Slow ODA disbursement hampers Vietnam

The problems were discussed at the workshop on accelerating the implementation and disbursement of ODA programmes and projects.

According to the Deputy Minister of Planning and Investment Nguyen The Phuong, for the first nine months, only US$2.68bn out of US$4.9bn in ODA and preferential loans was disbursed. The disbursement rate is only equal to 81.4% of last year's.

While the disbursement rates in Hanoi and HCM City and projects under Ministry of Transport is high, it is really low in other provinces including Quang Ninh, Hung Yen and other agencies such as the Ministry of Health or the Ministry of Education and Training.

Even major projects that can affect the regional and the development of several provinces have slow disbursement rates. The Mekong Integrated Water Resources Management project supported by the World Bank or an Italian project to improve the flood forecasting system have their funds slowly dispensed.

ODA and many preferential loans have interest rates and certain disbursement periods. This means slow disbursement will not only make Vietnam incur higher interest rate but also badly affect the country’s development strategy.

Rustam Ishenaliev, head of the Project Administration at Asian Development Bank in Vietnam, said according to 2013 research, slow disbursement caused costs to increase by 17.6% each year, eroding the benefits of ODA funding. Since last February, the disbursement process of 34 projects have been discontinued.

Statistics from six financial institutes and organisations that provide ODA to Vietnam showed that Vietnam often takes up to five years to disburse funds for a project and eight months to get a signed agreement approved. After a project is approved, it often takes up to three years for construction to start. If a project is delayed for more than two years, costs will double.

According to Resolution 78, if the disbursement is higher than estimated then it must be submitted to and approved by the NA Standing Committee. This has caused delays in various aspects and badly affected Vietnam's credibility.

"It's hard to give accurate estimation on the ability to disburse due to various factors such as difficult ground clearance tasks or administrative procedures. Many agencies and authorities failed to pay enough attention to the process so their plans on investment and capital are often inaccurate," the Ministry of Planning and Investment said in the report.

Moreover, the policies and procedures to disburse ODA are still cumbersome. Poor provinces that have low repayment abilities will not be given loans and differences about compensation and relocation policies between foreign investors and Vietnam are slowing disbursement.