A Risk Based Approach to the Problem of Credible Commitment in Public Private Partnership: the Case of Vietnam

Eduardo Araral (National University of Singapore)

Abstract: Vietnam is a leader in foreign direct investment with about US$47B in investments in 2008 but a laggard in public private partnerships in infrastructure with negligible amount of investment. I explore this paradox and argue that while it is able to make credible commitments for FDI, it was unable to do so for PPP in infrastructure. The reason for this is its inability to address inherent risks such as large sunk cost, length of time to recoup investments, asset specificity and political salience of infrastructure. The policy implication is that the problem of credible commitment in PPP for infrastructure can be approached using risk analysis.

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