Nov 17, 2012

Vietnam - Tighten purse strings for public works

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VietNamNet Bridge – The government will continue to substantially scale down its investment in public projects next year due to a tightening budget and falling property values, authorities say.

Minister of Planning and Investment Bui Quang Vinh announced that the government would use some VND180 trillion ($8.65 billion) for its public investment in 2013, down from VND240 trillion ($11.53 billion) in 2012 and VND341.6 trillion ($16.42 billion) in 2011.

“The $8.65 billion will be far lower than localities’ huge demand. However, it reflects the government’s big efforts given its limited budget,” Vinh said.

About VND39 trillion ($1.87 billion) of this $8.65 billion was expected to be collected from land use tax and land sales by the public and enterprises, Vinh said.

“But given the expected continual economic woes and the property market continuing to stand still, if this $1.87 billion cannot be collected, the total sum for public investment in 2013 is expected to be VND140 trillion ($6.73 billion),” Vinh said. “I am sure that it will be very difficult to collect this $1.87 billion in 2013.”

According to the Ministry of Planning and Investment (MPI), out of the $8.65 billion, VND93.1 trillion ($4.47 billion) would come from localities’ coffers and would be used by localities for their own projects. The rest cash, or VND86.9 trillion ($4.17 billion), would come from the central budget.

However, the government would have to use about VND20 trillion ($961.5 million) and VND39 trillion ($1.87 billion) from this sum respectively for social services and localities’ targeted programmes. Thus, the real investment capital from the central budget would be VND27.9 trillion ($1.34 billion), which would be used for the government’s projects.

The MPI said the government would minimise the construction of new projects in 2013 and only imperative projects would be allowed for construction next year. It also said these projects would be in such sectors as national security and defense, sea and island, agriculture, forestry and fisheries, national-level projects and counterpart fund for projects backed by official development assistance.

“New projects for 2013 must be in approved planning and their capital must be appraised in line with the government’s Instruction 1792/CT-TTg dated October 15, 2011 on strengthening management of state budget and government bond investment. This is to prevent wastefulness in using state capital and ensure projects would be completed as scheduled,” said MPI Deputy Minister Cao Viet Sinh.

Under the instruction, ministries, agencies and localities must prioritise projects within their investment plans. The portfolios and capital would be submitted to the government and the MPI for approval. Then capital from the central budget for projects would be allowed to be disbursed.

The MPI has since 2009 been drafting a law on public investment. This draft law should have been, as scheduled, tabled at the 13th National Assembly’s ongoing fourth session and was expected to be adopted by the fifth session and then would take effect on January 1, 2014.

However, implementation of the law proves problematic for many reasons. The law is expected to be considered again and approved by the top legislative body in early 2014 and take effect in mid-2014.


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