Directive No. 21/2005/CT-TTg on the implementation of the National Assembly's resolution on basic construction investment using state capital and combating waste and loss in construction investment.

DIRECTIVE

Regarding the implementation of the National Assembly's resolution

on construction investment activities using state capital

and preventing waste and loss in investment construction

__________________

In recent years, state construction investment capital has truly played a leading role, providing direction, attracting social capital for development investment increasingly. State management of basic construction investment has made significant progress, with more decentralization to various levels, specific regulations on the rights, obligations, and responsibilities of participating subjects; amendments and supplements to regulatory legal documents on investment management and bidding have created a more complete legal framework; guidance and management of planning and implementation from central to local levels have become stricter and more detailed; inspection, audit, and supervision by functional agencies and communities over basic construction investment have initially shown effectiveness, identifying weaknesses and negative practices in project management and implementation, contributing to limiting and rectifying violations in basic construction investment.

Alongside these significant achievements, there remain many shortcomings and weaknesses in the management of overall social construction investment capital, particularly state construction investment capital. The reasons include: inconsistent and low-quality planning and construction programs, lack of integration between comprehensive socio-economic development planning and sectoral or construction planning; widespread scattered investment, waste, and loss at all stages of construction investment, from planning, investment policy, preparation, implementation, acceptance, settlement, and operation; prolonged accumulation of construction investment funds; and insufficient investment efficiency in some projects.

To address these issues and restore order and discipline, improve the effectiveness of basic construction investment according to the spirit of Resolution No. 36/2004/QH11 dated December 3, 2004 of the National Assembly on state capital construction investment work and Resolution No. 01/2005/NQ-CP dated January 14, 2005 of the Government on key measures to guide the implementation of the socio-economic plan and state budget for 2005, the Prime Minister requests ministries, ministerial-level agencies, government-affiliated agencies, provincial people's committees under the central government, and state-owned holding companies to develop their own action programs, strictly implement Directive No. 29/2003/CT-TTg dated December 23, 2003 on improving state investment and construction management and Directive No. 08/2004/CT-TTg dated March 8, 2004 of the Prime Minister on implementing the Construction Law. At the same time, they must immediately focus on the following urgent tasks:

1. Strengthening the establishment, review, and adjustment of plans in a way that ensures consistency between sectoral development plans and construction plans with overall socio-economic development plans, linking plans with strategic socio-economic development goals, economic structure transformation, ensuring inter-sectoral and regional coordination, eliminating closed and parochial situations; implementing transparency in planning work; researching innovative content and methods for plan establishment suitable for market economy conditions and economic integration; enhancing community oversight of investment implementation according to approved plans; strengthening and improving the quality of planning work, forecasting, and information provision for planning purposes; allocating sufficient funds for planning work to strive for achieving 70 to 80 percent of detailed construction planning volume nationwide by 2010.

2. Concentrating on reviewing ongoing projects for compliance with approved plans, proposing measures to deal with projects not conforming to plans; not initiating projects that do not align with plans, are ineffective, or do not meet actual needs of sectors or regions; firmly halting ongoing projects if they prove ineffective. Projects without adequate funding balance or lacking required procedures under construction laws should not be included in investment plans.

Investment capital allocation must be focused, prioritized, and consistent with annual and subsequent year funding balances. Before allocating funds for new projects, a portion of funds must be reserved to settle previous years' state budget construction arrears for projects in line with plans and meeting legal requirements. Allocated funds must be closely monitored to ensure proper and effective use, avoiding waste and loss.

All levels, sectors, and localities must strictly comply with construction laws. While decentralizing investment management, additional strong administrative measures must be added to enhance the responsibility of participating investment subjects. Specifically:

For design consulting organizations and construction supervision consulting organizations: reviewing these organizations' professional capacity and subject status. Consulting organizations must operate independently and fully assume responsibility before investors and the law regarding design and consultancy work quality.

For investment decision-makers: clearly defining individual responsibilities of investment decision-makers, only deciding on projects when clear funding sources, compliance with plans, and guaranteed effectiveness are confirmed, and not contravening current investment construction management regulations. Investment decision-makers must face administrative penalties, dismissal, or removal and compensation for material losses if they decide on incorrect investments causing state financial waste.

For the project investor: the project investor shall bear full responsibility for the effectiveness, quality, and progress of construction projects. The selection of the project director must be a person who meets the required conditions regarding capacity and suitability for each type and level of construction project as prescribed.

When approving adjustments to investment construction projects, the project investor must conduct investment supervision and evaluation, clearly identify the causes and measures for handling by relevant parties before reporting to the competent authority for approval.

