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[Research Contribution] A Developmental State and Private Partnership Mechanism for Infrastructure Development in Ho Chi Minh City

19 December, 2025

Keywords: developmental state; public-private partnership (PPP); institution; urban infrastructure.

As Ho Chi Minh City faces immense pressure from rapid urbanization, the need for modern, green, and smart infrastructure has become more urgent than ever. This article analyzes the complementary roles of the state and the private sector in infrastructure investment and development, drawing on theoretical foundations such as the developmental state, public-private partnership (PPP) models, institutional economics, and sustainable regional development. Through a three-tiered analytical framework and practical case studies—from Metro Line 1 to pilot PPP models—the author identifies progress, bottlenecks, and proposes institutional reforms to realize a model of a “developmental state with private partnership.” This aims to create a transparent, effective, and adaptive public-private cooperation mechanism tailored to the new development demands of HCMC.

The Specific Context and Prerequisites for Infrastructure Development in HCMC

As the nation’s largest economic hub, HCMC’s rapid growth has placed increasing strain on its infrastructure systems, including transportation, wastewater treatment, housing, healthcare, and energy. However, the capacity for mobilizing and disbursing public investment has tended to shrink, with public investment disbursement rates consistently falling below expectations for many years (World Bank, 2022).

Current urban planning lacks multidisciplinary integration and has not been updated in a timely manner to reflect development realities, especially in the context of urban expansion and the merger of neighboring localities. The absence of a complete regional master plan for HCMC and its satellite cities has created difficulties in synchronizing technical and social infrastructure connectivity (Nguyen & Le, 2021).

Furthermore, existing legal frameworks for public investment, public-private partnerships (the 2020 PPP Law), and bidding are not flexible enough to handle large-scale, interdisciplinary, and multi-level projects in an expanding metropolitan area. The urban governance system remains fragmented, lacking close coordination among departments and between the city and newly merged communes, thereby reducing the effectiveness of development investment coordination and implementation.

The merger of localities such as Ba Ria-Vung Tau and Binh Duong into HCMC has created an urgent need to build a unified and synchronized policy space. This is necessary to maximize regional development resources, overcome infrastructure and governance bottlenecks, and promote effective regional connectivity in an increasingly competitive global context.

The Current PPP Coordination Mechanism in HCMC

In its role as a developmental enabler and coordinator, the HCMC government has shown a trend towards innovation by implementing several breakthrough pilot policies, such as building an international financial center, developing urban metro lines, and promoting logistics and smart city systems. These initiatives demonstrate a determination to enhance infrastructure capacity, modernize the city, and strengthen regional linkages. However, the current institutional framework still has many points of incompatibility with practical demands, creating difficulties in mobilizing and coordinating resources from the public and private sectors.

Specifically, PPP projects in urban transport infrastructure—most notably Metro Line 1—are facing numerous challenges related to the disbursement of counterpart funds from the state budget, adjusting total investment capital to match price fluctuations and progress, and clearly allocating responsibilities among project stakeholders. These difficulties have delayed progress, increased costs, and reduced investment efficiency.

From the private sector’s perspective, despite possessing financial potential and a desire to invest in infrastructure development, businesses still face many legal risks and complex procedures. Prominent issues include non-transparent risk sharing, a lack of reasonable revenue guarantee mechanisms, limited land access and use rights, and a lengthy and inconsistent project approval process (Nguyen, 2023). This reduces the attractiveness of PPP projects and affects the active and sustainable participation of the private sector.

Although BOT (Build-Operate-Transfer) and BT (Build-Transfer) models were once widely used in infrastructure development, their practical implementation has revealed many shortcomings. Issues related to financial transparency, project effectiveness assessment, and emerging risks led the government to suspend the signing of new BT contracts in 2020 to review, adjust, and improve the relevant laws.

