Law’s delay proves a big drag on public investment

Delays in issuing a new public investment law are hampering state-funded projects’ effectiveness in Vietnam.

The draft law, which addresses public investment projects, such as project backers’ responsibilities, implementation stages and project management, should have been submitted to the National Assembly four months ago for approval.

“The government cancelled the plan for submitting the draft law to the National Assembly in May. I don’t know exactly when it will be submitted,” said Nguyen Xuan Tu, deputy chief of the Ministry of Planning and Investment’s (MPI) Investment Supervision and Appraisal Department.

Tu, who is in the law draft team, said the submission was delayed because the government had not finalised the law draft, even though it had been adjusted 14 times.

In March this year, the MPI introduced the draft to local economists and lawyers for comments. However, many analysts warned unclear regulations in the draft law would continue to hurt state-funded projects’ effectiveness.

Le Quoc Dung, deputy director of the National Assembly’s Economic Committee, said the draft did not resolve the fundamental issue of making state-funded project implementation transparent to prevent corruption.

Though public investment plays a key role in the economy, there is no legal framework specialised in managing public investment projects.

All public investment projects, most of them in infrastructure, are now under the regulations of different laws such as the State Budget, Construction, Land and Anti-Corruption laws.

“These are complicated and overlapping regulations, hurting the effectiveness of state-funded projects. Therefore, we need a law covering public investment implementation and management to improve the effectiveness,” said Tu.

According to the MPI, public investment accounted for 23 and 24 per cent of the total socio-economic development investment during 2001-2005 and 2006-2010, respectively.

However, local economists and policy-makers said inefficient public investment was a major reason for high inflation and the economic slowdown in Vietnam during past three years.

The MPI estimated that public investment this year would climb to $9.4 billion, accounting for 22.5 per cent of the total socio-economic development investment, or a 4.7 per cent year-on-year increase.

Martin Rama, the World Bank’s acting chief economist for South Asia, who was chief World Bank economist in Vietnam, said Vietnam needed specific public investment regulations to improve the quality of state-funded projects, especially when the government planned to expand public investment.

“Quality must be the first priority and the government needs a legal framework to improve supervision and management mechanism,” he said.

Rama said some existing regulations on procurement process and decentralisation should be adjusted.