Strengthen and reorganize project management boards to ensure they have sufficient professional capacity and experience as stipulated by the Construction Law. Eliminate project management boards that do not meet the required capacity conditions and establish specialized project management boards operating under consultancy project management models. Limit direct project management by investors. In cases where the investor does not have the necessary capacity to manage the project, the investor must hire a project management consultant with the required capacity conditions suitable for the type and level of construction project as stipulated by the Construction Law.

For contractors: strictly define the capacity conditions and sanctions for contractors when participating in bidding. Specify the types and scales of construction projects that contractors are permitted to participate in, which should be commensurate with their level and capacity. End the practice of contractors accepting bids at any cost or subcontracting to contractors without the necessary capacity to construct projects.

If collusion or connivance between the project investor and consulting organizations or construction contractors is discovered, appropriate measures such as fines, administrative disciplinary actions, prohibition from participating in construction activities for at least two years, and public announcement on the Tender Information Bulletin and the State's tender information website will be taken based on the severity of the violation.

5. Review, supplement, and amend regulatory legal documents on investment construction management to form a coherent legal system with high legal validity for consistent implementation. Supplement and amend tender regulations to establish a healthy competitive tendering environment in construction. Establish a state tender information website and publicly disclose information about contractors such as their capacity, performance results, or violations of tender regulations, professional standards, and forms of handling. Study and promulgate principles and criteria for allocating investment capital according to objectives.

Study and perfect the mechanism for investment construction management to effectively manage, prevent closed-loop practices in investment construction, and separate government management functions from business management functions in all stages of construction activities towards the goal that by 2006, consultancy contractors operate in a completely independent environment and fully leverage their independent role, while construction contractors fully leverage their strengths.

6. Study to gradually implement socialization in investment construction by reducing the list of construction projects funded by the state budget. The state budget shall only invest in construction projects and programs in accordance with the State Budget Law. Encourage other economic sectors to jointly invest with the state in service-oriented construction projects such as water supply, drainage, environmental sanitation, urban transportation: metro, bus systems. Encourage private enterprises to invest in public construction projects such as schools, hospitals, office buildings for lease. From 2005 onwards, it is not allowed to transfer projects funded from ODA loans to the state budget allocation.

7. Improve the system of standards, specifications, and economic-technical indicators serving investment construction management. By 2005, review, amend, and supplement standards, specifications, and economic-technical indicators that are no longer appropriate; study and build indicators to evaluate effectiveness, determine total investment construction costs such as investment cost per unit, estimation index, standard price. Improve the current economic-technical construction basic indicator system towards: the state manages economic-technical indicators, the market determines prices to align with actual construction practices and international practices, moving towards implementing construction prices according to the market.

8. Strengthen investment supervision work, government inspections, and specialized inspections. Enhance the oversight of construction investment activities by media agencies and the community. Study and supplement inspection, supervision, and monitoring mechanisms for projects funded by the state budget.

Organize strict quality control for construction projects, establish a nationwide network of quality certification systems to manage and inspect, thereby improving the quality of construction projects and the responsibility of subjects involved in construction activities.

To implement the above tasks, the Prime Minister requests ministries, sectors, and localities to immediately carry out the following specific tasks:

- By January 2006, submit to the Prime Minister a draft list of particularly important state-owned companies directly implementing some rights and obligations of the state owner by the Prime Minister;

- Take the lead and coordinate with related agencies to review overall socio-economic development plans, industry development plans, regional development plans; adjust and supplement these plans in line with socio-economic development strategic goals, shifting economic structures.

- Lead together with ministries, sectors, and localities to supervise the implementation of overall socio-economic development plans, industry development plans; implement plans at the ministry, sector, and locality levels; review and assess investment construction projects using state funds during the 2001-2005 period regarding their alignment with approved plans, investment funding sources, investment and construction procedures to enhance investment efficiency, address scattered investment and construction arrears, propose handling measures, and report to the Prime Minister before December 31, 2005.

- To lead the research on innovating the content and methods for developing comprehensive economic and social development plans, industry development plans; innovating the mechanism for allocating investment capital according to objectives, ensuring the principle of balance between regions and areas; improving the structure of investment capital in accordance with the development needs of the economy; building mechanisms to encourage and mobilize various sources of capital to participate in investment construction projects, and to participate in construction activities, attracting foreign direct investment. Review, supplement, and amend the Tendering Regulations to ensure fair competition, build and publish the state's tendering information website (WEB).

