The delay in ODA disbursements

In the reciprocal capital arrangement

From the beginning of the year until now, despite the value of ODA and preferential loans of Vietnam being nearly 2 times higher than in 2015, with the total capital value of $US 4.9 billion, according to the Ministry of Planning and Investment (MPI), the disbursement rate is low, equaling 81.4% compared to the same period last year, with $US 2.68 billion. This situation has not only caused the increase of ODA repayment interest while the capital was untouched, but also affected the efficiency of use of capital and especially affected the development plan and strategy. In fact, ODA and preferential loans are mostly loans with interest rates and time to disburse.

Besides the reasons such as: the capital disbursement to some projects being not close to the ability to perform, the difficulties in premises clearance, the differences in the procedures of administrative management and procurement between Vietnam and the sponsors, or the institutional obstacles when Vietnam started implementing the Law on Public Investment, Law on Procurement, etc., and the reason that is mentioned quite a lot is the delay in the reciprocal capital arrangement.

According to the Ministry of Planning and Investment, the simultaneous deployment of many ODA projects with high total investment brought about the corresponding demand of reciprocal capital (average of about 20% of the total investment), which caused huge pressure to the narrow budget of central and local authorities. Many local projects have committed to arrange reciprocal capital, but put the burden on the central budget after that.

The Ministry of Transport (MOT) – one of the ministries with good ODA disbursement result also encountered some difficulties in this regard. Currently, MOT is implementing and managing 20 ODA projects from 7 sponsors with a total investment of nearly $US 10 billion, in which $US 1.6 billion is reciprocal capital. As of September 2016, MOT has disbursed 72% of foreign capital and 69% of reciprocal capital that is allocated to implement in 2016. However, the progress of the implementation and disbursement of the projects using ODA and preferential loans of MOT is currently having difficulties and obstacles, due to the lack of not only foreign capital, but also reciprocal capital. Accordingly, when the allocation of the reciprocal capital plan is much lower than the demand, it has a huge impact on the implementation progress of the projects, creating the potential for complaint by foreign contractors leading to compensation.

Speaking at the conference to hasten ODA disbursement which was held recently, Mr. Nguyen Ngoc Dong, the Deputy Minister of Transport said that, it is only 2 months from now until the end of the disbursement plan in 2016, hence the capital solutions are needed to resolve the remaining capital that required to be disbursed. Besides the proposal of arranging the ODA disbursement for delayed projects by concentrating on 1-2 key projects, instead of spreading the capital to all projects with 5-10 billion VND per project, which is not enough for clearance or construction, etc., the representative of MOT also recommended the Government to resolve the reciprocal capital problems for projects.

Relating to this problem, Ms. Phan Thi My Linh, the Deputy Minister of Construction, said, the conditions for beginning construction, according to the regulations, is that the premises must be available, but in fact, many projects cannot clear the premises completely. According to the representative of the Ministry of Construction, the conditions as well as the disbursement of local budget for the clearance are impacting on many projects, especially ODA projects.

The Ministry of Agriculture and Rural Development is also an agency with several projects facing problems relating to the issue of the reciprocal capital arrangements, the common issue is failing to allocate the reciprocal capital of local governments in a sufficient and timely way, leading to delayed clearance and construction.

Enhancing the administrative discipline

Sharing more information about the difficulties in the implementation of ODA projects, Ms. Phan Thi My Linh said, during the implementation of Decree No.37/ND-CP providing detailed regulations on construction contracts, the price adjustment

and contract payments provisions are specified in Decree 37, but when it is applied, the regulations between the parties involved have not been fully applied, resulting in a number of agreements not complying with the provisions of the law, creating difficulties in the contract management process.

Also according to the representative of the Ministry of Construction, the model of tri-party contract management requires the consultants of the projects to be independent, have professional ethics and legal knowledge, but many ODA projects have shown some consultants’ clear weaknesses which are their low level of competence and lack of knowledge of the regulations of the laws. This has led to the application of this model in the projects using ODA loans being difficult because the principals did not dare to delegate all the rights to the consultants, although Decree 37 has provisions on this matter.

A reason for the delay in starting ODA projects is the abilities of the Project Management Committees. Relating to this issue in the ODA projects of the Ministry of Health, the representative of this Ministry said that the project can be started when it comes into operation, but it cannot be implemented rapidly because recently, the staff of the Project Management Committees are often part-time staff with strong administrative work style. It would take about 1 to 2 years to recruit professional consultants, who are specialized in various different positions to run the projects smoothly. Considering that the project staff without experience contributed to delay the project, also emphasizing the importance of human resources in key positions could boost the project implementation schedule, the representative of the Ministry Health recommended the Ministry of Planning and Investment, the Ministry of Finance should have a mechanism to provide funds to hire good consultants right from the start of the project, so when a project is approved, it is going to be implemented quickly, this is the key point. Many opinions have agreed with the need to enhance the administrative discipline for relevant parties in order to hasten the disbursement of ODA projects in the direction of Resolution 60/NQ-CP on the key tasks and measures to accelerate the implementation and disbursement of the public investment plan in 2016, if at the end of September 2016, the disbursement rate still is not guaranteed as prescribed, capital should not be allocated anymore. Tightening this regulation will immediately set the procedure to be enhanced significantly.

The ODA disbursement has a problem that the disbursement rate is not uniform, besides a number of ministries and localities having a relatively high level of disbursements, such as the Ministry of Transport, Hanoi, Ho Chi Minh City, many ministries and localities have very low disbursement levels, including the Ministry of Health, the Ministry of Education and Training, the Ministry of Labour, Invalids and Social Affairs, Quang Ninh, Hung Yen, Tay Ninh, etc.

According to Mr. Nguyen The Phuong, to deal with the problems that a number of ministries and localities which disbursed very well, exceeding the amount of planned capital, the Ministry of Planning and Investment has reported to the Government in order to submit for the National Assembly’s approval to allow arranging funds between the projects within that province or that ministry. A project with good disbursement will continue to be focused to be disbursed and allocated the loans from other projects that are canceled or projects that are not fully disbursed.

According to the representative of the Ministry of Planning and Investment, some ODA disbursement policies are quite cumbersome, in which, the main problem is the financial mechanism for local governments to borrow ODA. Although the Ministry of Finance recommended the Government to decree, many issues are still complex. According to the re-lending mechanism, a province can borrow ODA only if it has the ability to repay. Thus, the poor provinces which are unable to repay loans cannot borrow ODA. In this regard, Mr. Hoang Hai, the Deputy Director General of Debt Management and External Finance (MOF) said, currently the Ministry of Finance proposed re-lending by local governments will be split into 5 groups, in which, the financial situation of each province should be noted to have an appropriate lending mechanism.