Public investment to offer backbone for infrastructure
With the economy gradually bouncing back, Vietnam will continue speeding up the disbursement of public investment this year, with a focus placed on infrastructure development in order to spur on economic growth this year and beyond.
|Last year, both Hanoi and Ho Chi Minh City reported slower-than-expected disbursement in public investment. -- VIR Photo: Le Toan|
Work has become quite busy at a section of road to lengthen Nguyen Van Huyen road in Hanoi’s Xuan Dinh quarter, where a number of state-funded projects are both under construction and set to be built this year.
This section will meet Nguyen Hoang Ton road connecting Lac Long Quan and Pham Van Dong roads, which link Thang Long Bridge with the city’s Belt Road No.3 and Noi Bai International Airport.
Near the intersection of Nguyen Hoang Ton and Lac Long Quan sits the under-construction Lotte Mall Ciputra Hanoi, covering 7.3 hectares and funded by South Korea’s Lotte Group.
Last year, Hanoi’s authorities decided to use its own budget to invest over VND1.75 trillion ($76.3 million) into five infrastructure projects vital to local residents of its outskirts. For example, one venture worth VND463 billion ($20 million) is constructing a 1.1km road in Xuan Dinh, which is home to hundreds of thousands of local residents and thousands of foreign ones.
This road will also be connected with Nguyen Van Huyen road leading to Samsung’s $220 million research and development centre currently under construction and to some overseas-backed property projects under construction including British-backed Refico Real Estate Group’s Kosmo Tay Ho.
It is calculated that over the next five years, Hanoi will need about VND482.8 trillion ($21 billion) worth of public investment for its infrastructure projects. A resolution for the 2021-2025 public investment plan has also been adopted by the city’s authorities.
Expanding public investment
Hanoi is among many other localities showing strong determination in boosting public investment with a focus laid on infrastructure development before 2025.
For example, Ho Chi Minh City People’s Council last December passed a plan to invest over VND44.9 trillion ($1.95 billion) into infrastructure development for this year alone, including VND2.497 trillion ($108.56 million) sourced from the central budget. The nominated state-funded projects will be upgrading and newly constructing channels, roads, hospitals, and railways.
In the Socioeconomic Development Plan for 2022 it recently adopted, the National Assembly (NA) stated that to ensure economic growth of 6-6.5 per cent for 2022, all efforts must be made to reach the disbursement rate of over 90 per cent in public investment this year.
However, the government stated in its freshly-promulgated Resolution No.01/NQ-CP that the rate must be 100 per cent this year.
“Public investment must be a primer to woo all legal resources for national development and economic growth, especially via public-private partnerships,” read the resolution. “Foreign investment must be attracted selectively, with investment promotion being conducted proactively, and big partners and groups must be supported to implement projects in Vietnam.”
The resolution underlined that in 2022, the government will accelerate the construction of key infrastructure projects that link regions, especially important road projects such as some intersections of the eastern cluster of North-South Expressway in which total state funding will be VND146.99 trillion ($6.39 billion), My Thuan-Can Tho Expressway, Long Thanh International Airport, and the metro lines in both Hanoi and Ho Chi Minh City.
“Accelerating public investment disbursement has to be one of the most important tasks in 2022 and beyond. All obstructions must be removed immediately. Boosted disbursement must be in line with ensuring work quality. Heads of units must be responsible for their units’ disbursement results,” said Prime Minister Pham Minh Chinh at a recent government-led conference with ministries, agencies, and localities.
Under the fresh monetary and fiscal policy package just adopted by the NA over a week ago to support enterprises and economic growth, the government is set to use VND113.85 trillion ($4.95 billion) for infrastructure development. Of which VND103.2 trillion ($4.48 billion) is planned for road construction, and VND5.69 trillion ($256.5 million) will be used for digital transformation infrastructure. About VND5 trillion ($217.39 million) will be earmarked for developing projects to respond to climate change and overcome natural disasters’ consequences.
The government last November finalised total public investment for 2022 will be VND611.4 trillion ($26.58 billion). This consists of VND304.5 trillion ($13.24 billion) from the central budget – including domestic capital of VND258.8 trillion ($11.25 billion) and foreign capital of VND45.7 trillion ($1.99 billion). The total investment demand of localities is over VND306.8 trillion ($13.34 billion).
According to the Ministry of Planning and Investment, as of the end of last year, the country’s public investment rate hit 77.3 per cent of the plan earlier assigned by the prime minister, lower than 2020’s 82.66 per cent. In which, the disbursement of domestic capital reached 83.66 per cent, lower than 2020’s 87.12 per cent, and that of foreign capital stood at 26.77 per cent, lower than 2020’s 46.06 per cent.
Last year, both Hanoi and Ho Chi Minh City reported slower-than-expected disbursement in public investment. The latest data showed that by late last November, the rate in Hanoi hit 44.4 per cent, and the whole-year rate is estimated to be 84.3 per cent ($1.69 billion) of the target set by the municipal authorities. Meanwhile, the rate for the entire 2022 in Ho Chi Minh City is estimated to be 73.2 per cent or $1.09 billion of the initial plan, down 26.7 per cent against that of the previous year.
According to a study by the Asian Development Bank, on average, delays in implementing state-funded projects will annually lead to a 17.6 per cent climb in costs and 11.1 per cent loss in the project’s benefit. Moreover, if the project is delayed within 1-2 years, its costs will be raised by 50 per cent due to fiscal deficit.
In need of huge capital
Last November, the NA adopted a resolution on the 2021-2025 medium-term investment plan (MTIP), with the prime target to “continue effectively restructuring public investment, reduce the ratio of public investment in the total development investment to attract more private investment and create clear changes in infrastructure development.”
Under the resolution, in the period, the total money for investment from the state budget is VND2.87 quadrillion ($124.8 billion). This embraces VND1.5 quadrillion ($65.2 billion) from the central coffers - including VND1.2 quadrillion ($52.17 billion) from the domestic capital and VND300 trillion ($13 billion) from foreign sources – and VND1.37 quadrillion ($59.56 billion) from localities’ budget.
The 2021-2025 MTIP will be implemented under priorities, with the total number of projects so far nearly 5,000, down over 50 per cent as compared to that in the 2016-2020 period. In which, the number of new projects will be nearly 2,240. The average capital for each project will be VND210.4 billion ($9.14 million), which is 2.4 times higher than that in 2016-2020.
“Sufficient capital will be provided for national key programmes and projects and three national target programmes, for site clearance of Long Thanh International Airport, for almost completing the construction of the eastern cluster of the North-South Expressway, and for roads No.3 and No.4 of Hanoi and Ho Chi Minh City,” said a government report sent to the NA.
In its plan, Hanoi will invest over VND51 trillion ($2.2 billion) in infrastructure development in 2022, and this plan is expected to continue befitting such areas as Xuan Dinh, which is home to many large-scale property projects.
“We have proposed to the municipal authorities implementing some road expansion projects in the area,” a representative from the area said. “Right now, we are expecting the 1.1km road worth $20 million to be constructed as soon as possible as this will help eliminate chronic traffic jams and boost socioeconomic development in the locality.”
News about the commencement of 12 projects along the North-South expressway in 2022 is considered to be the main driving force for the construction materials group, including steel, stone and asphalt.
A boost in infrastructure investment as a major part of the country’s hallmark programme on economic recovery and development is expected to help the national economy bounce back.