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Last updated: Friday, October 19, 2018


Why Are Public Investment and ODA Disbursed Slowly?

Posted: Friday, September 15, 2017

The slow disbursement of official development assistance (ODA) will result in an extra expenditure of 17.6 per cent a year. If the delay is 2-3 years, it will cost up to an extra 50 per cent, as a result of financial deficit. ODA disbursement amounted just VND41.7 trillion (US$1.85 billion) in the first seven months of 2017, equal to 42 per cent of the yearly plan, and 5 per cent lower than that in the same period of 2016. These alarming figures were reported to the workshop on “Public investment and ODA disbursement - Transparency and Effectiveness” recently held by the Ministry of Planning and Investment in Hanoi.

Mr Luu Quang Khanh, Director of Foreign Economic Relations Department under the Ministry of Planning and Investment, said that public investment and ODA disbursement is a more pressing issue than ever. If Vietnam is unable to solve the matter well, it will impede macroeconomic development, waste resources and bring rising pressures of public debt repayment.

This becomes even more urgent when major donors to Vietnam such as the World Bank (WB) and the Asian Development Bank (ADB) cut off the most preferential loans (WB already discontinued from July 1, 2017 and ADB makes the move from January 1, 2018). Other potential investors, such as Japan and South Korea also have plans to bring an end to these loans and replace them with loans with shorter terms and higher interest rates. These are grave difficulties for the Vietnamese economy, as it needs a huge fund to achieve economic objectives.

Being aware of the magnitude of this issue, the Government has repeatedly issued ultimatums to the Ministry of Planning and Investment to speed up the delivery and disbursement of public investment in 2017.

Mr Tran Quoc Phuong, General Director of Department for National Economic Issues under the Ministry of Planning and Investment, said there are many reasons leading to slow public investment disbursement. The first reason comes from the early precedent: Disbursement is often slow at the beginning of the year and quickens towards the end of the year. This is an administrative restriction caused by the traditional working style of State agencies and contractors. In this stage, many procedures must be completed, including tender and site clearance. In particular, site clearance is very complicated. It takes more time for larger project areas.

Another reason is time-consuming procedural completion and coordination among investors and relevant agencies in completing paperwork. If each procedure delays even just a few days, the overall time cost reaches months.
Meanwhile, Mr Luu Quang Khanh pointed out that, for many projects, it takes up to two years to work with consultants and three years with construction contractors. In addition, they cannot get disbursement when governing agencies approve, but local authorities do not add them to medium-term investment plans and annual plans.

Despite having administrative procedures completed, gigantic projects must get the nod from National Assembly for approval if they have investment capital changed. This is also a major drag on the progress of capital disbursement. Cat Linh - Ha Dong railway project or Ben Thanh - Suoi Tien metro project is a typical example. The latter hiked the investment budget from VND17 trillion to VND47 trillion.

He added that, in a bid to speed up fund disbursement, the Government’s Resolution 70/NQ-CP dated August 3, 2017 on main tasks and solutions to accelerated progress of public investment implementation and disbursement clearly states that it is necessary to raise the spirit of discipline and the sense of responsibility of unit heads in monitoring and inspecting projects. In particular, ministries, branches and localities should actively review and propose competent authorities to reallocate funds previously intended for delayed projects to those in need of capital for completion and commissioning; review the progress and implementation progress of disbursement plans for programmes and projects funded by ODA and other preferential loans from foreign donors to effectively use public investment budget to be allocated in 2017 for national economic growth.

Anh Phuong

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