Solution to the problem of counterpart capital for ODA projects?

(Baonghean) -Nghe An is currently implementing many ODA programs and projects. However, the implementation process has encountered many difficulties and obstacles due to limited counterpart funding. Since the beginning of 2013, many projects have not been allocated counterpart funding, affecting the progress.

Currently, the province has 41 ODA programs and projects (including projects in operation) with a total investment of 15,020 billion VND, of which 26 projects are managed by the province and 15 projects are managed by ministries and branches. The fields prioritized for ODA investment include construction of technical infrastructure in the fields of electricity, transportation, agriculture, rural areas, health, water supply and drainage, irrigation, specialized credit programs, etc. Previously, because the local counterpart capital was arranged promptly and fully, most of the ODA projects always ensured progress. In recent years, due to limited budgets of the Central and the province, the counterpart capital has encountered many difficulties. According to statistics, in the total investment to implement programs and projects, ODA capital accounts for 78.9% (11,863/15,020 billion VND) and the remaining capital is counterpart funds from the governing body (capital from the provincial and central budgets).

Thus, besides the joy of benefiting from ODA programs and projects, it is also a "burden" for the budget of the governing body, especially the provincial budget. In 2011, Nghe An allocated 27 billion VND from the budget as counterpart capital to arrange capital for 17 projects. In 2012, in addition to the Central counterpart capital of 45 billion VND, the province of 26.6 billion VND, the investor (Vinh City People's Committee) self-balanced 55 billion VND to implement the project of Medium-sized Urban Development in Vietnam - Vinh City Sub-project.

Due to the urgency of some projects, in September 2012, 6 projects advanced the 2013 State budget capital plan to arrange counterpart capital, with the amount of 176.15 billion VND (including the Medium-sized Urban Development Project in Vietnam - Vinh City Development Sub-project 100 billion VND; Traffic road from National Highway 48 to Ke Ninh village, Chau Hanh commune to Chau Hoi commune - Quy Chau 5 billion VND; Drainage and wastewater treatment system of Thai Hoa town 25 billion VND; Drainage and wastewater treatment system of Cua Lo town phase 2 is 20 billion VND...). Thanks to that, the progress was ensured and some completed projects promoted investment efficiency.

However, the advance payment of the above capital source has caused a "deficit" of counterpart capital in 2013. Mr. Nguyen Van Nam - Deputy Head of the Foreign Economic Affairs Department - Department of Planning and Investment said: "In 2013, the total capital demand for all ODA capital projects was 2,305,966 million VND and counterpart capital was 327,504 million VND, of which the counterpart capital of the central budget was 220,550 million VND and that of the local budget was nearly 152 billion VND. While the counterpart capital demand of ODA is quite large, the balancing capacity of the provincial budget is still limited, so there is a large difference in the ratio between ODA capital and local counterpart. This fact has greatly affected the implementation progress of ODA projects". It is known that from the beginning of 2013 until now, the Central Government has only balanced 41.4 billion VND, the counterpart fund from the local budget is only 8 billion VND and the investment preparation budget allocated for ODA projects in 2013 is 3.6 billion VND…”.

Construction of North Canal renovation (Vinh City) under the Medium Urban Development Project in Vietnam - Vinh City Sub-project.

With the amount of 8 billion VND of counterpart capital to implement ODA projects in 2013, it was allocated for the key project: Rural Energy - RE II 5 billion VND and the water supply project in the vicinity of Vinh 3 billion VND. Mr. Nguyen Huu Thuan - Director of the Water Supply Project Management Board of the Vinh vicinity said: "The project has an ODA investment capital of 297.9 billion VND from Finland and counterpart capital from the provincial budget of more than 89.5 billion VND, the counterpart capital plan in 2013 is nearly 40 billion VND, but the province only allocated 3 billion VND. Currently, it is in the final stage of construction, if there is not enough counterpart capital, the sponsor will cut the investment capital, so the enterprise had to invest 20.6 billion VND to continue implementing the project". The water supply project in the vicinity of Vinh has a capacity of 20,000 m3/day, serving the clean water needs of people in 13 communes and towns in the vicinity of the city. Vinh and Nam Cam Industrial Park.

As the investor of the Medium Urban Development Project in Vietnam - Vinh City Sub-project, in the past time, Vinh City People's Committee has made efforts to implement the project on schedule such as building the technical infrastructure of the Resettlement Area in Nghi Phu Commune to serve 500 households, and at the same time implementing the construction package of the North Canal system. Currently, the contractor is dredging the canal, driving piles, and diverting water to construct the main items... with the completed volume reaching 25 billion VND. Mr. Nguyen Thac Chinh - Director of Vinh Urban Development Sub-project Management Board said: "According to the project approval decision, the total counterpart fund for the entire project is 624 billion VND, in 2013 alone, the counterpart capital requirement for the project is 400 billion VND, but so far it has only been recorded as 40 billion VND, of which the local budget is 35 billion VND and has disbursed 34% of the plan, the central budget supports 5 billion VND and has disbursed 100% of the plan. Arranging enough counterpart capital in a timely manner for the project is very urgent, to implement the project on schedule committed to the sponsor and disburse ODA capital, but currently the counterpart capital has not been supplemented yet".

