NA Standing Committee analyses ineffective gov't bonds

Governmenrt bonds cannot fund expanded projects

Phung Quoc Hien, chairman of the National Assembly’s Committee for Finance and Budget, worried that government bond-funded projects may be unable to raise sufficient private capital for their expansion plans.

Hien addressed the issue at a meeting on January 7 held with the National Assembly (NA) Standing Committee. He said that many of these projects had expanded in scope during the construction and planning phases.

According to the committee’s figures, total investment in government bond projects between the period of 2003-2010 skyrocketed from VND246.447 trillion ($12.32 billion), to the current VND558.654 trillion ($27.93 billion) - an increase of 226.68 per cent.

The projected budgets of almost all government bond-backed projects have increased substantially from what was originally approved. Some estimates have even been tripled or quadrupled. Government bond-backed projects are routinely expanded dozens of times, while the maximum rate considered acceptable is 20 per cent.

Not only do plans for expansion drive up the cost of projects, but the rise in labour costs and construction materials are also contributing factors.

Ha Van Hien, chairman of the NA Committee for Economics blamed the developers who were awarded these projects, saying, “They were too hasty in their estimates during the bidding process. Then during construction they have to increase the original price because of unforeseen costs. If additional capital is not raised, some of these projects may even be left half-done.”

Pham Minh Tuyen, head of the NA Deputies’ Affairs Committee also admitted a lack of funding when it came to certain construction projects, saying that additional investment will be required to finish many of them. He added, though, that more care must be taken before making such approvals.

“Some roads that were supposed to be 90 metres wide have been widened further. Some hospitals, which were supposed to contain 300 beds, have been made into 700-bed hospitals,” said Phung Quoc Hien.

If the situation is not improved, projects may simply be left undone, Hien said, adding that the total investment in government bond-backed projects could surpass the projected VND558.654 trillion ($27.93 billion) by 20-30 per cent.

He also recommended that the government should not licence new projects before a thorough investigation into this problem.

Minister of Planning and Investment Vo Hong Phuc said that any concerned ministries should carefully scrutinise pending projects and that contractors for projects that had been expanded should be forced to seek private investment.