Jun 27, 2019 / 13:06

Cumbersome procedures lead to low ODA disbursement rate in Vietnam

The Hanoitimes - The disbursement rate in the first six months of 2019 is only 2.7% of the investment plan for 2019.

Complicated and time-consuming procedures in implementing projects have led to low disbursement rate of the official development assistance (ODA) in Vietnam, according to Eric Sidgwick, ADB country director for Vietnam. 
 
Overview of the conference. Source: VGP.
Overview of the conference. Source: VGP.
Vietnam’s average disbursement rate is less than half of the previous periods and slower than other countries that receive ODA from ADB, said Sidgwick in a conference discussing measures to boost ODA disbursement rate in Vietnam on June 26. 

Experts at the conference shared the view that a request for fund adjustment in a project would require the approval of multiple government agencies. For some cases, the procedure even took longer than the disbursement period, causing the projects’ validity to be extended along with other complicated legal requirements. 

At the conference, Minister of Finance Dinh Tien Dung informed the ODA disbursement rate since 2016 to date has not reached the plan, adding the disbursement rate in the first six months of 2019 is just 2.7% of the investment plan for 2019. 

Following the mid-term public investment plan for the 2016 – 2020 period, the ODA was set at VND360 trillion (US$15.44 billion). By the end of 2019, VND244.3 trillion (US$10.48 billion) would be allocated to the state budget’s estimate, equivalent to 67.9% of the total, Dung informed. 

The accumulative disbursed amount from 2016 to May 2019 stood at VND133.04 trillion (US$5.7 billion), equivalent to 54.5% of the allocated amount and 36.96% of the mid-term plan for the 2016-2020 period. 

As of May, the remaining amount pending disbursement reached VND226.95 trillion (US$9.73 billion). 

Truong Hung Long, director of the Department of Debt Management and External Finance under the Ministry of Finance (MoF), said part of the reason for slow disbursement progress was the delay in making public investment plan of 2019, while the Ministry of Planning and Investment (MPI) has only allocated 48% of the total fund to provinces and cities.

The insufficiency of fund allocation and slow implementation of projects have been the main concern for project owners and donors, Long added. 

For projects financed by six major development banks, over 60 projects have not been allocated with sufficient funding for 2019 and faced a shortage of VND34 trillion (US$1.45 billion). 

These ODA providers include the World Bank (WB), Asian Development Bank (ADB), Japan International Cooperation Agency (JICA), Export-Import Bank of Korea (KEXIM), French Development Agency (AFD) and German Development Bank (KfW).

On the contrary, a number of projects in spite of having sufficient funds  still suffered delay in implementation, indicating a lack of preparation, especially during the process of technical design, site clearance and resettlement. 

Minister of Finance Dung expected a joint effort to resolve the issue of low disbursement rate. 

Meanwhile, Vice Minister of Finance Tran Xuan Ha said it is necessary to revise the legal framework. As the new Public Investment Law will come into effect, Ha said a new regulation on ODA management with simplified process is essential. 

Low disbursement rate could lead to additional costs and higher commitment fees for the government, which are charged by a lender to a borrower for an unused credit line or undisbursed loan. 

More importantly, there could be potential contract dispute between project owners and contractors, affecting Vietnam’s credibility.