Map for strengthened state budget rolled out

Bui Quang Vinh

How significant is the government’s recent move to bolster management of state budget and government bond investment via Instruction 1792/CT-TTg of October 2011?

In the past years, investment using state budget and government bond capital has yielded discernible dividends. However, limitations in current investment management mechanisms have become increasingly exposed.

Expansive decentralisation and lack of synchronised measures in public investment management are to blame. Besides, massive adoption of projects led to capital distress. In the transport sector, investment plans were set on an annual basis, causing project delays. In the nutshell, investment efficiency remains low, causing huge wastes of development resources.

What are new points in Instruction 1792/CT-TTg?

Under the instruction, ministries, departments and localities are obliged to revise investment structures with retrenching public investment and diversify capital sources with emphasis placed on wooing investment from diverse economic sectors at home and abroad into viable socio-economic infrastructure projects.

In respect to investment decentralisation, the MPI will work with the Ministry of Finance in balancing investment projects’ capital sources green-lighted by the government, localities’ budget and government bond plans.

The instruction also clearly defined the responsibilities of people clinching investment decisions at projects not having clear capital sources which have caused project delays. Budget capital would further be preferably given to projects slated for completion and pressed into service before December 31, 2011, which are yet to be given sufficient investment capital and those to be completed in 2012 sourcing ODA reciprocal capital.

Capital allocation to 2012’s fresh projects must satisfy the principle that total capital amount for a project must be at least tantamount to 15 per cent of grade A projects, 20 per cent of grade B projects and 35 per cent of grade C projects’ total approved investment capital. Projects which can be converted into other investment forms could not benefit from capital allocations.

What will be largest hindrance in public investment management in the coming period?

The demand for government bond capital from 2012-2015 for National Assembly approved projects comes to around VND500 trillion ($23.8 billion) whereas just VND180 trillion ($4.76 billion) could be raised from government bond issuances, equal to around 36 per cent of total demand.

How will the MPI boost budget capital and government bond investment efficiency?

In light of Instruction 1792/CT-TTg, the MPI will review and summarise investment project portfolios of diverse ministries, sectors and localities to report to the prime minister. It will also take charge of guiding investment form conversion procedures and deciding on how to deal with projects facing delays or having progress extended. The MPI is compiling a draft decree on medium-term five year investment plan which will be submitted to the government for approval in 2012’s first quarter.

Accordingly, local governments are obliged to draw medium-term three year 2013-2015 investment project plans with clear capital sources for the government to approve, avoiding the situation the projects cannot source further investment when they were half way implemented.
Besides, the MPI will soon codify legal framework for public private partnership investment model, stimulating private equity investors to jump into infrastructure development projects.