To implement an investment program or project, obtaining an investment policy decision from the competent authority is a mandatory condition. So, what is an investment policy? How is it regulated under the current Laws? In this article, NPLaw presents to Clients legal regulations on investment policy as stipulated in the Law on Public Investment and related legal documents.
I/ What is an investment policy?
Pursuant to Clause 7, Article 4 of the Law on Public Investment 2012019, investment policy refers to a decision of the competent authority regarding essential contents of an investment program or project.
Such a decision serves as the basis for formulating, submitting, and approving the investment decisions for programs and projects, as well as feasibility study reports for public investment projects.
II/ What are objects of public investment?
The Law on Public Investment 2019 regulated new provisions compared to the Law on Public Investment 2014, including regulations on objects of public investment. Specifically, the current Law on Public Investment dedicates Article 5 to defining objects of public investment, instead of only promulgating investment fields.
Objects of public investment as stipulated in Article 5 of the Law on Public Investment 2019 include:
- Investment in programs and projects related to economic and social infrastructure.
- Investment in serving operations of State agencies, public service units, political organizations, and socio-political organizations.
- Investment in and support for investment activities providing public goods and services, and social welfare.
- State investment in projects implemented under the public-private partnership model.
- Investment in serving the preparation, appraisal, decision-making, or approval, announcement and adjustment of planning as prescribed by Law on planning.
- Subsidies for preferential interest rates and management fees; provisions of charter capital for policy banks and extra-budgetary state financial funds; and investment and support for other policy objects as decided by the Prime Minister.
III/ Regulations on the investment policy
1. Legal basis
Regulations on the investment policy are stipulated in the following legal documents:
- The Law on Public Investment 2019;
- The Law on State Budget 2015;
- Decree No. 40/2020/ND-CP providing guidance on the Law on Public Investment;
- Decree No. 29/2021/ND-CP on the procedures and processes for appraising nationally important projects and the monitoring and evaluation of investment;
- Other relevant legal documents.
2. Conditions for deciding on the investment policy for programs and projects
To implement programs and projects, it is necessary to meet certain conditions in accordance with the Law on Public Investment. Specifically, as stipulated in Article 18 of the Law on Public Investment 2019, conditions for deciding on the investment policy for programs and projects include:
- Being appropriate with economic and social development strategies and plans, and relevant planning according to legal regulations on planning that have been approved by competent authorities.
- Not overlapping with other programs or projects that have already received an investment policy decision or an investment decision.
- Being appropriate with the capacity to balance public investment funds and ability to mobilize other funding sources for programs or projects using many capital sources.
- Being appropriate with the capacity to borrow and pay public debts, Government debts, and local government debts.
- Ensuring socio-economic efficiency, national defense and security, and sustainable development.
IV/ Classification of public investment projects
1. Criteria for classifying public investment projects
The classification of public investment projects is determined based on specific criteria. According to Article 6 of the Law on Public Investment 2019, public investment projects are classified based on the following criteria:
- Based on nature, public investment projects are classified as follows:
+ Projects with construction components are projects involving new construction, renovation, upgrading, or expansion of existing projects, including purchases of project’s assets and equipments;
+ Projects without construction components include projects focused on purchasing assets; acquiring land use rights; purchasing, repairing, or upgrading equipment and machinery; and other projects not covered in the above criteria.
- Based on importance and scale, public investment projects are classified into:
+ Nationally important projects;
+ Group A projects;
+ Group B projects;
+ Group C projects.
Nationally important projects and Group A, B and C projects are classified according to specific criteria stipulated in Articles 7, 8, 9, and 10 of the Law on Public Investment 2019.
2. Authority to adjust criteria for classifying public investment projects
The criteria for classifying public investment projects may be adjusted by competent authorities in cases of significant price index fluctuations, major adjustments to public investment management decentralization affecting the classification criteria, or the emergence of other significant factors impacting these criteria. Specifically, under Article 11 of the Law on Public Investment 2019:
- The National Assembly has the authority to decide on adjustments to the criteria for classifying nationally important projects.
- The Government submits proposals to the Standing Committee of the National Assembly to decide on adjustments to the criteria for classifying Group A, B, and C public investment projects and reports these adjustments to the National Assembly at its nearest session.
V/ Frequently asked questions about the investment policy
During the provision of advisory services, NPLaw has received many inquiries from Clients regarding the investment policy. Within the scope of this article, we address some related issues.
1. Is it necessary to seek approval for adjusting the investment policy when an investor changes total investment capital?
Pursuant to Clause 5, Article 43 of the Law on Public Investment 2019: In cases where an adjustment results in an increase in the total investment capital that exceeds the amount previously approved by the competent authority in the investment policy decision, the project must be implemented with the processes and procedures for adjusting the investment policy before the competent authority approves the project adjustment.
2. What is the duration for group C public investment policy?
Current legislation does not define Group C projects but specifies the criteria for classifying Group C projects in Article 10 of the Law on Public Investment 2019. Specifically:
- Projects in the following sectors: Transportation including bridges, seaports, river ports, airports, railways, and national highways; Electric power industry; Oil and gas exploration; Chemicals, fertilizers and cement; Machinery manufacturing and metallurgy; Mineral extraction and processing; and Housing construction projects with total investment capital below 120 billion VND.
- Projects in the following sectors: Transportation (excluding bridges, seaports, river ports, airports, railways, and national highways); Irrigation; Water supply and drainage, waste treatment, and other infrastructure projects; Electrical engineering; Manufacturing of information and electronic equipment; Pharmaceuticals and chemicals; Production of materials (excluding chemicals, fertilizers, and cement); Mechanical works (excluding machinery manufacturing and metallurgy); Post and telecommunications, with total investment capital below 80 billion VND.
- Projects in the following sectors: Agricultural, forestry, and aquaculture production; National parks and nature reserves; Urban infrastructure in new urban areas; Industries (excluding those specified in Clauses 1, 2, and 3 of Article 8 of the Law on Public Investment 2019), with total investment capital below 60 billion VND.
- Projects in the following sectors: Health, culture, and education; Scientific research, information technology, broadcasting, and television; Museums; Tourism and sports and physical activities; Civil constructions (excluding housing construction); Projects in the defense and security sectors (excluding those specified in Clauses 1, 2, 3, and 4 of Article 8 of the Law on Public Investment 2019), with total investment capital below 45 billion VND.
Pursuant to Clause 2, Article 52 of the Law on Public Investment 2019, projects must meet certain conditions to be included in the medium-term public investment plan. These conditions include compliance with the principles and criteria for allocating public investment capital, including: programs and projects approved by the competent authority for the investment policy, as well as new projects, must ensure the capital allocation period does not exceed 6 years for Group A projects, 4 years for Group B projects, and 3 years for Group C projects.
Therefore, for programs and projects with approved investment policies, the capital allocation period for Group C projects must not exceed 3 years.
The above article clearly explains regulations and conditions on the investment policy under the provisions of the current Law on Public Investment. If you have any questions or require further assistance, please contact NPLaw for support.
