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Sep 28, 2019 / 12:24

Vietnam PM warns of deadly consequences of slow disbursement

The slow disbursement of public investment over the last ten years has created a bottleneck for the economy.

Prime Minister Nguyen Xuan Phuc has warned of four major consequences of slow disbursement of public investment, saying these are bottlenecks to the economy. 
 
Prime Minister Nguyen Xuan Phc at the meeting. Source: VGP.
Prime Minister Nguyen Xuan Phuc speaks at the conference. Source: VGP.
Funds available for projects that suffer delays in disbursement would be transferred to those implemented at a faster pace, Phuc said at a conference discussing public investment in 2019 on September 26. 

Public investment contributes significantly to GDP growth and socio-economic development, particularly national infrastructure projects, Phuc added. 

In 2019, public investment is projected to make up 10.7% of total GDP and 32% of total investment in the country. 

Phuc said the slow disbursement of public investment over the last ten years has created a bottleneck for the economy. The issue has been going on for a long period of time, and particularly this year with low disbursement rate. 

Phuc pointed out four major consequences to the economy:

Firstly, it would cause a slowdown to economic growth as the capital factor being essential to GDP growth. Phuc added there has been large amount of capital pending disbursement in provinces and government agencies. 

Secondly, public investment capital is a key resource of infrastructure projects, the slow disbursement, therefore, could delay the spending of other counterpart funds from the private and foreign sector, affecting the mobilization of social capital, nation credibility and causing loss of trust from investors and donors. 

Thirdly, it represents major waste as the investment capital stays idle while the government has to pay incurred cost. 

Fourthly, enterprises and project owners have to bear additional costs, causing debt and loss of credibility.

Phuc requested government agencies to identify reasons behind slow disbursement process, as there have been provinces with high disbursement rate of 70 – 80%, while others with rate below the average, at 10  - 15%. 

In the first nine months of 2019, Vietnam  disbursed VND192.13 trillion (US$), or 45.17% of the target set by the National Assembly and 49.14% of the target set by Prime Minister, these rates are lower than those recorded at the same period last year. 

Statistics showed that seven government agencies and 14 provinces have disbursement rate of over 70%, in which four agencies and four provinces with over 80%. 

However, the majority has the disbursement rate lower than the average, including 31 agencies and 19 provinces with rates lower than 50%, 17 agencies and one province with disbursement rate below 30%. 

A report from the Ministry of Planning and Investment attributed the slow disbursement rate to complicated legal frameworks and the Law on Public Investment, while there has been confusion in following regulations stipulated in the Land Law, Law on Construction, Procurement Law and Law on Environmental Protection, among others, leading to time consuming process of site clearance, approval process of technical design, financial estimation and contractor selection. 

Reasons behind slow disbursement of ODA are due to the inefficient process of preparation of projects, while some have not been allocated sufficient counterpart funds, in turn directly impact on the absorbing capacity and disbursement of foreign investment capital.