Disbursement on capital borrowed from aboard: How to solve difficulties?

Many projects have been allocated capital plans but are having to carry out project adjustment procedures. Source: Internet

No volume for disbursement

According to the Ministry of Finance, the biggest problem that caused the disbursement rate of ODA loans and concessional loans to be low is that there is no volume of completed construction, so there is no payment record leading to impossible disbursement.

The reasons include the impact of the Covid-19 pandemic, natural disasters and floods. Even in areas less affected by floods, the Ministry of Finance found that progress in implementing and submitting applications of capital withdrawal is still slow. This needs to be further clarified and more specific about the responsibilities of each stage. Additionally, there are many projects that have been allocated capital plans but have to implement project adjustment procedures (such as extending project implementation time, extending disbursement time, adjusting allocation of projects item using capital), adjusting loan agreements, so those projects do not have enough basis for disbursement.

Some projects have faced problems with the mechanism, so the allocation/re-lending to allocate capital for implementation in 2020 (for example: projects of the Vietnam Expressway Development Corporation (VEC) which borrowed from the Japan International Cooperation Agency (JICA) has not been approved by the competent authority to switch from re-lending to allocation).

Another problem is that, according to the special account disbursement method of some donors such as the World Bank (WB), Asian Development Bank (ADB) and JICA, many project owners have delayed implementation of returning documents for withdrawing from special accounts, sponsors approve dossiers of withdrawing supplementary funds in special accounts for small expenditures. Besides that, the preparation of capital withdrawal documents of project owners is not thorough, including incomplete, inaccurate, and inappropriate expenditure plans.

December is the peak month for concentrating to complete payment procedures. In particular, documents and evaluation sheets are made to determine the completed basic volume, and documents sent to the State Treasury to control expenditure, make payment notes, disbursement of capital withdrawal and closing the state budget settlement book.

Currently, the Ministry of Finance is working with the Ministry of Justice and relevant authorities, as well as the Office of the Government, to complete the draft Decree amending Decree No. 97/2018/ND-CP dated June 30, 2018 about on-lending ODA and foreign preferential loans of the Government, ensuring that the Decree after being revised, will simplify the process and procedures for appraisal and signing of on-lending contracts.

The ministries and sectors need to immediately report in a timely manner, if the capital plan must be adjusted within the units or if the total investment is increased, then report it to the Prime Minister. If the project ends in 2020, it needs to implement project adjustment and capital withdrawal procedures, it is necessary to promptly report to the competent authority to ensure the appropriate time for withdrawal. Ministries and sectors need to direct project management boards that have completed workloads early to the State Treasury to control expenditure, and send to the Department of Debt Management and External Finance, and donors for implementing disbursement procedures, ensuring recording of revenues and expenditures as well as disbursement procedures.

Timely reporting

To promote the disbursement of this special capital, as 2020 is coming to an end and will be a premise for 2021, the Ministry of Finance has proposed to the Government a number of solutions such as: proposing ministries and sectors, project owners to be responsible for urgently completing the procedures for investment, construction, migration and resettlement, and site clearance to implement the project; to completely handle the shortcomings and problems of large investment projects, focus on accelerating the disbursement of investment projects which have disbursement potential, projects that have completed investment procedures, and bidding, immediately implementing the signing of bidding packages with a "no objection" opinion of the sponsor.

Additionally, to strengthen the capacity of implementation of ODA projects at the governing body, investor and project management board levels, to ensure that the project management staff are capable and qualified. The ministries and sectors are also responsible for allocating enough reciprocal capital to pay in accordance with the assigned estimates; coordinate with the Ministry of Planning and Investment and the Ministry of Finance to solve problems.

The Ministry of Finance also requested donors to review and reduce unnecessary procedures, and speed up the approval time for issues that require no objection. For projects in the recruitment stage of consultants to set up total investment, it should have solutions to supervise the quality and progress of consultants, avoiding problems and delays that affect project implementation.

For proposals on cutting capital plans, ministries and sectors must determine which projects should be cut. Also, it is necessary to clarify which projects are completely disbursed in 2020, which projects can only partially disburse, coordinate with the Ministry of Planning and Investment to determine the amount of capital that has been allocated in the 2016-2020 period and the actual disbursed capital. If there was a shortage of capital and it is still available for disbursement in the following years, it must be proposed to include in the medium-term plan for the 2021-2025 period and the investment capital plan of 2021.

Regarding matters around adjusting investment policies and loan agreements, for programs and projects requiring adjustment of investment policies, the Ministry of Finance requests ministries and sectors to report to the Ministry of Planning and Investment to submit to the Prime Minister for approval of the investment adjustment policy. On the basis of the Prime Minister's decision on the investment adjustment policy, the Ministry of Finance will coordinate with the ministries and sectors in reporting to the Prime Minister on the adjustment of the time limit for disbursement and capital allocation under the loan agreements already signed and other adjustments to the loan agreement (if any) in accordance with the regulations, complying with the Law on State Budget and the Law on Public Debt Management.