Slow disbursement of public investment will affect 2018 GDP

Metro No.1 Ben Thanh - Suoi Tien with a total capital of 2.49 billion USD, started construction in August/2012, expected completion in 2020. By the end of February/2018, the project only reached about 50% of volume and disbursement reached over 30% of capital. Source: Internet..

Disbursement is very slow

In early April, 2018, Deputy Prime Minister Vuong Dinh Hue at the meeting with Ministry of Planning and Investing (MPI) to evaluate the disbursement of public investment capital and perfecting the system of laws on investment has emphasized, in 2018, the Government set the goal of disbursing 100% of public investment, the achievement of this goal is a challenge.

Also at this meeting, representatives of MPI said that 2016 disbursed 91.3% of public investment. In 2017, public investment was disbursed 86%, lower than in 2016, with the main reason being the introduction of new investment projects using government bonds came into effect, lead to the slow disbursement of public investment funds.

In fact, public investment funds in 2018 are in very slow disbursement. A recent report from the MPI shows that, according to the Resolution on the State Budget Plan (2018), the resolution on central budget allocation in 2018, the National Assembly passed the total investment capital for the state budget in 2018 at 399,700 billion VND, of which domestic capital is 339,700 billion VND (including government bonds of 50,000 billion VND) and foreign capital is 60,000 billion VND. Up to now, ministries, sectors and localities have deployed the plan of investment capital with the total investment capital of state budget allocated at 384.135,856 billion VND and the unallocated capital of 15,564.144 billion VND.

With regards to the disbursement of these source of funds, data from MPI indicates that investment capital from the state budget in the first four months reached 70.9 trillion VND, equaling 21% of the plan. However, according to the Ministry of Finance, disbursement of this source of capital includes VGBs of 65,021 billion VND, equivalent to 16.27% of the National Assembly's plan and 16.93% of the Prime Minister's assigned plan. According to the Ministry of Finance, the disbursement of capital by central and local ministries in the first 4 months of 2018 is lower than that in the same period of 2017, especially the source of foreign capital. Specifically, the domestic capital disbursed more than 60.464 billion VND, reaching 17.8% of the plan assigned by the National Assembly; foreign capital only disbursed more than 4.557 billion VND, only reached 7.6% of the plan allocated by the Congress. Only 6 ministries and 14 provinces have disbursement rates of over 30%, the rest, ministries, branches and localities have low disbursement, in which 19 ministries, branches and 2 localities have disbursement rates below 5%.

Deputy Prime Minister Vuong Dinh Hue recently had a meeting with three ministries (Transport, Agriculture and Rural Development, Natural Resources and Environment) on public investment disbursement situation in 2018. These are the three units that make up most of the public investment capital (accounting for over 25% of total public investment in the period 2016-2020), accounting for over 10%), but the disbursement rate of these three ministries is very low, lower than the national average.

Many concerns

Understanding the known causes, the disbursement of capital by ministries, branches and localities is low due to the investment budget of the new state budget allocated by the Prime Minister and MPI in January. To February, ministries, branches and localities basically completed the detailed allocation of capital plan for the projects. Besides, under the provisions of the Law on Investment, capital plan in 2017 was extended to 2018, on the other hand some of the funding plan in 2017 allocated additional funding late (for instance capital VGB delivery phase 3 at the end November, 2017), so the investors focused on disbursement last year.

In addition, according to the Ministry of Finance, subjective psychology implies the that time to process capital payment in 2018 is also a cause of disbursement delay. For foreign capital, the capital plan is too late, so the implementation of disbursement projects are under a slow capital plan. Some projects are still waiting for procedures for extension of disbursement from donors; some projects are in the process of payment and settlement, so disbursement progress is uneven.

According to experts, the slowdown of public investment will affect the economic growth rate. According to economist Le Dang Doanh, disbursement of public investment slows the demand for public services such as highways, ports, schools, hospitals... will be slow to put into use, which will affect the economy, not timely serve the needs of socio-economic development. The expert said that the procedures relating to public investment is very cumbersome and annoying, therefore it is necessary to quickly cut the procedures, if this problem is done soon, it will accelerate economic development efficiency and economic growth will be higher.

Commenting on this, economist Luu Bich Ho emphasized that public investment is an important resource, mainly promoting economic growth in 2018, so if this disbursement is prolonged, the economy growth in 2018 will have many limitations. "In 2017, public investment disbursement was only over 80%, but in return we have invested from the private sector and FDI. But in 2018, if the recapitalization of public investment is slow, it is unclear whether private investment will be sufficient to fill the gap. As a result of this concern, expert Luu Bich Ho emphasized that one side must carefully review each investment project in order to find out the causes and promptly handle and remove, on the other hand, policies on encouraging private investment must be done thoroughly.

According to Prof. Dr. Dang Dinh Dao, former Director of Research and Development Institute (National Economics University), slow disbursed public investment directly affects 2018 GDP, affecting the effective use of budget capital, causing many important consequences such as prolonging a project so that the works will not be put into operation on schedule. To promote efficiency in economic development, works need team capital, and that influences quality... Prof. Dr. Dang Dinh Dao stressed, there should be coordination for effective disbursement of public investment funds in 2018 and for handling slow progress projects, and 2017 funds have not been fully disbursed.

To resolve this situation, MPI suggests improving the legal framework to ensure consistency and uniformity of the legal system for investment management, promptly remove barriers difficulties and obstacles and facilitate the speed of disbursement and improve the efficiency of public investment projects. In addition, investment in infrastructure in the form of public-private partnerships (PPPs) should be mobilized, institutionalized and investment incentives in this form to be mobilized. The State budget capital shall be supplemented with a breakthrough in the construction of the socio-economic infrastructure system.