Disbursement of public investment as of date is much lower than expected. How can you assess and explain the performance of public investment?
|Deputy Minister of Planning and Investment Tran Quoc Phuong |
Public investment disbursement is always a concern and contributes significantly to socioeconomic development. Slow disbursement of public investment in the first months of the year is the normal situation every year caused by numerous objective and subjective reasons.
The Ministry of Planning and Investment (MPI), which is the agency providing general advice on plans for public investment, has closely followed up and updated the situation of public investment projects to report to the government and prime minister, as well as timely propose measures and adjustment to ensure the best results of public investment disbursement.
In 2020, public investment disbursement reported an impressive performance and contributed remarkably to GDP growth at 2.91 per cent, which was also an impressive growth in the context of the pandemic. The role of public investment this year is the same as one of the major driving forces for socioeconomic development, while other areas like manufacturing, services, retail, and tourism are being hit seriously by the COVID-19 pandemic.
However, it is a big difference between the performance of public investment disbursement last year and this year. The disbursement in the first seven months of 2021 accounted for 36 per cent of the yearly plan only, lower than the last year’s result (40 per cent). Based on the report and proposal of the MPI, the government issued Resolution No.63/NQ-CP dated June 23 on major tasks and measures for strengthening economic growth, public investment disbursement, and sustainable export in the last months of 2021 and early 2022.
The government has sent a note to leaders of ministries, government agencies, and localities to remind them to try and boost public investment disbursement. Thereby, we hope that public investment projects will be developed more drastically to achieve 60 per cent of the yearly plan as the end of September.
The health crisis hit the economy during the first and second quarters of 2020, but why was its performance then better compared to this entire year?
There are some new factors hitting the country’s growth this year. Public investment is one of the elements of the economy, also facing a lot of challenges caused by the coronavirus like transportation of materials and equipment for construction. Moreover, numerous projects have to halt or delay for few months due to social distancing, especially in localities that are being hit by the pandemic for a few months.
Employees who are working in public investment projects, including experts and consultants, have to follow the social distancing requirements of the government. The number of localities hit by the coronavirus and applied social distancing is much more than last year, so developing projects is facing a lot of challenges, especially in such localities.
Another reason is the increase in input costs and the price of materials. So investors and main contractors have to change suppliers.
Additionally, the infection outbreaks over the last four months have dispersed and increased the attention and direction of the government and local authorities. So all resources like time, people, and money have been concentrated to fight against the pandemic, partly affecting implementation of socioeconomic development goals, including public investment disbursement.
On the other hand, the third quarter of 2020 was a time of recovery of the economy in sectors like manufacturing, services, tourism, and wholesale and retail, while today we are suffering the most damage ever caused by the health crisis. They are all new factors that are impacting the disbursement of public investment this year.
At the end of this year, how will disbursement pan out and what are the solutions to ensure the best possible result?
The trend that public investment disbursement is boosted at the end of every year has become so familiar to be a rule. However, 2020 is much different from 2021, because 2020 was the last year of the mid-term public investment plan from 2016, so all investors and contractors wanted to accelerate the process to successfully accomplish their projects. So the disbursement in 2020 reported an impressive result over previous years.
In 2021, this is the first year of a new mid-term public investment plan towards 2025, so they usually spend a lot of time on preparation for all projects over the next five years. New projects for this term are waiting for the approval of the National Assembly, they may start to build in the next few months and about VND70 trillion ($3 billion) will be poured in soon.
Regarding the performance of public investment disbursement, we can see good reports, especially key projects of such major investors as ministries of transport; agriculture and rural development; public security; defence; and some localities. These have contributed a lot to the general disbursement of the whole country.
However, small-sized projects should also accelerate soon, because as of September 30 capital will be transferred if projects cannot implement 60 per cent of the plan. Last year, about VND8 trillion ($347.8 million), which could not be disbursed, was transferred. However, when an investor offers to decline plan, we need to find another investor who wants to receive more capital, to match with the requirement of transferring. So we will conduct a report as of September 30 and submit it to the prime minister to make new decisions and propose solutions.