Speeding up ODA Projects

According to report from Ministry of Finance (MoF), ODA (official development assistance) disbursement rate is still low at 18 percent of the year’s plan on average while total value of ODA contracts and programmes signed in the first six months of 2011 was US$293,270 (equal to VND5,802 million). At the moment, there are 23 ODA programmes and projects under management and implemented by Ministry of Finance.

 

Besides on-going programmes and projects, MoF has received some new ones. ODA projects and programmes have actively contributed to Vietnam social-economic recovery, development as well as public financial management reform agenda. However, slow disbursement in 2011 influenced capital efficiency as well as programme’s effectiveness.

 

MoF supposed that the reasons for low disbursement rate were some obstacles in implementation such as lack of human resource, slow capital transfer, inappropriate project design etc. For example, some project management units lack experience in procurement, tender, taking procedures of investors and the government etc, which caused slower implementation progress than planned, especially some projects with large loans. As a result, many projects had to ask for extension such as Project Developing Capital market, Project Reforming public financial management, Project Assisting to build Price Management law etc. Moreover, as Vietnamese project owners have limited design capacity, being unable to forecast procedural difficulties, internal and external risks, projects’ feasibility is low. Some projects ended with so low disbursement rate, investors had to terminate loan credit for the projects like project Modernizing Custom sector funded by WB and the United State.

 

Another difficulty causing Ministry of Finance’s ODA slow disbursement is differences between regulations and procedures of Vietnam Government and investors. Actually, in project implementation reports, owners of some MoF’s projects mentioned obstacles related to sponsors’ procedures, for example: slow capital transfer (Project Component Enhancing Financial Investigation capacity to 2014); inadequate guides on investors’ expense norm (Project MDTF2); no provision or slow provision of related information, causing project owners lack information to report Vietnam Governmental Authorities like Project Developing Capital market in Vietnam, Project Taxation Procedural reform phase 2 etc.

 

To tackle limitations in mobilizing and implementing ODA programmes and projects in Finance sector, increase aid effectiveness for the sector and Vietnam reputation when there are some opinions supposing that ODA capital is “free grant”, MoF has recently proposed some measures.

 

MoF and Vietnam Government should (i) continue to foster harmonization of regulations, procedures between Vietnam Government and sponsors, strengthen information exchange and sharing through other channels such as Portal or International Cooperation Department to timely discuss and address arising issues. (ii) Conduct common assessment/review meetings between MoF and sponsors of ODA, Loan projects, especially of those with slow progress and in need to avoid such current separate project reviews conducted by sponsors.

 

As for sponsors, Vietnam also requires assistance to build capacity for MoF’s officers, assistance to consult on alteration in MoF’s procedure of implementation and management of projects and programmes foreign funded after Altered Decree 131 was issued by the Government.

 

To speed up implementation progress of ODA projects, MoF also recommended related authorities to study new supporting methods to make appropriate management regulations. At the moment, MoF is taking charge of some national programmes, projects (mainly loan ones and not related to public financial management reform) such as: Project Local development investment Fund funded by WB, Project Reforming state enterprises and Assisting corporate management funded by ADB, Project Assisting post-disaster reconstruction funded by ADB phase 2. Ministry of Finance is projects’ owner but not last beneficiary and only plays role of moderator and coordinator. Since these projects and programmes’ assisting method is new, there should be appropriate management regulations to ensure capital using efficiency and payment capability in future.

It is known that Ministry of Finance has proposed WB to add form of aiding directing to National Budget in addition to aid through projects as before. According to MoF, this form will help to reduce transaction fee created by taking Vietnamese procedure. At the same time, Finance sector is also boosting up mobilization for ODA, building new cooperation programmes, projects for the last months and new phase, especially to access sponsors from WB, JICA or the US on public debt management, state enterprise management or taxation and custom administrative reform.