Delays in public spending, Covid relief disbursement to impact economy: experts

Many contractors undertaking public works have expressed frustration at delays in payment by the government.

Nguyen Quoc Hiep, president of the Vietnam Association of Construction Contractors, said: “The problem of outstanding debt has been there for years. Even contractors of some projects carried out to celebrate the 1,000th founding anniversary of Hanoi in 2010 have not been paid yet.”

The delays force many to borrow money to maintain operations, and delays payment to suppliers of materials and so on.

Contractors also complained about the big differences between contracted material and labor prices and market prices.

The director of a construction company in the central region told VnExpress that after signing agreements for state-funded projects, contractors cannot renegotiate the contracts if prices of building materials increase.

In the past two years, for instance, the prices have skyrocketed, and some contractors have even made losses of 30-40%, he said.

“Price hikes have thrown everything out of control, but the authorities have not yet applied market prices. So contractors have lost motivation.”

The Asian Development Bank (ADB) has warned that delays in public spending could slow down Vietnam’s economic growth in 2022 and 2023.

ADB chief economist Nguyen Minh Cuong said disbursement of public spending has taken on additional importance in the context that other growth factors such as exports are weakening.

The ADB has forecast the global economic downturn to affect Vietnam’s exports more severely than expected earlier.

Phung Duc Tung, director of the Mekong Development Research Institute, told VnExpress that slow disbursement of Covid relief would affect economic growth and employment.

According to Tung and other experts, the biggest challenge to disbursement is the capability of the official apparatus comprising ministries and other agencies and local governments.

Deputy Minister of Planning and Investment Tran Quoc Phuong said there are a number of problems causing the slow disbursement and they could be classified into three main groups: policies, mainly relating to land, environmental resources, construction, and bidding; implementation; and specificity of the 2022 plan.

In the year to date only 46.7% of the targeted public spending, or VND253.15 trillion ($10.55 billion), has been done, the Ministry of Planning and Investment said.

In HCMC, the figure was 26% in the first seven months, with 100 projects yet to spend a single dong.

As of Sept. 6 only VND55 trillion (US$2.34 billion) out of the VND350 trillion Covid socioeconomic relief package slated for completion in late 2023 was disbursed, according to the ministry.