The Government Office has just issued Notice No.184/TB-VPCP, dated May 17, 2023, on the conclusion of Deputy Prime Minister Le Minh Khai on inspecting, urging, and removing difficulties and speeding up disbursement of public investment capital in 2023.
Currently, disbursement of such investment remains at a slow pace, affecting the country’s efforts in socio-economic recovery and development.
The reasons behind the slow disbursement have been reported by the ministries and localities. They mainly include poor preparations of investment and projects, leading to projects not being eligible for capital allocation. In addition, procedures for approving investment policies and investment projects take a long time, especially those for design approval, bidding, and site clearance.
“The update, review, and announcement of construction material prices and construction price indexes have failed to reflect market changes in a timely manner, while fuel and construction material prices have increased, raising costs for businesses and negatively affecting construction investment activities,” the Notice stated. “Difficulties in compensation and site clearance are slow mainly due to problems in land price determination, compensation, support and resettlement plans, and also because of an overlap between land use planning and construction and sector planning.”
Last month, Prime Minister Pham Minh Chinh promulgated Directive No.08/CT-TTg on accelerating allocation and disbursement of public investment to reach 95% of the total yearly plan.
The Ministry of Planning and Investment (MPI) is now coordinating with relevant agencies to review state-funded projects that have completed investment procedures and are eligible for assignment of medium-term public capital plans for the 2021-2025 period.
The MPI is also coordinating with the Ministry of Finance (MoF) to guide implementation of capital between the Programme on Socio-economic Recovery and Development and the medium-term public investment plan for the 2021-2025 period, ensuring the disbursement of all capital in 2023.
One of the key reasons behind Notice 184 and Directive 08 is that public investment disbursement in some localities is facing difficulties, hindering economic development.
For example, disbursement in Ho Chi Minh City in the first two months of 2022 was tantamount to only 1% of the total allocated funding (at about 3 billion USD), despite documents already being issued to speed it up.
Most of Ho Chi Minh City’s public investment has been spent on key infrastructure projects or regional links such as Ring Road 3, National Highway No.50, An Phu Intersection, and a connecting road from Tran Quoc Hoan Street to Cong Hoa Street.
However, in an inspection in March, Ho Chi Minh City Department of Transport and Communications found that the three latter projects were being built too slowly, even though they have been arranged with sufficient capital.
Meanwhile in the central province of Nghe An, as of March 20, the province has disbursed more than 282 billion VND (12.26 million USD) in public investment, equivalent to 5.06% of the yearly plan. However, six districts and 34 units, authorities, or investors have not yet seen disbursement. In 2023, this province has been allocated over 9 trillion VND (392.7 million USD) from the state coffers.
Tightening disciplines
DPM Le Minh Khai ordered that the chairmen of people’s committees of provinces and cities be fully responsible for allocating and disbursing public investment capital, and for how their staff perform in implementing the projects.
The government has also requested ministries and localities to consider the acceleration of the disbursement of public investment as an important political task in 2023. They must “focus on thoroughly overcoming the subjective causes that slow down the project implementation progress”, while “The results of disbursement are the basis for evaluating, rewarding, fostering, and promoting officials, as well as punishing those that fail to complete the disbursement task in 2023 due to subjective reasons”.
The government has also ordered that speeding up disbursement must go with ensuring the quality of projects and the effective use of public investment capital.
“We must tighten discipline in the disbursement of public investment capital, and immediately and proactively review and evaluate the disbursement ability of each project so as to have a plan to transfer the capital from projects that are slow to disburse to well-disbursed projects that lacks capital according to regulations,” DPM Khai stressed.
Notably, the government said it will “strictly punish irresponsible investors who slow down progress of projects.”
It has requested that the project investment preparation and implementation must be carried out as soon as possible, such as site clearance, relocation of related technical infrastructure works, bidding, contractor selection, contract assignment, and appraisal of capacity of project management boards.
“At the same time, there must be sanctions to strictly punish investors, project management boards, organisations, and individuals who intentionally cause difficulties, obstruct, and irresponsibly slow down the progress of capital allocation, capital adjustment, project implementation, and disbursement of public investment capital,” Notice 184 stated. “It is needed to promptly replace cadres, civil servants, and public employees who are weak in capacity and involve in negative acts. It is also a must to resolutely handle negative acts in public investment management.”
Revamping PPP framework
The government recently has tasked ministries and localities nationwide to deploy feasible solutions to get rid of difficulties for projects implemented under the public-private partnership (PPP) format. The move is aimed to reform the way the country is trying to attract private investments into PPP projects in line with international practices.
Specifically, Deputy Prime Minister Tran Hong Ha assigned the MPI to coordinate with relevant ministries in assessing the deployment of the Law on Public-Private Partnership Investment promulgated in 2020 as well as in reviewing and identifying all impediments during the implementation process of relevant documents on guiding the implementation of this law. As such, they must propose amendments and supplements, and then report to the prime minister in Q2 of 2023.
Ministries and localities are required to propose solutions to attract international financial funds and foreign capital sources to partake in PPP projects in Vietnam and report to the prime minister in Q2 of 2023.
Especially, they are also ordered to study sources of payment capital for enterprises implementing the PPP projects in the case of the revenue sharing mechanism is applied and contracts are terminated ahead of time. This work must be reported to the prime minister in Q3 of 2023.
The government also assigned the MoF to combine with relevant ministries to review and identify difficulties in the implementation of relevant legal documents on financial management of PPP projects and on the use of public assets to pay for investors with projects constructed under the form of build-operate contracts. They are also required to propose amendments and supplements, and then report to the prime minister in Q3 of 2023.
After receiving reports from ministries and localities, the government is expected to enact a new document on PPP investment, making it more favourable for private investors to engage in PPP projects in the country.
At the Vietnam Business Forum organised in Hanoi on March 19, the VBF’s Infrastructure Working Group (IWG) underlined need for the formulation of sector specific policies to enable long term and large-scale energy and infrastructure investment.
“The law on PPP investment is not working - no project has been implemented and financed on a project (non-recourse) basis under this law. A thorough review and amendment of the law is required urgently,” the IWG stated in a proposal sent to the government. “Guidelines and best practice negotiation should be open for project contracts in each specific sector, which should be devised with the goal being a bankable solution for BOT project development.”
When it comes to tendering, the IWG suggested that in addition to an open bidding process which has not been successful under the law on PPP investment and the Law on Investment, “legal frameworks and policies should be allowed for competitive bidding process on selection of investors for PPP and non-PPP projects based on investors’ capabilities.”
Pan-Asia law firm Dezan Shira & Associates has also highlighted some challenges on PPP investments in Vietnam.
“Firstly, the disbursement of state funds can be difficult, especially given that overlapping regulations in some legal documents can deter special-purpose entities from receiving investment capital from the government,” said the firm. “Secondly, dispute settlement may be difficult for foreign investors given that the process usually goes through Vietnamese courts instead of international arbitration centres. And thirdly, lengthy and unclear administrative procedures need to be completed before investment and operation. However, the government has already enacted several measures to improve the business environment, which is an encouraging sign.”
In Vietnam, PPP projects currently often refer to infrastructure development such as roads, expressways, bridges, water, electricity, and healthcare, among others.
