More Effective Management of Investments

According to investors, capital allocation of 2010 has been implemented earlier than last year, especially Government bond with three months ahead of previous years.

By early July, total social investment capital posts at VND390,100 billion, 13,4 % more than the same period last year including State capital of VND166,800 billion, 42.7 % of the total capital and up 17.8 % compared to the same period last year.

The success is due to the early allocation of investment capital by central and local authorities, especially Government bonds with three months earlier than previous years.

However, there remain certain shortfalls to be overcome in the last six months of the year to implement successfully the Decision of the Prime Minister on increased management of State investments and construction in 2010.

Still indiscriminate investments

According to Ministry of Planning and Investment, the allocation of State investment capital in early months of this year has been implemented in conformity with the Decision of the Prime Minister. However, there are still indiscriminate investments to projects without adequate formalities and failing to focus on key projects.

Certain provinces have not allocated all Government bonds such as Thai Nguyen still withholds VND28 billion of communication projects, Lao Cai still keeps back VND7 billion for communication projects and VND10 billion for water conservancy projects, Nghe An VND7 billion for communication and water conservancy projects.

The Prime Minister has asked ministries and provinces to transfer capital from projects of slow disbursement to those of high disbursement.

However, few transfers have been made by ministries and provinces, Except the case of Ministry of Agriculture and Rural Development, VND85.4 billion of 30ojects have been transferred to 11ojects and VND80 billion worth of Government bonds reduced from seven projects to increase to seven other projects.

Nine out of 63 cities and provinces (Lai Chau, Lang Son, Tuyen Quang, Haiphong, Quang Tri, Binh Thuan, Binh Phuoc, Cao Bang and Ho Chi Minh City) have reduced 92 projects of State capital and postponed one project to increase capital for 97 projects with increased capital of VND401 billion

In some provinces, the number of projects receiving additional capital is bigger than those with capital reduced.

Though the disbursement in the first six moths was higher than the same period last year with VND53,040 billion, or 42.3 % of the plan (27.8 % by central government and 50 % by provinces), it was mainly advanced capital (not yet used) making up 45 % of the disbursement and payment for projects of previous year. The number of completed projects, especially new projects remains very low.

According to Ministry of Planning and Investment, the slow implementation is due to higher price for land clearance stipulated by Decree 69/2009/ND-CP causing confusion for investors.

In addition to weak financial capacity, shortage in experience, equipment and human resources of contractors and consultants, inadequate coordination between investors and local authorities and poor management have affected the project implementation.

Besides, as the biddings are done by investors, State organizations cannot follow the project implementation.

Reinforced measures

To dismantle obstacles and accelerate investments and disbursement in the second half of 2010 and refrain from shifting big capital to the next year, the government should review investment management and simplify formalities to encourage investors in business activities.

Ministry of Planning and Investment has submitted to the government guidance on Public Investment Law. If the Law is approved by the National Assembly, it will create a system of investment law and at the same time overcome shortfalls in investment planning and management.

Experts also believe that together with the expansion and perfection of the legal framework and investment policy in the forms of BOT, BO, BT, PPP. The acceleration of public participation will attract more domestic and foreign resources for infrastructure development.

To ensure State budget and government bonds for project implementation and efficiency, Ministry of Planning and Investment has suggested to withdraw capital from projects unable to complete formalities or by June 30, 2010 failed to allocate capital in compliance with the guidance of the Prime Minister, Ministry of Planning and Investment will then propose the transfer of capital to other projects to accelerate investments.

The government also asked Ministry of Planning and Investment to report to the Prime Minister the amount of remaining government bonds to transfer them to needed ministries and provinces.

Ministry of Planning and Investment has proposed to the government that by September 30, 2010, if ministries and provinces could implement only 60 % of the budget and government bonds planned for 2010 their capital would be[VTC1] cut back and transferred to those have completed 90 % of the plan.

By January 31, 2011, if ministries and provinces fail to disburse their planned capital, the remaining will be withdrawn back to central budget and distribute to other projects without delaying as in the past years.

For their parts, ministries and provinces should review all their plans and projects to make them suitable to socio-economic development of the localities and nation-wide.

Concerning distribution of State budget and government bonds, Ministry of Finance should review regulations on advanced capital in fiscal year, avoiding the misuse of advanced capital in other purposes against the law.

Tags: invest in Vietnam, Vietnam FDI, Vietnam investment