Against this backdrop, HCMC is piloting new cooperation models to enhance efficiency and transparency in infrastructure investment, such as public-private service contracts (availability payments) or public-private joint ventures. However, alongside the implementation of these new models, HCMC still lacks a complete legal corridor and clear implementation guidelines, limiting the ability to scale up and attract investment.

A noteworthy point is that HCMC has not yet established a regular, transparent, and highly binding public-private dialogue mechanism. The process of consulting the private sector during the formulation and design of infrastructure policies remains largely formalistic, lacking a serious commitment to absorbing or providing clear feedback. This situation undermines the motivation for partnership and erodes trust from the private sector—a key factor that many international studies have confirmed is essential for the success of PPP projects.

Building a sustainable and effective public-private dialogue mechanism will help resolve institutional bottlenecks, promote transparent cooperation, and enhance the quality of investment and project management capacity for HCMC’s infrastructure in its upcoming expansion and development phase.

Key Projects in HCMC – Bright Spots Driving Urban Development

In the practical development of infrastructure in HCMC, several projects can be considered bright spots, helping to create momentum for urban development and improve the quality of life for citizens. A prime example is Metro Line 1—a large-scale, key public transport project. Despite encountering many difficulties during its implementation, this project has sent a positive signal for the modernization of the city’s public transport network.

Additionally, the HCMC Environmental Sanitation Project (Phase 2), with a financing model combining ODA funds and private sector participation in the operational phase, has shown clear effectiveness in improving the quality of the urban environment and increasing the sustainability of the wastewater treatment system.

Furthermore, the development of underground transit-integrated commercial centers in the city’s central areas has helped reduce surface traffic pressure while enhancing service utilities and promoting socio-economic development in the inner city.

However, most projects invested in through PPP or by the private sector are still primarily concentrated in areas with easy capital recovery, such as retail and commercial housing. Meanwhile, sectors with a strong public-interest character and a major impact on the quality of life—such as waste treatment, clean water supply, and public transportation—have not yet truly attracted the private sector due to low profitability and high risk.

This situation clearly reflects a polarization in investment attraction, where essential infrastructure segments still rely heavily on the state budget or public support. The key policy lesson is: to attract the private sector to participate in high-public-interest fields, the state must proactively design risk guarantee mechanisms, fair benefit sharing, and sufficiently attractive investment incentives, while also improving transparency and enforcement capacity in project management.

From these practical implementations, several important policy lessons have been learned. First, HCMC needs to redefine the role of the state, moving beyond being a “licensor” to becoming a “strategic coordinator”—an entity capable of building trust with investors, allocating risks reasonably, and promoting value sharing among stakeholders (Yescombe, 2011). This requires the perfection of a transparent and flexible legal framework, accompanied by effective monitoring mechanisms to ensure sustainability and fairness in infrastructure investment projects.

In addition, the private sector needs to be seen as a true strategic partner, actively participating from the planning and implementation stages to the operational phase—rather than merely acting as a service provider or contractor. This approach will enhance the long-term commitment of private enterprises, foster innovation, and improve project management efficiency. In particular, a regular, transparent, and binding public-private dialogue mechanism is a crucial foundation for building trust and for promptly identifying and resolving obstacles during implementation.

Thus, to enhance the efficiency of infrastructure development in the context of HCMC’s urban expansion, learning from and adjusting policies based on practical experience is essential. The transformation of the state’s role from manager to enabler, along with a sustainable partnership with the private sector, will be the key factor helping HCMC overcome challenges, realize its sustainable development goals, and fully exploit its potential for regional connectivity.

