Economic Restructuring: Troubleshooting Public Investment

According to the Ministry of Planning and Investment, as of March 28, 2011, 30 ministries, 63 provinces and 12 State-owned economic groups and corporations cut down 1,387 projects (at present, the country has more than 32,000 ongoing State-funded investment projects) with a total reduced value of nearly VND3,400 billion (the State Budget spends VND152,000 billion on State-funded projects) in 2011. The reduction was some 2 percent in both volume and value and the average value of a project is VND2.5 billion. Up to 22 ministries and branches had not submitted reports on the matter, including big investors like Ministry of Transport, the Ministry of National Defence, the Ministry of Public Security, and the Ministry of Construction. Some provinces and cities asked for no reduction in public investment.

 

As of June 2011, ministries, branches and State-owned enterprises proposed reducing as much as VND80.55 billion of public investment capital, or about 9 percent of total social investment in 2011. As many as 2,048 projects worth VND5,556.4 billion using the State Budget capital were cut. As regards projects using government bonds, 126 projects with VND2,777.6 billion were proposed for termination. Ministries delayed and reduced 91 projects with VND2,478.5 billion to raise funds for 88 projects. Provinces and cities cut and reallocated 35 capital projects with VND299.1 billion.

As of August 26, 2011, all ministries, central branches, provinces and cities submitted reports on the results of investment reduction and reallocation of investment capital in 2011. They allocated VND123,029.1 billion of State Budget capital for 20,529 projects. Of the sum, VND22,176.6 billion was allocated for 5,474 new projects and VND100,825.5 billion was granted for 15,055 forward projects. The entire country delayed, reduced and reallocated VND6,532.7 billion in 2,103 projects, of which 1,206 new projects with VND3,768.5 billion were stopped and 897 projects with VND2,764.2 billion were reduced and reallocated. State-owned economic groups and corporations reduced a “shocking” investment capital of VND39,212.2 billion, or 10.7 percent of their investment capital planned for 2011 (a total of VND349,848.4 billion). The Electricity of Vietnam Group (EVN), the Vietnam National Oil and Gas Group (PetroVietnam) and the Vietnam National Coal, Mineral Industries Holding Corporation Limited (Vinacomin) had a low ratio of reduced capital but the absolute value was relatively large. For instance, EVN cut nearly VND12,160 billion, PetroVietnam slashed VND7,251.6 billion, Vinacomin took back VND4,787 billion, and the Vietnam Posts and Telecommunications Group (VNPT) trimmed VND3,000 billion. Remarkably, a majority of delayed projects (907 projects in total) are involved in the construction of working offices, purchase of expensive equipment and items with relation to core business and services provided. A lot of them were kicked off in 2011 but they were disqualified for investment because they had not met capital resources and site clearance conditions. These projects were short of capital or infeasible in practice.

 

In fact, most but not all ministries, branches and localities strictly implemented the policies on public investment reduction. Some tried to keep even investment for projects necessarily deterred as stated in the Resolution 11. Specifically, according to the Ministry of Planning and Investment, to date, ministries and central agencies are still keep 183 projects newly start

According to the Ministry of Planning and Investment, about 10 percent of total social investment capital, or an equivalent of VND96,888.3 billion will be reduced by ministries, branches and State-owned enterprises in 2011. Particularly, up to VND50,000 billion will be reduced from “not prolong the time of disbursement in 2011, not advance capital allocated for 2010 in 2011, reduce 32 percent of investment from proceeds of government bonds, and reduce 10 percent of State investment credits. The remainder of VND46,888.3 billion will be summed by VND5,128 billion from the State Budget, VND2,547.5 billion from government bonds, and VND39,212.2 billion from investments carried out by State-owned enterprises.

ed with a total investment capital of VND337.6 billion but their scopes were excluded in the Resolution 11 and Resolution 83. At local levels, only 471 projects were allocated VND1,762.9 billion in 2011 while 638 projects did not belong to the group of projects kicked off in 2011 but they still arranged VND1,763.6 billion for execution. Even, many provinces did not cut 2,000 projects funded by local budgets although they did not belong to the group of projects allowed for commencement in 2011. Wrongdoings were also found in projects using proceeds from government bonds.

 

In fact, the standpoint of the Ministry of Planning and Investment concurs with the guidance of the government: Curbing inflation. Apart from the list of projects allowed by the Government, the ministry proposed the Government to take back all capital allocated to projects without enough procedures for commencement or enough conditions for commencement. The withdrawn value for central agencies was VND337.6 billion. This investment capital will be supplemented to the East Sea - Island Programme of the Ministry of National Defence. As regards VND1,736.6 billion disbursed for 638 projects in 55 provinces, which were born with the wrong purpose, the ministry proposed offsetting this capital with new funds to be allocated for localities with these projects in the following years.

 

In my opinion, to seriously and effectively reduce public investment under the spirit of the Resolution 11/NQ-CP, we need to itemise criteria and target projects. We also drastically reform the stages of review and decision-making. More importantly, we should have the Law on Public Investment. Accordingly, the roles of public investment in the economy need to be redefined in the following directions: “Investment for business purpose” needs to be reduced; the “investment for welfare purpose” needs to be strengthened; public investment is channelled for infrastructure projects (electricity, traffic), used for key sectors or projects with strong ripple effect on the economy and society, used for scientific and technological application projects, used for education, training, health, social welfare, etc. In addition, basing on the orientation of the Government, concerned units must be more proactive with their investment priority, basing on their actual needs, to focus resources on more necessary projects. The appraisal of investment projects using State funds should be performed independently, professionally, objectively and responsibly. In addition to State supervision, public investment projects should also be placed under the surveillance of the community, and, to do so, rights and duties of the community towards public investment need to be clearly defined.