Sunday,  Feb 17, 2019,10:15 (GMT+7) 0 0
Idle funds
By Son Nguyen
Thursday,  Dec 6, 2018,19:47 (GMT+7)

Idle funds

By Son Nguyen

For years on end, and across the country, the valuable money has been unproductive, despite repeated calls from top leaders to dredge the passage for the stagnant cash flow to move faster. To catch all by surprise, the idle funds are so huge, amounting to US$10 billion or so this year, despite ear-piercing complaints of capital shortages among localities, ministries and agencies. 

Multiple conferences, seminars, and State meetings have been convened in the recent past – just like in previous years – to explore why the disbursement for public investment projects has been depressively low. The old reasons are revisited, but effective solutions are not in sight.

Hanoi City’s Party Committee convened its 16th meeting on November 28, and one day later, the HCMC Party Committee organized its 22nd meeting. A topic in common at these two meetings in the country’s two biggest cities, according to local media, is the snail’s pace of disbursement.

Early this year, Hanoi had plans to spend VND42.74 trillion, or some US$1.8 billion, on public investment projects, according to Tien Phong. As of October 31, disbursement was put at a mere VND21.73 trillion, slightly over half of the target, while the year is almost out. The picture is similarly somber in HCMC, where only half of the approved public investment capital has been disbursed.

In Hanoi, the city’s Party chief Hoang Trung Hai complained at the meeting that the disbursement rate for public investment projects tends to fall year after year while in HCMC, Nguyen Thien Nhan as the top leader rebuked heads of departments for their failures to speed up work on such projects.

“When challenged by the people over the chronic flooding, we point the finger at the lack of capital. Is the answer correct?” Nhan is quoted as saying by Nguoi Lao Dong. The local Party chief called out some agencies, saying the Department of Transport had disbursed only 58% of the targeted amount as of October 31, while the anti-flooding center made it at only 53%.

But the lower-than-expected disbursement is not limited to Hanoi and HCMC alone.

In the first seven months of this year, the disbursement for public investment projects nationwide totaled VND150.45 trillion, or just 37.6% of the year’s target, according to Bao Dau Thau. The rate moved a little bit faster towards the year-end, with some VND240 trillion in the January-November period, still less than 60% of the target although the year is drawing to a close, according to vov.vn, the news site of the Voice of Vietnam radio station.

Take the transport sector for example. Numerous complaints have surfaced over the shortage of funds for infrastructure development, but in reality, the allocated capital has never been used up. This year, the Transport Ministry is allocated VND25.33 trillion for capital construction, but as of end-October, only VND13.74 trillion had been disbursed, according to Phap Luat Online.

Reasons behind the stubbornly slow disbursement rate, as reported in local media, abound, ranging from the country’s inadequate institutional mechanisms and the incompetence of officials in charge to the long-persisted headache of site clearance and compensation.

The Ministry of Finance, citing reports from various localities, says that after capital for a project is approved, it takes at least three months for the project owner to go through all processes for signing the construction contract, according to Bao Dau Thau. Then the project faces a major hindrance: site clearance.

Under prevailing regulations, it takes 195 days for relevant agencies to approve compensation for the affected people, since a decision to take back land for project development is issued. “But in reality, the process often lasts 400 to 500 days,” Tuoi Tre reports, quoting Nguyen Van Toan, head of the planning-investment division under the HCMC Department of Transport.

The winding, bumpy road continues. While it takes too long for compensation to be assessed and approved, market prices in most cases have moved up, and affected people tend to reject the prices offered to them. Toan of the Transport Department suggests in Tuoi Tre that new policies are needed so that the jobs of compensation, support and resettlement for affected people can be conducted concurrently among relevant agencies.

While complicated procedures are to blame, top leaders also point the finger at the incompetence of many State agencies for the delays.

Deputy Prime Minister Pham Binh Minh, at a conference on ODA disbursement on November 23 in Hanoi, complained that the Government approved VND60 trillion of ODA for 2018, but to date, the disbursement rate has reached only 40%, according to the Government news website chinhphu.vn.

In a recent conference, Deputy Prime Minister Vuong Dinh Hue challenged that given the same institutional environment, some localities and ministries made faster disbursements, while others lagged far behind, according to Vneconomy.vn. Those officials moving behind schedule should be replaced to speed up the progress, the senior Government leader said.

In fact, according to vov.vn, some bodies such as the Ministry of Planning and Investment and the Ministry of Health as of end-November had the disbursement rates at below 30%, while five other ministries and 11 localities saw their rates at over 80%. The Voice of Vietnam news site says that the slow disbursement of public investment will certainly curtail the country’s economic growth, as public investment accounts for a sizeable proportion of the total investment in the economy.

Meanwhile, the Asian Development Bank warns that damages for the economy are extensive due to foot-dragging projects, according to Dan Tri. At a conference to step up ODA disbursement on October 18, Rustam Ishenaliev, a senior official with the regional lender, asserted that “the final cost would rise by up to 50% if a project is two to three years behind schedule.”

“Slow disbursement causes the cost to surge by 17.6% a year, including 6.5% on rising prices of materials and 11.1% due to the project’s benefits being wasted,” the news site quotes the ADB report. To make matters worse, failures to disburse ODA funds may also prompt donors to stop providing new capital for the country. Citing a report from a group of six global institutions that offer ODA for Vietnam, Dan Tri says the pledged ODA funding for Vietnam that had not been disbursed in the 2011-2015 amounted to US$22 billion.

Early this year, the Government issued Resolution 01, targeting to disburse 100% of the public investment this year, according to Kinhtedothi.vn. In reality, however, such a target looks increasingly unattainable now.

At the meeting of the HCMC Party Committee a fortnight ago, Secretary Nguyen Thien Nhan repeated the target, saying authorities would not tolerate slow capital disbursement in public investment projects for 2019, according to Tuoi Tre.

However, as long as bottlenecks in terms of the institutional corridor as well as the competence of relevant agencies are not to be removed, valuable capital as a driver for economic growth will remain idle, as seen in the past years, while costs will continue to surge and benefits to be wasted.

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