On October 28, the Ministry of Finance coordinated with the World Bank to hold an online conference with ministries, sectors and localities to assess the situation and seek solutions to remove problems in the disbursement of WB-financed projects. Deputy Minister of Finance Tran Xuan Ha and Carolyn Turk - World Bank Country Director in Vietnam co-chaired the online conference.

The conference.

Propose to return 34.6% of the WB loan estimates

The World Bank is a major donor to Vietnam. Currently, the bank’s total committed loans for 36 ongoing programmes and projects is US$7,369.5 million, of which 33 loans have signed under agreements at the total value of US$6,589 million; and three newly-negotiated loans at the total value of US$506 million approved by the bank’s International Development Association but have not signed the agreement. In this list, eight loans will be disbursed in 2020, 10 loans will be disbursed in 2021.

WB-financed projectshave some specific characteristics such as ODA project model which accounts for a large proportion (19/33 loans, accounting for 57.5% of loans which are implemented in fiveministries and 57 localities; implemented under results-based financing (fourprojects); disbursement method is mainly through special accounts (accounting for 80-90% of disbursement value).

All projects must be implemented according to the WB’s regulations on compensation and resettlement; procurement, bidding, and issuance of a separate handbook.A loan agreement is an international treaty, so any amendment to the agreement must comply with the law on international treaties.

Another problem is thatnot all WB loans are ready to disburse. As of October 15, fiveof 36 loans under the list have not yet been disbursed because they have not completed investment procedures or have not been singed installation contracts (10.6% of committed capital).

According to the World Bank, the remaining 17 of 31 loans that are being disbursedare adjusted the loan agreement for many reasons (amendment of project design, adjustment from recurrent expenditures to investment expenditures,delay in progress so that the deadline for the implementation of projects must be extended, and disbursement is extended).

The disbursement value of the World Bank in the first nine months increased by 55% year-on-year. According to Vietnam’s 2020 capital estimate, 64 projects/sub-projects (of 17 loans) have been assigned the estimate but have not yet been disbursed.

Eighteenof 36 loans have not been disbursed in the WB’s fiscal year 2021, so that the the disbursement rate according to the WB’s calculation (disbursement/total committed loans) in 2021 only reaches 1.7%.

As of September 30, 34 WB-financed projects/sub-projects proposed to return the capital plan in 2020 with total capital of 34.6% of the WB loan estimates

Promote disbursement

At the conference, ministries, sectors and localities proposed measures to promote the disbursement of World Bank loans and the Government's foreign loans. Accordingly, governing bodies should focus on prompting completion of investment in 2020; urgently complete project adjustment procedures; accelerate thepreparation of payment records to send to the State Treasury to confirm completed volume and make payments from special accounts or direct payments andurgently report spending for reimbursement, reducing idle capital.

The ministries managing ODA projects should accelerate offering suggestions for localities on site clearance, project design and effectively manage capital withdrawal and use of the special accounts of ministries.

The WB’s representative also suggested improving the project design, negotiation and signing of agreements, such as abolishing the ODA project modality to be consistent with current legal regulations of Vietnam; following Vietnamese regulations to avoid problems in implementation; assessing the committed capital in accordance with the demand, unit price and norms of Vietnam, avoiding return or cancellation of capital, low disbursement/committed capital rate; reviewing disbursement model based on results to have an appropriate model and effective loan management; researching to facilitate direct payment; eliminating the requirement on developing and approving the handbook in projects to simplify procedures and avoid legal conflicts that lead to problems for project owners.

The World Bank proposed speeding up the approval time for issues that need comments, research to improve the efficiency of the special account payment method and apply the direct payment method to reduce loan costs.

Speaking at the conference, Deputy Minister Tran Xuan Ha also committed to continue to work closely with ministries, central agencies and localities to review and contribute to solving problems in building projects, work with development partners for appropriate regulations and simplify loan agreements, accelerating the implementation and disbursement of projects.

Continue to accelerate the processing of capital withdrawal applications, signing of on-lending contracts, loan check, and debt collection; develop a project to install software to handle electronic withdrawal applications to further facilitate disbursement, and ensure safe management of State budget loans.