- By the third quarter of 2005, the Ministry of Planning and Investment will complete and submit to the Government for issuance of a Decree amending Decree No. 17/2001/NĐ-CP on the issuance of regulations on management and use of ODA, and a Decree amending Decree No. 77/CP dated June 18, 1997 on the Tendering Regulations for BOT projects within the country.

- In the fourth quarter of 2005, study and submit to the Government proposals to separate state management functions from business management in all stages of investment construction management; develop and perfect specific timelines to prevent closed-loop practices in investment.

- Study and submit to the Government specific criteria for types of investment projects that need to be reviewed and approved by the National Assembly and provincial People's Councils through a rigorous process; propose criteria for allocating capital, targeted support criteria, and principles for balancing capital between regions and areas to ensure harmonious development between the economy and society; between dynamic regions and poor, remote, and far-flung regions in line with reality; implement transparent and open capital allocation for state investment.

- Study and submit to the Government regulations on inspecting and supervising the implementation of investment projects funded by state capital; coordinate with agencies of the National Assembly to build regulations to ensure that elected bodies and the people can effectively supervise state-funded construction projects to prevent and curb corruption in state-funded investment projects. Direct the strict implementation of existing regulations with clear accountability.

b) The Ministry of Finance:

- Lead and coordinate with ministries, sectors, and localities to review the situation of settlement and finalization of basic construction investment funds from the state budget during the period 2001-2005; study and innovate payment methods and mechanisms according to contracts, and settlement mechanisms for investment funds for projects funded by the state budget, aiming to address the issue of completed construction projects being put into use without final settlement of investment funds as currently exists; establish and implement a mechanism to shift from current budget disbursement to project financing for projects with potential for capital recovery.

- Lead and guide, inspect, and urge ministries, sectors, and localities to settle final investment funds for completed projects and to finalize investment funds for completed project components, projects, and works according to the prescribed time frame, and compile and report to the Government before December 31, 2005.

- Lead and coordinate with the Ministry of Planning and Investment and the Development Support Fund to review investment projects during the period 2001-2005 financed by the Development Support Fund, and propose solutions to gradually reduce direct loans and increase post-investment interest rate support and investment guarantees.

c) The Ministry of Construction:

- Direct the review and evaluation of the current system of legal normative documents and propose amendments and supplements to improve legal documents on investment construction towards clearly defining sanctions, capacity conditions, and responsibilities of subjects participating in construction investment activities.

- Lead and coordinate with ministries, sectors, and localities to review and evaluate the management of construction planning, implementation according to planning, and report to the Government before December 31, 2005.

- Strengthen specialized inspection forces, intensify specialized inspections of construction investment projects decided upon by central ministries, sectors, and localities. Establish an independent testing network to manage the quality of construction projects nationwide.

- Conduct a review of the current system of standards, specifications, indicators, and economic-technical norms serving investment construction management; complete and supplement cost norms as a basis for establishing and managing construction costs in line with market-oriented construction activities.

d) The Government Inspectorate leads and coordinates with ministries, sectors, and localities to annually conduct summaries and evaluations of the situation regarding the prevention of waste, dispersion, and inefficiency in basic construction investment, and propose measures to deal with organizations and individuals involved in negative practices, and report to the Government.

đ) The Ministry of Transport reviews and completes the list of BOT projects in the transport sector to attract non-state budget capital.

e) The State Bank of Vietnam leads and coordinates with the Ministry of Planning and Investment to build a system for providing enterprise information as a basis for banks to consider and decide on lending. Develop a pilot credit rating service for enterprises to provide banks with a basis when considering lending to enterprises.

Credit institutions providing loans must bear joint responsibility for the results of calculations when reviewing the feasibility of projects leading to ineffective loans and unrecoverable capital.

g) Ministers, heads of ministerial-level agencies, and heads of government-affiliated agencies, Chairmen of provincial People's Committees under the Central Government should strengthen supervision of the implementation of legal documents, take concrete measures to promote the completion of assigned tasks; closely direct the implementation of issues of concern to the people and the National Assembly to create real changes in investment and construction management work.

Conduct a review of industry and local development plans to ensure that industry and local development tasks align with the overall plan for socio-economic development; review the list of construction investment projects under management during the period from 2001 to 2005, propose solutions to address existing issues and obstacles; inspect and audit projects and works showing signs of corruption and waste within the scope of management.

h) Provinces and cities shall review, amend, and supplement their socio-economic development plans, urban planning, and industry development plans based on the overall plan and strategic socio-economic development goals to leverage local advantages.

Assign the Ministry of Construction to lead, together with the Ministry of Planning and Investment and the Ministry of Finance, in monitoring and urging the implementation of this Directive and reporting periodically to the Prime Minister as prescribed.