Inadequate funding is hindering disbursement and implementation at many official development assistance (ODA) transport infrastructure projects.

The Cat Linh-Ha Dong urban railway project was allocated more than planned, but disbursement was slower due to legal procedures

Scarce allocated capital and slow disbursement

The Mai Dich-Nam Thang Long viaduct project will break ground before December 25, 2017. Duong Viet Roan, director of the Thang Long Project Management Unit under the Ministry of Transportation (MoT) said that construction units proposed to break ground sooner than the terms of the contract in order to speed up the cutting and removal of trees on Pham Van Dong Road.

Earlier, the Thang Long Project Management Unit has handed over two main construction and installation bidding packages of the Japanese ODA project to the Sumitomo-Cienco4 joint venture (the first package, with a winning bid of $63.6 million) and Tokyu-Taisei (the second package, with a winning bid of $53.2 million).

If this project cannot break ground on schedule, 2017 will set a ten-year record in the smallest number of works launched by MoT using ODA capital.

Up to now, the construction of Thinh Long Bridge crossing the Ninh Co River (a coastal road in Nam Dinh province) also managed by the Thang Long Project Management Unit using preferential loans from the Korean Economic Development Co-operation Fund (EDCF), is the only new project launched in 2017.

Not only is it rare for new projects to be launched, the disbursement at almost all ODA transport projects have fallen short of the goals set forth in 2017. According to statistics of MoT, ODA transport projects have been allocated VND29.086 trillion ($1.28 billion), including $1.09 billion of foreign capital and $0.19 billion reciprocal capital.

However, 20 projects under MoT using preferential loans from seven donors have only disbursed $843.3 million in 2017, reaching only 66 per cent of the plan.

There are two disbursement paradoxes taking place in ODA transport projects: First, projects were allocated much, but only saw slow disbursement compared to the plans due to legal procedures. Such projects include Cat Linh-Hadong urban railway and the Road Asset Management Vietnam project, among others. Additionally, there were a number of projects that implemented the bidding slowly, such as the Greater Mekong Subregion transport network improvement project or the Mai Dich-Nam Thang Long viaduct project.

Second, allocation falling below construction capacity caused slow progress at key highway projects. At the Ben Luc-Long Thanh Highway project, the disbursed amount of the whole work reached 70 per cent of the 2017 plan ($114.7 out of $166 million), but was 5 per cent slower than initially planned due to the slow allocation of reciprocal capital compared to the plan.

Reduced prospects for new projects

According to MoT, the allocated ODA capital’s falling short of the demand has caused many difficulties and obstacles during implementation. The reciprocal capital of Line 1 of Hanoi urban railway project (Yen Vien-Ngoc Hoi) is too little, about $0.35 million, while expected demand is $15.4 million in 2017, leading to slow land clearance and related works.

At the Ben Thanh-Suoi Tien Metro project, $111.17 out of the planned $106.33 million was disbursed, equivalent to 104.5 per cent, in 2017, including VND500 billion ($21.9 million) advanced amount from the Ho Chi Minh City People’s Committee.

According to data from the Ho Chi Minh City Urban Rail Management Board, until November 2017, the allocated ODA capital met 36 per cent of the demand. In 2017, Metroline No.1 needs more than $237.4 million, while it was allocated only $92.3 million.

In the mid-term plan for 2016-2020, the stateneeds to disburse $923 million, while Ho Chi Minh City has just received approximately $330 million.

“The payment of the bidding package is rather difficult because the State Treasury of Ho Chi Minh City has stopped confirming payment documents for the projects because the ODA capital raised to fund Ho Chi Minh City Urban Rail Management Unit has exceeded the plan,” Deputy Minister of Transport Nguyen Ngoc Dong said.

“It raises the risk of causing undue difficulties contrary to the Vietnamese government’s commitments to donors, potentially resulting in compensation claims,” he said.

The big concern of MoT is that it will be hard to sign new credit agreements—meaning fewer new projects—in the next years.

As of early December 2017, strengthening transport linkages in the Central Highlands project (upgrading National Highway No.19) using a $150-million loan from the World Bank is the only new project that has signed a credit agreement in 2017.

MoT changed the investment form of several projects, such as the Huu Nghi-Chi Lang section of the Hanoi-Lang Son Expressway project, from ODA loans to build-operate-transfer (BOT) format.

Based on this, Deputy Minister Dong confirmed that the mid-term public investment plan for 2016-2020 allocates MoT less than the existing demand, making it very difficult to attract more ODA capital and preferential loans.

Moreover, ODA attraction through signing new agreements is hard as the public debt approaches the ceiling set in Resolution No.10/2011/ND-QH13 of the National Assembly.

“The government needs an ODA and preferential loans attraction plan in conformity with national finance balance for specific sectors, then MoT will proactively build a capital attraction plan from donors,” MoT proposed.

VIR