Vietnam is given priority in receiving ODA loans; however, procedures for establishing ODA-funded projects are still being formed. Many reports from economic organisations show that, although Vietnam has made great efforts to disburse ODA loans, disbursement progress is still slow. The lack of transparency in managing ODA loans is a concern for financiers pouring capital into Vietnam.
ODA management decentralisation a pressing issue
In 2006, Decree No. 131 took effect, decentralizing ODA management. However, confusion remains in implementing the decree, affecting disbursement progress for ODA projects. This is because of conflicts of interest among financiers, the local government and localities.
In the opinion of Dr Duong Duc Ung, senior expert of the Ministry of Planning and Investment, Vietnam now has no proper policy for management and decentralisation. The current government role of loan manager is suitable. However, the government cannot deal with every issue, and needs to continue decentralisation.
Dr Ung added that decentralisation at the grassroots is sometimes very difficult, with disapproval from sponsors, not from the central body. The survey on decentralisation in three provinces, Ho Chi Minh City, Quang Tri and Son La, at the beginning of this year showed decentralisation was inconsistent.
In order to carry out ODA projects, financiers will concurrently hold the positions of consultant, designer, contractor, and even supervision consultant, hindering the implementation of the projects. However, localities seeking investment for projects still have to accept this model. When financiers hand authority over to the province people’s committee to ensure efficiency, it is unreasonable for the committee to be both the investor and the state management body. The inconsistency between financiers and local authorities in project management has resulted in the big overlap in ODA management.
In addition, the survey also showed that the policy to attract and use ODA loans for industries has significantly affected capital allocation for localities. Projects in Ho Chi Minh City and Hanoi alone account for more than one third of ODA loans on average.
On the other hand, although localities are decentralised, they still have little authority and ask for approval from central industries and bodies in many phases. It is necessary to further decentralize power to provinces. Specifically, project appraisal should the responsibility of localities, prioritising poor provinces. Province people’s committees need to renovate oversight and management of ODA loans, in parallel with administrative reform.
Little improvement in disbursement rate
Financiers, especially the group of five development banks including the World Bank (WB), Asia Development Bank (ADB), French Development Agency (AFD), Germany Reconstruction Bank (KFW) and Japan Bank for Cooperation and Development (JIBIC), which account for 80 per cent of ODA loans for Vietnam, pessimistically assessed that if the disbursement rate for old projects is too slow, commitment for new loans may waver.
Mr James Adams, deputy director of the World Bank said, “Slow project implementation and disbursement is a chronic situation for ODA projects in Vietnam.” While the number of preferential loans sharply increases each year (the five banks pledge annual loans of average US$1.6 billion), the country disbursed only 80 per cent of that last year.
Doctor Vo Tri Thanh, chief of the International Integration Policy Board under the Institute of Central Economic Management, said slow disbursement is due to prolonged project appraisals and sluggish implementation. Many projects take one year or even longer to be started, after approval. Most ODA-funded projects in Vietnam disburse only 5 per cent in the second year of the project life cycle. The disbursement rate for WB-funded projects is especially slow; it takes on average nine months to start, double the WB regulation.
Deputy Minister of Planning and Investment Cao Viet Sinh also said ODA loan disbursements face difficulty during project preparation, with increasing input prices, as well as when changing operational models, leaving project management boards incompetent for the task.
According to the Ministry of Planning and Investment, Vietnam disbursed US$1,438 million of loans in the first nine months this year, compared with planned disbursement of US$2 billion this year, including loans of US$1,242 million and aid of some US$196 million. The figure shows Vietnam’s great efforts in disbursing ODA-funded projects, however this is only a short term figure. In the long term, Vietnam still has to improve its management and boost ODA disbursement to relieve financiers’ worries.
Huong Ly
Vietnamese
