How to improve the "quality" of ODA capital flows? (part 2)

09:02, 12/22/2023

Part 2: “Barriers” in ODA capital flow

Projects from official development assistance (ODA) capital have contributed significantly to the socio-economic development of the province in recent times. However, in the process of circulating this capital flow, there are still many difficulties and obstacles that need to be resolved.

"Sluggish" disbursement

ODA disbursement is considered the slowest compared to other capital sources in Vietnam and is no exception for Dak Lak province. According to statistics from the Department of Planning and Investment, in the period of 2021 - 2022, the total ODA capital allocated to programs and projects is more than 161 billion VND, of which more than 97 billion VND has been disbursed (equal to 60.1% of the total capital).

Reporting at the recent supervision meeting of the Economic - Budget Committee of the Provincial People's Council, Head of the Investment Cooperation Department (Department of Planning and Investment) Ta Van Quang said that ODA projects managed by central ministries and branches take a long time to adjust investment policies because they have to wait for all provinces to complete procedures according to regulations. This slows down the implementation progress and disbursement of component sub-projects in Dak Lak.

For example, the Dak Lak Province Dam Repair and Safety Improvement Project (WB8 Sub-project) has been approved by the Provincial People's Council to adjust the investment policy in Resolution No. 12/NQ-HDND, dated June 24, 2022 and the Dak Lak Province Upgrading and Construction Irrigation System Sub-project under the Project to Improve Water Use Efficiency for Drought-Stricken Provinces has been approved by the Provincial People's Council to adjust the investment policy in Resolution No. 43/NQ-HDND, dated November 18, 2022. However, to date, the projects have not been submitted to the Prime Minister for adjustment by the Ministry of Agriculture and Rural Development.

Ea Quang Lake (Ea Kenh commune, Krong Pac district) was invested and built from the Dak Lak province dam safety improvement and repair project.

According to the representative of the Provincial Management Board of Investment Projects for Construction of Transport Works and Rural Development, the unit is currently the investor of an ODA project, the Sub-project to upgrade and build an irrigation system to serve irrigation for upland crops in Dak Lak province, with a total capital of more than 545 billion VND (equivalent to more than 23.5 million USD), including more than 464.4 billion VND of ODA capital. In 2023, this sub-project was assigned an ODA capital plan of 39 billion VND, but due to the inability to disburse, the investor reported to the competent authority to adjust the capital down.

The reason for not being able to disburse is due to many problems such as: changing the design solution according to the sponsor's request, increasing the total investment due to increasing compensation costs for site clearance leading to having to adjust the investment policy. In particular, adjusting the investment policy encountered many difficulties due to regulations, so it has not been completed yet.

Processes, procedures… are lengthy.

In reality, the problems that lead to the prolonged implementation of ODA programs and projects are mostly due to processes and procedures. According to ODA project investors, Vietnam's processes, procedures and policies are currently very different from those of donors in terms of bidding, site clearance and resettlement, disbursement procedures, etc.

In addition, some processes such as approving bidding documents, contractor selection results, project adjustments, etc. must consult with sponsors before implementation, leading to a lengthy preparation process.

For example, the Land Management and Land Database Enhancement Project, due to the donor’s disagreement with the contractor selection results and due to lack of time, it was not possible to continue to reorganize the bidding process. Therefore, some items of this project were not implemented.

ODA capital disbursement situation from 2021 - 2023. Graphics: Duc Van

As for the WB8 Sub-project, which has been completed to date, ODA funds have been fully disbursed to contractors before the loan closing date (October 31, 2023). However, counterpart funds are still not sufficient to cover the necessary work until the project ends (December 31, 2023).

Specifically: in Resolution No. 12/NQ-HDND, dated June 24, 2022 of the Provincial People's Council, the counterpart capital allocated to the WB8 Sub-project is more than 53.4 billion VND. At the same time, in Resolution No. 22/NQ-HDND, dated July 20, 2022 of the Provincial People's Council on adjusting and supplementing the medium-term public investment plan for the period 2021 - 2025, the local budget capital source also agreed to add more than 19 billion VND to the WB8 Sub-project in the province's medium-term public investment plan. Since its implementation, the WB8 Sub-project has been allocated more than 23.6 billion VND according to the capital plan, the remaining capital is more than 29.8 billion VND.

However, up to now, this project has only received an advance payment of nearly 2.3 billion VND for compensation and site clearance, while the following expenses: project management costs, taxes for packages using loan capital, consulting costs for packages not using loan capital, etc. still do not have counterpart funds to pay.

According to the investor of the WB8 Sub-Project, the Department of Agriculture and Rural Development, the reason why the WB8 Sub-Project has not been allocated the remaining counterpart capital is because the Prime Minister has not yet issued a Decision to adjust the investment policy on capital structure, and must wait for the opinions of the People's Councils in 6/34 provinces participating in the WB8 Project on balancing local counterpart capital.

More worryingly, if there is no capital for payment in 2023, then in 2024, even if capital is allocated, it cannot be disbursed because the WB8 Project has ended. At that time, to disburse, it is necessary to continue adjusting and extending the implementation period of the WB8 Project. This is difficult to do because it is impossible to adjust the implementation period of the WB8 Project for a few provinces, while there are up to 34 provinces participating in this project.

(To be continued)

Final episode: To make ODA capital truly effective

Kha Le

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