Disbursement of ODA funds has reached a very low rate what solutions can accelerate it

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Disbursement of ODA funds has reached a very low rate, what solutions can 'accelerate' it?
There are many reasons why the disbursement of ODA funds by ministries and local authorities has reached very low rates. Illustration: Vietnam+

Many projects are delayed due to bottlenecks in equipment price appraisal.

Following the Government’s directive to consider the implementation and disbursement of ODA funds and concessional loans as one of the key political tasks of 2024, ministries and local authorities have implemented many decisive measures to direct the disbursement process. These measures include urging investors to register monthly disbursement plans; reviewing and consolidating steering committees to assign ministry leaders to directly address emerging difficulties and obstacles, and to expedite the implementation and disbursement of projects.

The Ministry of Finance has also implemented a variety of solutions to support the disbursement process, such as organizing meetings with delegations from two ministries (the Ministry of Transport and the Ministry of Agriculture and Rural Development) and three localities (Thanh Hoa, Hue, and Dak Lak) and project owners to promptly acknowledge obstacles and recommend solutions within their authority; directing the reduction of time taken to perform expenditure control and process withdrawal applications, etc. However, the result of foreign capital disbursement in the first five months of 2024 (as of May 15, 2024) by ministries and localities remains very low.

Sharing information about the project implementation and the reasons why the Ministry of Labor, Invalids, and Social Affairs (MOLISA) has not yet disbursed the 2024 capital plan, Ms. Doan Thanh Phuong (Department of Planning and Finance, MOLISA) stated that the main issue is the equipment price appraisal, as the appraisal units have refused to appraise the prices, leading to all three sub-projects being unable to proceed with the bidding packages. This price appraisal issue has been ongoing since 2022, and the Ministry has submitted several reports on this matter since 2023.

A representative from the Ministry of Education and Training (MOET), which has a disbursement rate of 0% in the first five months of 2024, stated that in 2024, MOET was allocated 629 billion VND for the project to build technical infrastructure and facilities for Da Nang University. The main obstacle preventing disbursement in 2023 and causing delays into 2024 was related to collateral and the signing of the re-lending contract. Currently, the biggest hurdle for the project is the estimation appraisal, as finding appraisal agencies and getting quotations is very challenging. To accelerate progress, the MOET representative suggested that the Ministry of Construction assist Da Nang University in quickly appraising 6 out of the remaining 13 construction items to proceed with the next steps and expressed the goal to have disbursement volumes by September 2024.

There needs to be a detailed and specific review and assessment of the disbursement capability of each project.

According to Mr. Vo Huu Hien, Deputy Director General of the Department of Debt Management and External Finance (Ministry of Finance), the main reasons for the very low disbursement rate primarily stem from the lack of completed work to disburse funds due to delays in preparatory tasks for investment. These include slow land clearance, incomplete signing of design consulting contracts, delays in bidding processes, contract signing, adjustments to basic designs, projects undergoing procedures for investment policy adjustments, project adjustments, loan agreement adjustments, and capital planning not aligning with the project implementation progress. This reality indicates that the goal of disbursing 95% as set by the Government in Resolution No. 01/NQ-CP is very difficult to achieve.

To strive for a high disbursement rate for ODA and concessional loans as assigned by the Prime Minister for 2024, the Ministry of Finance suggests that the Ministry of Planning and Investment (MPI) should support localities in accelerating the progress and procedures in extending the time for capital allocation to avoid affecting the project’s disbursement progress. Additionally, clearer guidance should be provided to localities on the authority to approve project adjustments for projects implemented across multiple agencies.

In addition, local authorities need to conduct a detailed and specific review and assessment of the disbursement capability of each project, particularly paying attention to projects whose planning year is the final disbursement year to ensure sufficient funds for the projects and avoid the need for disbursement extensions, implementation time extensions, and additional administrative procedures. For projects that are unable to complete the planned workload on schedule, funds should be cut or transferred, and a written proposal for cutting, reducing, or reallocating funds should be sent to the Ministry of Planning and Investment (MPI) and the Ministry of Finance by June 30, 2024, for coordination. For programs or projects requiring investment policy adjustments, local authorities need to report and closely coordinate with MPI to submit the adjustment proposals to the Prime Minister for approval. Based on the Prime Minister’s approval and decisions on investment policy adjustments, local authorities will coordinate with the Ministry of Finance to adjust the disbursement deadlines and reallocate funds according to the signed loan agreements (if any).

For projects with obstacles in the preparation and implementation phases, local authorities and project management units are responsible for promptly completing investment and construction procedures, resettlement and land clearance to implement the projects; finalizing technical designs, resolving difficulties in contract bidding; and quickly addressing any issues arising in each stage of project implementation. Central project management units of ODA projects under the supervision of ministries and agencies should provide guidance and training on expertise and capacity building for local project management units to ensure the projects are implemented uniformly and effectively.

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