Proposed Mechanism

A PPP Model for HCMC

In the context of urban expansion and growing infrastructure demands, HCMC needs to establish an institutionalized, transparent, and flexible public-private coordination mechanism to maximize social resources and enhance development investment efficiency. Based on practical experience, several key policy lessons can be drawn from the following pillars:

First, it is necessary to institutionalize integrated planning and a portfolio of key projects capable of “leading private investment.” Regional and urban development plans must be clear, multidisciplinary, multi-level, and highly connected with satellite localities such as Binh Duong, Long An, Dong Nai, as well as areas with potential for merger, like Ba Ria-Vung Tau. The transparent disclosure of priority project portfolios will help investors proactively plan and commit resources. At the same time, periodic updates will allow the mechanism to respond flexibly to reality, thereby strengthening the private sector’s confidence.

Second, HCMC needs to build a specialized legal framework suited to the nature and scale of a large, complex metropolis. This framework should aim to simplify administrative procedures, increase flexibility in handling multi-sectoral and multi-level projects, and enhance the capacity for rapid and effective dispute resolution.

Third, a sector-specific risk-sharing model should be implemented for infrastructure areas such as transport, water supply, waste treatment, and energy. The fundamental principle is to allocate risks fairly: the state is responsible for policy, legal, and foundational infrastructure risks; the private sector bears operational and market risks. Tools such as revenue guarantees, contingency funds, and risk insurance can be applied to support investors.

Fourth, the development of long-term financial instruments is a key factor. HCMC needs to establish specialized urban investment funds, promote the issuance of project bonds, and apply innovative financial tools to diversify capital sources. An effective combination of budget funds, ODA, and the private sector will create a flexible and sustainable financial structure.

Finally, organizing a regular public-private forum with a clear policy feedback mechanism is indispensable. These forums should not only be channels for dialogue but must also have the function of receiving, processing, and responding to feedback transparently and responsibly—thereby building trust and promoting long-term cooperation.

In summary, an effective public-private coordination mechanism in HCMC needs to be based on five pillars: (1) integrated planning, (2) a specialized legal framework, (3) sector-specific risk sharing, (4) long-term financial instruments, and (5) regular public-private dialogue. This is a solid foundation for the city to effectively mobilize social resources and develop infrastructure in a sustainable and challenge-resilient manner.

A “Developmental State, Private Partnership” Mechanism for HCMC’s Transport Infrastructure Development

HCMC needs to shape an innovative and sustainable public-private cooperation mechanism, in which:

The state plays a strategic enabling role: setting development direction, creating a master plan and a long-term portfolio of key projects; establishing a transparent and flexible legal framework; allocating risks related to policy, land, and planning; and providing financial support tools such as project guarantees, investment funds, and technical assistance.
The private sector acts as a proactive partner: participating from the planning stage, proposing initiatives, providing financial resources, technology, and operational capacity; bearing business and operational risks, while promoting innovation.

The coordination mechanism must ensure the harmonization of interests and appropriate risk allocation, establish transparent contracts, clear revenue guarantee mechanisms, and channels for regular monitoring and dialogue with responsive feedback. This model will help strengthen trust, promote effective cooperation, and enhance transparency in urban transport infrastructure projects.

The “Developmental State, Private Partnership” model is a strategic approach to building a sustainable, transparent, and effective infrastructure development foundation for HCMC. In a context of limited public resources, this model opens a new path for deep, proactive cooperation between the public and private sectors—not just in financial investment, but also in sharing responsibility, risk, and value.

The transformation of the state’s role from manager to enabler, along with the promotion of the private sector’s innovative role, will be the key for HCMC to overcome financial, technical, and governance challenges, thereby realizing its vision of a modern, regionally connected, and sustainable urban development in the long term.

This article is part of the proceedings of the scientific conference “Planning Vision and Economic Development Drivers for a New Ho Chi Minh City,” organized by the University of Economics Ho Chi Minh City. Read the full article A Developmental State and Private Partnership Mechanism for Infrastructure Development in Ho Chi Minh City HERE.

Author: Dr. Huynh Thanh Dien – Nguyen Tat Thanh University

This article is part of the series spreading research and applied knowledge from UEH with the message “Research Contribution For All.” UEH cordially invites readers to look forward to the next UEH Research Insights newsletter.

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