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Situation and Effectiveness of Public Investment in Vietnam

Situation and Effectiveness of Public Investment in Vietnam. Dr. Pham Lan Huong Presented at the Workshop on Capacity Building to Improve Appraisal of Public Investment Projects in Vietnam DaLat City, April 22-24, 2013. Outline. Definition and roles of public investment in Vietnam

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Situation and Effectiveness of Public Investment in Vietnam

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  1. Situation and Effectiveness of Public Investment in Vietnam Dr. Pham Lan Huong Presented at the Workshop on Capacity Building to Improve Appraisal of Public Investment Projects in Vietnam DaLat City, April 22-24, 2013

  2. Outline • Definition and roles of public investment in Vietnam • Public investment situation in Vietnam • Pulic investment performance in Vietnam • Issues of public investment in Vietnam

  3. Public Investment • Definition: investment project that use state capital • Roles: • To realize targets of socio-economic development • The most important tool of the Government to promote growth and poverty reduction • To direct and mobilize other sources of capital for investment • To overcome market failures • Create public goods (infrastructure) • Ensure social equality • Some key areas that require large investment cost and take long time to regain funds so that other parties do not want or are incapable to invest

  4. Public Investment: Classification • By capital source • State budget • Borrowings • Capital from state-owned enterprises and other sources • By management level • Central • Local • By sector

  5. PUBLIC INVESTMENT SITUATION IN VIETNAM

  6. Role of Investment in GDP growth:Investment-led growth

  7. Role of Public Investment: The most importance source

  8. State investment by management level (%)

  9. State Investment by capital source

  10. State investment by economic sector (%)

  11. Gross Domestic Capital Formation (% GDP)

  12. PUBLIC INVESTMENT PERFORMANCE IN VIETNAM

  13. Contribution to economic growth in 1990-2010(percentage point)

  14. Capital formation and social investment(1994 prices, bil. VND)

  15. ICOR by economic sector

  16. Map of deep-water seaports

  17. Map of airport system in Vietnam

  18. Economic Zones in Vietnam

  19. Approved EZs in development plan by 2020

  20. Issues of public investment in Vietnam: Inefficiency • Excessive investment, too many projects are carried out at a same time; investment demand exceeds capital supply capacity • Invest in such areas that may be funded from other sources of investment • Accumulated debts on capital construction tends to reincrease • Loss and wastage • Unable to bring impetus for the improvement of comparative advantage of each sector, each area and the economy as a whole

  21. Underlying causes of inefficient public investment • Non-transparency and low accountability • Disciplines/regulations are not strictly obeyed • Development thinking is slowly innovated • By term of office • By geographic boundaries • Investment decentralization • Capacity to appraise and assess investment projects in many provinces is still limited • Capacity to manage, inspect and monitor investment and construction projects at different industries and levels is inadequate and insufficient • Competitiveness in infrastructure construction

  22. Underlying causes of inefficient public investment • Planning • Unconnected plans while the State lacks of effective tools and policies to manage and monitor the implementation of plans. • Low quality plans, which are unable to be foundation for investment development plan, which in turns leads to wrong investment decisions or adjustment of projects • The existence of „hung“ plans • Unprompted investment without any plan • Shortcomings of bidding mechanism • Incapability of management authorities and implemented bodies • Violation of bidding regulations on purpose for self-interests

  23. Thank you for your attention

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