Public spending delays hamper economic growth

By Minh Son   July 8, 2020 | 03:16 am PT
Public spending delays hamper economic growth
Workers construct the Ben Thanh-Suoi Tien Metro Line in Ho Chi Minh City on April 20, 2020. Photo by VnExpress/Quynh Tran.
Tardy public spending is hindering Vietnam’s efforts to revive its economy post-pandemic and speed up slowing GDP growth.

The country has earmarked nearly VND700 trillion ($30.2 billion) for this year, but in the first six months it spent only 20 percent of it, according to the Ministry of Finance.

It also plans to spend VND60 trillion ($2.6 billion) worth of official development assistance (ODA), but 22 provinces and cities have yet to spend a single dong from it so far this year.

Delays in public investment have been a feature for years with local authorities saying they have difficulty persuading people to sell their lands for public works. Some ministries have even proposed returning funds meant for public spending because they cannot spend them.

All this means many infrastructure works are delayed, including a 300-meter road near Hanoi’s West Lake which is still not finished despite being approved 13 years ago.

Pham The Anh, chief economist at the Vietnam Institute for Economic and Policy Research, said public investment has become even more important now that the economy needs a boost after the coronavirus breakout, which has disrupted trade and foreign investment.

If public funds are used judiciously, GDP growth could reach 5 percent this year, he said. Vietnam posted a decade-low growth rate of 1.8 percent in the first half.

Analysts at SSI Securities Corporation said public spending is the most efficient way to boost economic recovery.

The government is seeking to speed up disbursement. At a meeting on Tuesday Prime Minister Nguyen Xuan Phuc exhorted cities and provinces to make a stronger effort to spend funds, warning that if they could not their money would be handed over to others.

Public spending last year was VND270.2 trillion ($11.6 billion), or just 67 percent of the target, according to the finance ministry.

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