Accelerating ODA disbursement is urgent task

11:03 | 03/12/2016 Economy- Society

(VEN) - At a recent meeting in Hanoi, Deputy Prime Minister Pham Binh Minh affirmed the great urgency of accelerating the disbursement of official development assistance (ODA) loans.  

The amount of ODA and preferential loans disbursed in the first nine months
of this year equaled just 81.4 percent of that in the same period last year

The price to pay for slow disbursement

According to Deputy Minister of Planning and Investment Nguyen The Phuong, ODA and preferential loans committed for Vietnam in the first nine months of 2016 totaled more than US$4.9 billion, 1.8 times higher compared with the same period last year. However, data from the Ministry of Planning and Investment (MPI) show that the amount of ODA and preferential loans disbursed in the first nine months of this year, nearly US$2.7 billion, equaled just 81.4 percent of that in the same period last year, US$3.3 billion. Deputy Minister Phuong said the ODA disbursement result of 2016 could hardly reach the level achieved last year, which was US$4.65 billion.

According to the MPI, the disbursement of ODA loans in the first nine months was slow and unequal between ministries, sectors, and localities. The amount of ODA loans disbursed into the transport sector, Hanoi, and Ho Chi Minh City was much higher than into other sectors like health, education and training, labor, invalids and social affairs, and localities such as Hung Yen, Ba Ria-Vung Tau, and Quang Ninh.

Large-scale projects topping the list of ODA disbursements include the Ho Chi Minh City urban railway project (Ben Thanh-Suoi Tien), the Hanoi pilot urban railway project (Nhon-Hanoi Railway Station), and the Mekong Delta transport infrastructure development project. Meanwhile, many projects have shown stagnancy in ODA disbursement, with examples including the construction of the Vietnamese-German University, the upgrade of the Can Tho University, and strengthening weather forecasting and early warning systems under the Vietnam-Managing Natural Hazards Project.

In the opinion of international experts, the slow disbursement of ODA and preferential loans, for any reasons, will adversely affect Vietnam’s reputation and opportunities. Vietnam has become a middle-income country and has received less nonrefundable aid and preferential loans. The country has to borrow commercial loans with higher interest rates instead. Therefore, the tardiness in ODA disbursements may increase charges and burden to the country.

Sharing this opinion, Deputy Prime Minister Pham Binh Minh, Head of the National Steering Committee for ODA and Preferential Loans, said slow disbursements not only extend the time for implementing projects but also increase their expenditures. Specifically, if an ODA project is delayed for one year, its expenditure will increase by 17 percent of the loan, and if the project is delayed for two to three years, its expenditure will increase by 50 percent of the loan. Therefore, accelerating ODA disbursement is an urgent task.

Comprehensive measures needed
Rustam Ishenaliev, Head of the Project Administration at the Asian Development Bank in Vietnam, attributed slow ODA disbursements to the stagnancy in getting projects started. According to him, it takes too much time, from eight months to a full year, for Vietnamese state authorities to approve loan agreements. Moreover, the incompatibility of some laws and decrees makes it difficult to develop projects and reclaim land.

Apart from these reasons, the MPI indicated some other factors leading to slow ODA disbursements, including a lack of counterpart funds, new institutional regulations, site clearance-related problems, differences in financial management and bidding procedures between Vietnam and ODA providers, the substandard quality of feasibility study reports, and time-consuming project assessments.

More comprehensive measures are required to boost ODA disbursements in the coming time, according to the MPI. Specifically, all sectors need to seriously implement the project aimed at providing directions for attracting, managing, and utilizing ODA and other preferential loans in the 2016-2020 period, Governmental Decree 16/2016/ND-CP dated March 16, 2016 regarding ODA management and utilization, and circulars guiding the implementation of this decree. At the same time, it is necessary to implement Governmental Decree 60/NQ-CP dated July 8, 2016 proposing measures to accelerate the development of ODA-funded projects, focusing on improving the legal framework for public investment management, and simplifying procedures related to the assessment and approval of construction investment projects as well as the control of spending from the state budget.

To overcome differences in financial management between Vietnam and ODA providers, the MPI requested ODA management authorities to improve the legal framework according to international standards in order to ensure effective management of public investment funds, including ODA and other preferential loans. Decentralization should be increased to give those who are responsible for managing ODA projects the authority to decide the reallocation of approved funds. Vietnam needs to seriously implement its commitments related to compensations for site clearance, supply of human resources, and provision of counterpart funds for ODA projects.

Apart from these measures, in the opinion of experts, state management authorities, project owners, and fund providers need to meet on a regular basis to review the implementation situation so that they can deal with any problems arising in the implementation process and accelerate ODA disbursements.

Chu Huynh