Disbursement of public investment: Can "sprint" be effective?

Many projects implemented from public investment funds are delayed due to many reasons. (Image: Ben Thanh - Suoi Tien metro project (HCMC)). Source: Internet.

Disbursement reached 62% of estimate

Public investment is one of the drivers of economic growth. Total public investment in 2017 is about VND357 trillion. However, disbursement of this source of funds in reality has many difficulties and so far, now the 2017 year plan has almost finished, the disbursement of these funds has not really achieved expectation.

As reported by the Ministry of Finance, disbursement of capital construction investment in 11 months of 2017 only reached 62.4% of the estimate. In particular, state budget investment reached 67.9% of the estimate. Government bond disbursement was about 6.4 trillion VND, equaling to 17.7% of the estimate (adjusted budget according to Resolution No. 49/2017/QH14 of the National Assembly was 35,966 billion VND). Compared with the budget assigned by the Prime Minister, 32.8% of the budget is allocated to the Prime Minister, compared to 46.6% in the same period of 2016. In addition, the government bond funds planned for 2016 will be transferred to 2017 in accordance with the resolution of the National Assembly. Disbursal up to now reached 6,900 billion VND, equivalent to 40% of the transfer (17,280 billion VND).

According to the Minister of Planning and Investment Nguyen Chi Dung, although the state budget plan (excluding government bonds) this year has been delivered right from the beginning of the year and reached 93% before 31st December, but with a low disbursement rate. Government bonds are slow and do not have enough time to disburse. In addition, Minister Nguyen Chi Dung pointed out many other causes such as the Environmental Impact Report take a long time and some problems have not been removed in time. Procedures after the plan was assigned have taken a lot of time, such as; completion of appraisal, approval, bidding, selection of contractor, finalization of payment documents, and appraisal at the treasury etc. In addition, the investor and the Project Management Board of the project are not decisive in urging and directing project implementation and settlement. Objectively, it is the ground clearance work that has encountered many difficulties due to adverse weather conditions. such as Rain, storms, and floods lead to the slow construction progress, and many projects are stagnant and not conducive to volume of payment and slow disbursement.

In addition to the above reasons, according to economist Le Dang Doanh, one of the causes for concern is that the legal framework for public investment makes it difficult for ministries and public officials to implement high risk public investment. For fear of being blamed for neglect and risk, the ministry is very careful, even extrusion leading to slow disbursement rate. Therefore, there is a need for a comprehensive reform of public investment and the implementation of the new Public Investment Law to promote public investment.

Is there a growth effect?

According to the Government's plan, in 2017, investment capital for development of state budget disbursement will reach 84% of the plan approved by the National Assembly, of which state budget capital is estimated at about 92%, and capital of government bonds estimated at about 30%. Thus, the Government does not aim to disburse 100% of public investment allocated from the beginning of the year, and with this target, from now until the end of the year the pressure is on disbursement of investment to decrease but achieving the goal is a very difficult task and may affect the economic growth in 2017.

Prof. Dr. Dang Dinh Dao, former Director of the Institute of Economic Research and Development, National Economics University (Hanoi), said that with public disbursement of more than 60%, compared with expectation of GDP growth rate of 6.7%, surely slow disbursed public investment slow will affect growth, because now there is not much time. Many international organizations forecast Vietnam's GDP to be 6.3-6.4% and the actual occurrence could be as predicted. According to economic expert Nguyen Minh Phong, the Government has recognized slow disbursement of public investment as one of the shortcomings of 2017; this issue was the government "push" from the beginning of the year but not much has change. The disbursement of public investment has met the target, according to expert Nguyen Minh Phong, it is difficult to predict because the project has completed procedures that have not been announced. So it is unclear what percentage can be reached at the end of the year. Failure to complete or get about 90% of the growth dynamics, as well as the spillover of public investment, means that investment from the budget will be reduced and reduce the role of state management and economy, not to mention the affect it can have on employees the incomes at the end of the year.

Prof. Dr. Dang Dinh Dao said that the allocation and disbursement of public investment should be reviewed. Because if we keep trying to speed up the disbursement process, how to achieve the target will affect the quality of using the capital and the quality of the works. And although this may help boost GDP growth to 6.7%, growth in quality will not be guaranteed. In cases where we "make good use of the capital”, 70% or 80% are acceptable, not necessarily 90 or 100%. “We often get into trouble at the beginning of the year, and at the end of the year. The work is usually done at by the end of the year, opening the door, fearing that quality is not ensured in this direction", said Dr. Dang Dinh Dao.

On solutions to promote public investment in the future, according to Prof. Dr. Dang Dinh Dao, with the experience of disbursement of public investment in 2017, from 2018, the Ministry of Planning and Investment Finance needs to review the projects, from the investment efficiency of the projects to early allocation and implementation of the rhythmic, fast. The review of each project is also to find problems, evaluate each project of in each locality, each sector to draw experience, avoid investment spread, widespread, and avoid running the criteria, waste, not effective. It is time to go in depth, attach importance to quality growth and quality of investment. Public investment is mainly from the budget, so more attention should be paid to efficiency and quality.