Changing the mindset of using investment capital from the state budget

(Baonghean) - On June 22, in Hanoi, to focus on implementing the main tasks and solutions to direct and implement the socio-economic development plan and the 2015 state budget estimate, the Ministry of Finance held a workshop to collect comments from ministries, branches and localities on amending and supplementing the investment finance management mechanism, and discussing solutions to speed up the disbursement progress in 2015.

According to the report at the workshop, the Ministry of Finance said that the total capital plan for basic construction investment (CIC) from the State budget's CIC in 2015 assigned to central and local ministries, branches is 181 trillion VND. Of which, the capital assigned to central ministries and branches is 39.4 trillion VND, and to localities is 141.7 trillion VND. On this basis, up to now, ministries, branches and localities have deployed plans to send to the Ministry of Finance for review and notify capital to implementing units, and the estimated implementation in the first 6 months of the year is nearly 82 trillion VND, reaching 45% of the plan. The capital from government bonds (G-bonds) assigned is 85 trillion VND, estimated to reach over 27.5 trillion VND, reaching 40.3% of the plan.

Disbursement progress in 2015 is quite slow.

According to the Ministry of Finance, although not yet complete, the total debt of construction investment capital related to the State budget capital by the end of 2003 was about 11 trillion VND. By the end of 2005, this debt was about 9 trillion VND, but by 2011, the debt of construction investment capital of 63 localities for the volume implemented was very large: over 91 trillion VND, each province owed an average of nearly 1.5 trillion VND), equal to 68.4% of the total construction investment capital plan for 2011 of the whole country. The disbursement progress in 2015 was slow compared to the plan as well as compared to the same period, easily leading to outstanding construction investment debt in the disbursement of state investment capital.

By the end of 2013, nearly 33 trillion VND from the State budget was the outstanding debt of nearly 15 thousand construction investment projects nationwide. Of which, the capital source from issuing government bonds was 10.5 trillion VND (mainly projects in localities). This debt is actually the volume of work performed by contractors according to signed contracts exceeding the investment capital plan assigned to investors but there is no capital to pay. If there are no strong enough measures, this situation will continue to arise, severely damaging the work of mobilizing capital for construction investment.

Construction of the project to upgrade and expand National Highway 48. Photo: Hoang Vinh

According to the Ministry of Finance, the reasons for the large amount of outstanding debt in construction investment capital from the State budget have been pointed out many times, such as: the investment demand to serve socio-economic development in ministries, branches and localities is very large, while the State's ability to balance capital is limited. Capital conditions have not met the increasing investment demand, leading to the situation where capital is not allocated enough according to progress, even projects have been bid, equipment has been ordered but capital is not allocated. According to Acting Director of the Investment Department (Ministry of Finance) Trinh Nam Tuan, in terms of macro management, construction debt management is not considered an important content in construction investment management; there are no specific regulations on requirements, management content, responsibilities are not clearly defined and there are no specific sanctions. Besides the situation of widespread investment, exceeding the balancing capacity of the state budget, which has been happening for a long time and on a large scale, there is still a situation where the effectiveness of state management in this field is not strong enough to prevent it in time - Acting Director Trinh Nam Tuan said.

Still advance capital even though payment source is unknown

The inadequacy in decentralization of management (localities decide on investment according to the provisions of the law on investment and construction management, but the capital is supported by the central budget according to the balancing capacity) has lasted for many years. On the other hand, the failure to develop a medium-term investment plan as a basis for investment decisions and investment capital allocation according to project implementation progress is also the cause of scattered investment and outstanding debt in construction investment. Not to mention the common difficulty that the source of investment expenditure from the budget is decreasing, in order to ensure investment efficiency, ministries, branches and localities must select, review and arrange priority investment projects, leading to some projects not being allocated capital.

At this workshop, many delegates said that the responsibility of ministries, branches and localities in the management work at all levels is not high, and even the capacity of investors has not met the management requirements. There is even a situation where there is no capital but they still do things, keep bidding, keep ordering equipment. Along with the term mindset in some localities, some leaders, due to haste, have made investment decisions that do not ensure compliance with State regulations. In addition, the laxity in management, not or not checking, detecting and supervising in a timely manner; not organizing to monitor and manage the debt of construction investment volume also makes investors, contractors and management agencies suffer. Even when the project has not yet been allocated capital, investors have already implemented construction, exceeded the volume compared to the assigned plan, expanded investment beyond the budget's balance capacity.

In many cases, the bidding documents or the bidding designation clearly state that the contractor must pay in advance as a criterion for selecting a contractor. Contractors (especially construction contractors) due to work pressure still carry out construction, even pay in advance despite the unclear source of payment, which has led to the situation of arrears in construction debt in collaboration with the locality. Some contractors believe that important local projects using state budget capital will be paid sooner or later, so they borrow money to carry out construction. The arrangement of investment capital is spread out, not paying attention to or not paying in arrears and having the mindset of waiting for support from the state budget is also a major cause - Acting Director Trinh Nam Tuan frankly stated.

Tighten investment financial management mechanism

To avoid the situation of overdue construction investment debt, an objective and inevitable requirement is that ministries, local branches and contractors need to fully comply with and strictly implement current legal regulations on construction investment management and current regulations. First of all, it is to strictly comply with the provisions of the Law on Public Investment; ensuring that no overdue construction investment debt arises after 2014.

According to the Ministry of Finance, along with the general investment management mechanism continuing to be innovated through the promulgation of the Law on Public Investment, the Law on Construction (amended), the Law on Bidding (amended) and the Decrees guiding the implementation, the work of operating and managing budget expenditures must be even tighter; using investment capital from the State budget economically and effectively, and further strengthening financial discipline. In order to improve the effectiveness of investment capital management, the Ministry of Finance is implementing the amendment and supplementation of a series of mechanisms in the management, payment and settlement of investment capital to meet the new requirements. The content of this revised study has boldly proposed new management mechanisms that clearly and more clearly demonstrate the role and responsibility of financial agencies at all levels in investment capital management; at the same time, expanding the scope of management to meet the requirements of strict management of investment capital from the State budget at all stages of implementation.

Speaking at the conference, Deputy Minister of Finance Tran Van Hieu said that the contents of the adjustment and amendment are aimed at concretizing the new regulations of the laws and newly issued Decrees in a synchronous manner according to the principle of further enhancing the responsibility of financial agencies at all levels. Capital management will be stricter, and the Ministry of Finance has drafted many circulars to replace old regulations on management and payment of investment capital from the State budget. At the same time, it will further stipulate the responsibility of the Treasury agency in assessing the implementation of capital advances to contractors and the responsibility of coordinating with investors to recover in case the advanced capital is not used for the right purpose, and strengthen cost control of the project management board. Accordingly, the cost management mechanism of the project management board will unify a common financial mechanism with a clear revenue and expenditure mechanism, reflecting the true nature of the department that helps investors perform the task of managing the project implementation process guaranteed by State budget funds - Deputy Minister Tran Van Hieu affirmed.

In particular, to minimize the occurrence of incorrect and underspending, the new circular will stipulate the responsibilities of financial agencies at all levels in examining annual cost estimates; and stipulate that the finalized costs will be annually settled for allocation to investment projects. These new regulations will fundamentally change the awareness and responsibilities of the implementing levels, thereby improving the capacity and efficiency of general management, especially limiting negativity in the settlement of completed projects. It is hoped that with the revised directions in the management of investment capital of financial agencies in general as well as related units, the actual management and use of State investment capital will have important changes, minimizing the negative aspects that may arise, in accordance with the direction of strengthening financial discipline of the Party and State.

Red River