Construction delays prompt public financing shake-up

Construction delays prompt public financing shake-up, Illustration photo

At the end of September, the Ministry of Planning and Investment (MPI) received requests from 15 ministries and agencies and 23 localities to refund $946.6 million in 2021’s central budget, while six localities asked to receive an additional $71.5 million of total public investment.

A week later, nine ministries and agencies, including the Ministry of Industry and Trade and the Ministry of Natural Resources and Environment, asked to refund public investment due to the poor performance of projects.

“More than $350 million has already been requested, making up 44 per cent of total capital plan assigned by the prime minister,” said Truong Hung Long, director general of the Ministry of Finance’s Department of Debt Management and External Finance.

Explaining the reason for the refunds, Le Truong Giang, representative of the Vietnam Academy of Science and Technology said, “Social distancing rules over past months halted all construction projects and a lot of administrative procedures.” The academy has also submitted documents to refund 89 per cent of its $94-million capital plan of the year.

Director of Ho Chi Minh City Department of Finance, Pham Thi Hong Ha, said that the health crisis paused socioeconomic and construction activities for three months in the southern region. Moreover, most of these activities involved foreign factors like imported machines and devices, experts, and contractors, rendering the execution too complicated.

Most project managers complained that official development assistance (ODA) procedures and their management were also too complicated. The disbursement rate of ODA capital, as well as other foreign loans, of Ho Chi Minh City was just $70.5 million, equivalent to 12.45 per cent of the total allocated sum.

In the view of the Ministry of Agriculture and Rural Development, all projects under its management in localities with social distancing restrictions could not progress during the last few months. In addition, the prices of raw materials increased significantly – especially steel, which has become seven times more expensive compared to the time when contracts were signed.

Meanwhile, disbursement of public investment from foreign loans made up 45.5 per cent of total capital allocation of the year’s total of $123.7 million.

According to the MPI, total disbursement in the first nine months reached $9.5 billion, equivalent to 47.4 per cent of the yearly plan, much worse than the on-year 56.33 per cent rise in the same period last year. Of this, disbursement of local capital reached 51.71 per cent, and foreign capital 12.69 per cent.

As of September 30, only four ministries and 11 localities reported a disbursement performance of 60 per cent and more, while 45 ministries, agencies, and 52 localities disbursed less than 60 per cent of the yearly plan. The Ministry of Transport (MoT) was one of the few ministries disbursing 62.5 per cent of the yearly capital allocation, meeting the requirements of the government in Resolution No.63/NQ-CP from June on key tasks and solutions to boost economic growth. The ministry had accelerated transport projects across the country in the last quarter of the year.

Such projects include the North-South Expressway and two projects to improve runways at Tan Son Nhat and Noi Bai international airports, which are the best-performaning projects for the MoT in the first nine months. These projects will also be key factors for public investment disbursement in the sector in the remainder of the year.

“If the weather is not too hard on us in the last quarter, we will accomplish the public investment plan that the MoT assigned to the project,” said Nguyen Vu Quy, director of Ho Chi Minh City’s Road Project Management Unit.

Meanwhile, Hong Ha from Ho Chi Minh City Department of Finance said that the city’s people’s committee “will adjust public investment from projects that have had bad disbursement rates, and shift these funds to the better-performing ones that need more capital and may develop more quickly.”

Ministries and agencies are being urged to complete disbursement of public investment capital as allocated by the MPI or otherwise face penalties. However, due to the pandemic, many projects could not be implemented, leading to the return requests.