ODA capital efficiency: Looking back and looking forward

In the first 9 months of 2024, Vietnam has achieved certain results in managing and using ODA capital. However, besides the achievements, there are still many challenges in allocating and disbursing this capital.

Disbursement is still "sluggish"

As of September 30, 2024, the total amount of foreign capital that has not been allocated in detail is more than VND 2,000 billion (out of the total approved VND 20,000 billion). Capital allocation has not achieved the expected progress mainly due to many projects not completing investment procedures according to regulations, problems in equipment price appraisal and ineffective bidding mechanisms.

Regarding disbursement, the Ministry of Finance's report shows that from the beginning of the year to September 30, 2024, only more than VND 4.8 trillion has been disbursed, reaching only 24.33% of the plan assigned by the Prime Minister. This situation is quite similar to the same period in 2023 (also reaching only 28.37%)... Such figures show that due to many different reasons, problems related to ODA capital, preferential loans from foreign donors, especially in disbursement, have existed for a long time without being resolved.

There are many factors that have caused the progress, allocation and disbursement of ODA capital to fall short of expectations. Among them, it can be affirmed that the issue of complicated and time-consuming procedures is among the leading causes. For example, the procedures for approving contract changes and disbursing ODA capital are often not synchronized, making it difficult for projects to coordinate between relevant agencies. Or the international bidding process to select consulting contractors as required by some donors is also prolonged, affecting the progress of other construction packages.

In addition, the differences and inconsistencies between Vietnam's legal regulations and the technical requirements of the sponsor also lead to difficulties in unifying and implementing the project. The differences between Vietnam's regulations and international contract models such as FIDIC (a contract issued by the International Federation of Consulting Engineers, used by many countries and international financial institutions) give rise to many additional procedures, affecting the payment progress and project completion.

The untimely preparation and handover of the site also affects the construction process; the limited management capacity of project owners also significantly affects the ability to implement projects effectively and on schedule. Some sponsors intervene quite deeply in the project implementation process by giving opinions and requesting adjustments to many technical stages, causing additional procedures and prolonging the project progress.

Metro Line 1 project in Ho Chi Minh City begins trial run

At the mid-term press conference on October 17, Mr. Sugano Yuichi said that in Japan's fiscal year (April 2023 to March 2024), JICA signed loans with a total value of up to 102.2 billion yen (about 678 million USD), the highest figure since 2017. At the same time, JICA's technical cooperation projects in Vietnam reached a scale of 5.2 billion yen (about 35 million USD), the largest in the world in the same fiscal year. In addition, JICA's non-refundable aid to Vietnam reached 1.1 billion yen (7.5 million USD) in committed capital.

High expectations from the Law on Public Investment (amended)

In the current investment scale, ODA capital accounts for a small proportion, however, the projects all focus on essential areas for the local community. Therefore, if implemented more effectively, it will create positive spillovers, contributing to socio-economic development. To improve the efficiency of ODA capital use and resolve long-standing problems and shortcomings, it will be necessary to implement many synchronous solutions. In particular, strengthening decentralization and delegation of authority; enhancing coordination between agencies to advise, negotiate and approve loan agreements is very important. Along with that, improving the quality of project preparation, making capital plans close to the reality and capacity of investors, and implementing site clearance well will help projects to be implemented on schedule.

In addition, simplifying project adjustment procedures, perfecting regulations on non-refundable aid projects, promoting coordination with donors to promptly resolve problems, issuing specific regulations and instructions to maximize harmony between Vietnamese and donor regulations, adjusting legal regulations to approach international standards such as the FIDIC contract model, etc. are also issues that need great attention.

The good news is that in the draft Law on Public Investment (amended) to be submitted to the National Assembly, many contents have been amended and supplemented related to the issue of management and use of ODA capital and preferential loans from foreign donors. For example, the draft proposes to allow foreign capital plans allocated by the central budget to be disbursed independently, not depending on the plans or budget estimates of other capital sources. This is to increase flexibility and efficiency in the management and use of foreign capital, especially ODA capital and preferential loans from international donors. This is a new point compared to the current law, when there are no specific regulations for this independent disbursement.

Regarding decentralization of authority, the draft proposes to decentralize authority and simplify the procedures for approval, adjustment of investment policies, and investment decisions for projects using ODA capital, similar to those for projects using domestic capital. This helps localities and investors to be more proactive in project implementation, reduce administrative procedures, and increase transparency.

Assessing the draft Law on Public Investment (amended), Mr. Sugano Yuichi, Chief Representative of JICA Vietnam Office, said that the amendments are quite positive.

“Previously, some provisions in Vietnamese laws were not consistent or not in sync with those of donors, leading to difficulties in implementing necessary procedures, as well as delays in the implementation process. Therefore, we expect and also realize that in this revision, the problems related to the inconsistency between Vietnamese domestic laws and those of donors will be resolved,” said Mr. Sugano Yuichi, adding: “We see these revisions as quite positive, aiming to create more favorable conditions for ODA projects as well as projects using foreign loans. We are also closely monitoring the progress and content of the revision of the Public Investment Law.”

Source: https://thoibaonganhang.vn/hieu-qua-von-oda-nhin-lai-va-huong-toi-156906.html