PM issues ultimatum to speed up ODA projects

The Vietnamese government has lost patience over the slow disbursement of official development assistance (ODA) for several projects and the prime minister had to issue an ultimatum to speed up disbursement or risk losing this important capital source.

Cat Linh-Hadong urban railway deadlock persists
Cost increases on Hanoi Metro Line 2
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The Cat Linh-Hadong urban railway project (Photo: Duc Thanh)

Increasing investment cost

A wide range of large-scale projects were listed out by the Ministry of Planning and Investment (MPI) due to slow disbursement of ODA funds. These projects include the urban railway project Hanoi Metro line 2 - South Thang Long-Tran Hung Dao, and Metro Line 1, Ben Thanh-Suoi Tien, and Line 2 Ben Thanh-Tham Luong in Ho Chi  Minh City, among others.

“All of these projects have adjusted their capital, which seriously influences their schedule because of the long appraisal process and asking for approval from related agencies,” MPI said.

Along with slow construction, the huge additional amount of capital needed also makes the government impatient, as most of the urban railway projects adjusted their investment costs. For example, Hanoi Metro Line 2 - South Thang Long-Tran Hung Dao asked to increase its investment from nearly VND19.6 trillion ($862.4 million) to around VND51.8 trillion ($2.3 billion). After appraisal, this project was requested to reduce costs to VND33.6 trillion ($1.5 billion) only.  

Also, Ho Chi Minh City Metro Line 1 - Ben Thanh-Suoi Tien adjusted its cost from VND17.4 trillion ($765.6 million) to VND47.3 trillion ($2 billion). Line 2 Ben Thanh-Tham Luong’s cost is expected to increase from VND26.1 trillion ($1.1 billion) to VND47.6 trillion ($2.1 billion).

The Cat Linh-Hadong urban railway project in Hanoi increased its cost from VND8.8 trillion ($387.2 million) to more than VND18 trillion ($792 million), and Nhon-Hanoi Station route’s cost increased from about $923 million to $1.4 billion.

Besides, there are also other reasons that forced these projects behind schedule, including a lack of planning on spending ODA and preferential loans from the government budget, and the shortage of counterpart funds.

According to MPI’s 2017 statistics, during 2018-2020, there were 418 valid projects with the total undisbursed capital of over $15 billion. After 2020, there will be 53 valid projects with the total undisbursed capital of about $3.7 billion.

Among all of these projects, there were 22 projects far behind schedule, with total ODA funds and preferential loans of more than $5.1 billion. Also, there are some projects that having been implemented for more than four years with a huge amount of investment, but their disbursement is low at under 30 per cent.

Prime Minister Nguyen Xuan Phuc’s ultimatum

In its report to the government about obstacles in ODA fund disbursement, besides important proposals involving difficulties in foreign capital plans and speeding up project resettlement, MPI also emphasised reviewing projects that are running behind schedule and ending capital disbursement for inefficient projects.

Accordingly, projects that signed agreements to be implemented a long time ago but show no end in sight, getting approval for cost estimates or organising bidding, must be revised and if they are not efficient enough, the capital supply for these projects will be transferred to more efficient ones.

In particular, at the recent meeting with ministries and local authorities to find solutions to speed up ODA fund disbursement on August 1, 2017, Prime Minister Nguyen Xuan Phuc granted an ultimatum to end the slow disbursement of ODA capital.

According to the prime minister’s directions, in 2017, for projects failing to disburse the entire approved fund, the undisbursed amount should be transferred to other projects.

“Developers should revise their capacity and responsibilities, they must take the initiative to stop if they find that their projects cannot be implemented or if they can find other sources of funding and do not need ODA funds anymore,” the prime minister said.

Meanwhile, regarding projects that sharply increased their investment costs, the prime minister requested that all should be revised to avoid long delays.

 

By Ha Nguyen