consultants, who conduct a feasibility study With the completed feasibility study, the 58 competent authority will develop the request for proposal document and invite a domestic or international tender to select an investor for project implementation Different from Decree 108 on BOT, Decision 71 provides a limitation on the “State’s Participation” The State is not allowed to account for more than 30 percent of the total investment of the PPP project The State may invest through various forms, such as the state capital, investment incentives and related fiscal policies; however, the investment may not be made in the form of an equity contribution to the PPP project company, which is dividend receivable Vietnam Regarding the project contract, Decision 71 restates most of the relevant Provisions under Decree 108 except for those, regarding performance guarantee and the governing law In particular, the PPP regulations require a minimum of 2% of the total investment capital for security of obligation performance, in the form of bank guarantees or other securities according to the Civil Code In the meanwhile, Decree 108 provides various levels of performance guarantee fees corresponding to the amount of investment capital (2% or 1% depending on whether the investment capital accounted for more or less than VND 1,500 billion) Also the contract governing law is determined differently by Decision 71 While Decree 108 allows the Parties to choose the governing law, Decision 71 provides that the selection of the governing law will be determined depending on the specific project Remaining Obstacles As a pilot regulation, Decision 71 is not attractive enough to motivate investors to participate in PPP projects for strategic, administrative and financial reasons Dilatoriness and uncertainty characterize the project selection process The decision was issued in 2010, but according to the Tender Management Department (subordinate to the Ministry of Planning and Investment) the Government is yet in the first step of the process (strategic analysis) 30 projects have been proposed, and have been implemented Despite being chosen as a pilot PPP according to Decision 71, the project “highway Ha Long – Hai Phong” has finally been implemented as a combination of BOT and BT The burden of the Government’s inefficiency has been falling heavily on foreign investors The complexities of the administrative procedures are often an obstacle Lengthy negotiations and overlapping competencies of authorities often cause problems These problems will increase dramatically when further projects are implemented at the same time In addition, many projects have suffered from postponement and rising expenses due to sluggish site clearance Under the Decision, the provincial People’s Committee is responsible to clear the site, while in many circumstances the state authorized competent authority, as Party of the project contract, is a ministry or another body of the Government The poor coordination between competent authorities in Vietnam has been widely acknowledged as impedient to investment activities A more critical barrier to investment in infrastructure relates to the financing of large-scale projects The domestic banking sector is usually not able to make large and long-term loans to the investors The international commercial banks are hesitant to lend, unless there is significant participation by multilateral institutions and commercial loans are covered for political risk and counterparty default risk, because of the economic crisis On top of that, prices for services provided by the PPP-invested infrastructures (e.g toll roads, power or water tariffs) are mostly under state control, which result in low revenues for the PPP investors Vietnam Outlook and Suggestions According to report of the “2012 Mid-Year Consultative Group Meeting for Vietnam”, the development of Vietnam’s economy has been remarkable, and the nation’s potential to deliver higher living standards for its people in the future is high However, the chart of “ease of doing business” for the year of 2012, prepared by World Bank, shows that Vietnam stands lower than the ASEAN average level It is widely acknowledged that the first viable solution for the lack of foreign investment must be to trigger the drafting of a more detailed and complete PPP legal framework, since Decision 71 is not attractive enough for foreign investors and does not provide a safe legal corridor for them to join the market In order to encourage private investment in infrastructure, the expected law needs to address complex problems In particular, the Government should affirm their strong commitments to support the private sector via preferential policies, which should be implemented through transparent and effective administration procedures Additionally, the investors must obtain strong guarantees and warranties for investment, such as government guarantees and initiatives to purchase the products of the projects, to provide raw materials, fuels and other public facilities Foreign investors, who wish join the Vietnamese investment environment at this time, should obtain advice from cautious and experienced consultants Their experience will shed light on the practical implementation of the potentially contradictory and incomprehensive legal framework of Vietnam Additionally, experienced consultants can be a valuable asset, providing you with flexible approaches to work with competent authorities efficiently, in terms of negotiating the project contracts and obtaining necessary licenses For more information, please contact Oliver Massmann at omassmann@duanemorris.com Disclaimer: This Alert has been prepared and published for informational purposes only and is not 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