It is known that the reason for the low disbursement of counterpart funds by the governing body is that the exploitation of land funds in Vinh City is currently facing many difficulties. However, according to the leader of Vinh City People's Committee, "This is one of the city's key projects, and this year we will try to arrange enough counterpart funds for the project, which is 35 billion VND. However, according to the project's requirements, the counterpart funds in 2013 are very large, the city and the province have submitted a proposal to the Ministry of Finance to consider allocating counterpart funds from the central budget for the Vinh Urban Development Sub-project".

The Department of Agriculture and Rural Development, one of the sectors that has been implementing many ODA programs and projects, in which investment in construction and development of irrigation infrastructure is a field that ODA is very interested in and prioritizes investment. Therefore, in the past time, through this capital source and the contributions of ministries, sectors and localities, has invested in repairing and upgrading 150 irrigation works for production and people's lives, including many large works such as: Repairing and upgrading Vuc Mau reservoir; Dam clusters in Anh Son, Thanh Chuong, Do Luong, Tan Ky... Sao River reservoir canal system; Ban Mong Lake; Nam Dan culvert, Khe Lai - Vuc Mau Lake; Vach Nam - Song Bung flood drainage system...

Currently, in the irrigation sector, many large and key projects are being implemented, contributing to the fight against climate change and rising sea levels, such as: The project to repair and upgrade the Northern irrigation system with a total investment of 5,300 billion VND; Mo River salinity prevention sluice 700 billion VND; Lam Tra canal irrigation system 174 billion VND; Nam Viec irrigation 150 billion VND... However, a major problem now is that the managing unit is having difficulty in arranging counterpart funds to implement the project. In one of the key projects of the irrigation sector, the repair and upgrade of the Northern irrigation system is currently also at a standstill in terms of counterpart funds.

It is known that the total counterpart capital of this project is arranged by the Central Government at 350 billion VND and the provincial budget at 371 billion VND. In 2013, the Project Management Board made a plan to propose the arrangement of counterpart capital from the province of more than 80 billion VND to conduct site clearance, mine clearance, etc., but up to now, the capital has not been arranged. Currently, only 3 billion VND is available to pay for the project's activities. Because the capital for site clearance, mine clearance, etc. has not been arranged, the Project Management Board plans to transfer the counterpart capital to the 2014 plan. Also in a project in the field of rural development, which is clean water supply and rural environmental sanitation in the Central region, the counterpart capital of the province and beneficiaries to implement the project is more than 17 billion VND, according to the counterpart capital plan for 2013 is more than 3 billion VND, but up to this point, the capital has not been arranged.

According to the financial mechanism, investment is implemented for each project item. If there is no counterpart capital or the capital arrangement is not as committed, the sponsor will consider cutting or reducing the investment capital. In fact, the Clean Water Supply and Rural Environmental Sanitation Project in the Central region, when counterpart capital was not arranged in 2013, it greatly affected the progress of the Dien Yen clean water supply pilot project (Dien Chau). Currently, the field of investment in rural agriculture development is implementing many ODA projects, but counterpart capital has not yet been arranged.

In 2013, many ODA projects were not allocated counterpart funds to implement the project, and to gradually overcome this situation, the province encouraged investors to boldly borrow capital from banks to implement the project on schedule, the province will support the interest rate. However, this method is still not effective, because some banks refuse, or require very strict terms... Due to the special nature of ODA projects, there is a commitment to allocate counterpart funds in the capital structure to implement the project. In the coming time, the province will implement many ODA projects, which will cause the "overload" of the provincial budget.

Faced with that reality, our province will base on the principle of supporting counterpart capital for ODA projects managed by localities from the central budget assigned in the annual State budget plan. ODA counterpart support for projects using development investment capital is balanced in the State budget, not allocating counterpart capital for projects using public service funds and re-lending projects. Accordingly, the province will base on the ability to balance annual development investment capital, prioritizing counterpart support in the fields of hunger eradication and poverty reduction, transportation, rural agricultural development, health care, improving environmental sanitation conditions, etc.

While the demand for ODA counterpart funds is quite large, the provincial budget's ability to balance is limited, and the "tightening" of investment and prioritizing counterpart funds for urgent areas is only a temporary solution. It is known that in 2014, the demand for counterpart funds for ODA projects was 283 billion VND (of which the central budget is 155.5 billion VND) and the demand for counterpart funds will increase every year, so the province needs to find a solution to the problem of lack of counterpart funds so that ODA projects can be implemented on schedule and effectively.

Article and photos: Hoang Vinh