Viet Nam : Public Investment for a High-Performing Economy

Public investment has played, and will continue to play, a crucial role in Viet Nam's economic and social development. The Government of Vietnam has made major progress in the past decades in improving the country's infrastructure. Recognition of past successes should not, however, prevent us from seeking to do better. The analysis in this paper shows that there is significant scope to increase the value-for-money that Viet Nam's citizens derive from public investment. Value for money can be substantially increased by better aligning investment resource allocation with development priorities, i.e., improving allocative efficiency. It can also be boosted by attacking excessive project cost and delays, i.e., by improving operational efficiency. The need for action to increase both the allocative and operational efficiency of public investment reflects a range of challenges that affect public investment management in Viet Nam at present, including weak project prioritization, low quality-at-entry due to inadequate project screening, inflexible selection and budgeting processes, inefficient project implementation, and inadequate monitoring and ex-post evaluation. These challenges are compounded by the existence of major impediments to regional investments and linkage programs, and the excessive complexity of processes for ODA/concessional financing management. Recent amendments to the Public Investment Law (PIL) have been useful in addressing a number of the practical problems that have arisen in recent years, such as the unsatisfactory legal framework for inter-jurisdictional projects and the impact of price level movements on the thresholds for CAT-A projects. However, these amendments to the PIL represent quick wins that do not address the most fundamental problems facing public investment management. There is a need for further, more fundamental reform to ensure that public investment makes the maximum possible contribution to Viet Nam's future development