"Pillars" of private investment projects
Tam Hiep Port Logistics Industrial Park, Vinh Duc General Hospital, Nam Phuoc Market Quarter, Thang Hoa General Hospital, Dien Nam Trung Market Quarter (Dien Ban), Kham Duc Market Quarter (Phuoc Son), Dong School, Sky-line (Dien Duong), Driver Training and Testing Center (Phu Ninh), Hoi An Water Plant Expansion Project, Minh Thien General Hospital Upgrade Project..., are considered to be typical examples of the effectiveness of investment capital from the Quang Nam Development Investment Fund over the past 15 years.
Mr. Nguyen Viet Thanh - Director of Hoi An Water Supply and Drainage Enterprise said that the support of Quang Nam Development Investment Fund has contributed to creating an effective Hoi An water plant project. The plant's capacity has increased from 6,000m3 /day and night to 15,000m3 /day and night, providing enough water for local residents and businesses.
Starting from its establishment, only providing capital for infrastructure investment in Chu Lai Open Economic Zone, the Provincial Development Investment Fund has expanded its investment scope in many fields. Statistics from the initial state capital allocated to the unit of 54 billion VND (in 2009), up to now the total capital of the Fund has reached 1,500 billion VND, including: 25% of charter capital from the budget, 16.4% of revenue-expenditure difference to supplement operating capital, 14% of mobilized capital and 44.6% of capital entrusted to other financial funds. The Provincial Development Investment Fund has invested and lent more than 76 projects with a total capital of more than 1,700 billion VND. Capital has been recovered for reinvestment and lending.
Not only investing and lending, the Fund has advanced capital to districts, towns, cities and land fund development centers for 72 projects (compensation, resettlement support, infrastructure investment in residential areas, resettlement and other important infrastructure projects in localities). The total advanced capital is more than 900 billion VND (more than 700 billion VND has been recovered). This advanced capital has contributed to the localities to create thousands of land lots for resettlement, auctioned to generate revenue for the local budget.
Loans and financial support (0% interest) from the Quang Nam Development Investment Fund have contributed to increasing the number and quality of offshore fishing vessels, improving fishing capacity and income for fishermen. The total investment capital for this activity is nearly 195 billion VND to build 125 new large-capacity vessels. Currently, 123 vessels have been completed and put into operation, and more than 120 billion VND in debt has been recovered.
According to analysis, one dong of operating capital of the Provincial Development Investment Fund has mobilized 10 dong of private capital to participate in infrastructure investment. One dong of state budget capital allocated to the Fund has attracted 26 dong of non-budget capital to invest in developing infrastructure projects. More importantly, bad debt has not appeared.
Mr. Nguyen Tien Thach - Director of Quang Nam Development Investment Fund affirmed that without the Development Investment Fund, many private investment projects would not be completed, especially during the economic crisis, when banks tightened loans or had high lending interest rates. Without the Fund's investment capital, Vinh Duc General Hospital (Dien Ban), Nam Phuoc Market Quarter (Duy Xuyen), Thang Hoa General Hospital (Thang Binh)... could not meet the plan, and it would be difficult to complete the project when the bank interest rate at that time was very high and only provided short-term loans, from 1 to 2 years. The Fund's lending interest rate was 9.6%/year, so it met the investment needs of businesses...
Risk of capital shortage
There have been many "words and gossip" about the Provincial Development Investment Fund in its 15 years of existence. The issue of the existence or dissolution of this Fund has been put on the agenda many times. However, the decision to increase capital (300 billion VND in charter capital), expand the Fund's investment loan portfolio (7 areas) for the period 2021 - 2025, according to Resolution 14 dated March 16, 2021 of the People's Council of Quang Nam province. This Resolution has created the driving force to change the operating mechanism of the Provincial Development Investment Fund.
Mr. Dang Phong - Director of the Department of Finance said that there is a lack of legal status, no specific documents on the operating mechanism, a lack of unified operating model, organizational structure or decentralization, assignment of specific responsibilities from the central to each locality is not clear, regulations on investment fields, rigid loan portfolio, incompatible with local socio-economic development conditions... Charter capital, low ownership, unable to meet the demand for loans or direct investment of projects with large total investment. However, although direct investment and lending are both difficult, the Provincial Development Investment Fund still achieves its goals and is effective. Each dong of operating capital of the Fund for lending and capital contribution has attracted more private capital to participate in infrastructure investment... or the absence of bad debt is a success.
It can be said that the Provincial Development Investment Fund has become an important financial mobilization channel and seed capital to attract capital from non-state economic sectors to participate in infrastructure development investment, in line with the original goal when establishing the Fund.
However, the Fund is facing a series of new difficulties, lacking funds for lending. The Quang Nam Development Investment Fund announced that it is about to face a serious capital shortage and cannot mobilize new capital. The study and proposal to issue bonds for the Fund is facing difficulties due to the central government tightening bond issuance activities. In addition, it is passive in implementing the plan. With no other choice, the Fund has to arrange to reduce the lending limit and refuse to lend to some projects that have been promoted for investment.
"The risk of capital decreasing is not enough to meet the development investment needs in the coming period"
Mr. Nguyen Tien Thach - Director of Quang Nam Development Investment Fund
Mr. Nguyen Tien Thach - Director of Quang Nam Development Investment Fund said that the Fund has improved liquidity, financial structure to a safe level, reduced financial risks due to over-reliance on mobilized capital and increased financial autonomy. The Fund has selected key investment portfolios and projects; limited dispersion, not dispersed resources, and minimized idle capital temporarily deposited at commercial banks. However, the Fund's biggest current difficulty is the impending capital shortage. The mobilized sources have reached the maturity date for loan repayment (WB loans and deposit sources...).
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